FBR Revises Income Tax Rates on Prize Bonds & Lottery Winnings for 2023-24

 

The Federal Board of Revenue (FBR), Pakistan's main tax collection authority, recently announced revised income tax rates applicable to winnings from prize bonds, lotteries, and promotional prizes for the upcoming fiscal year 2023-24.

 

The new tax rates represent an effort by the FBR to enhance tax compliance and generate additional revenue for the government. According to section 156 of the Income Tax Ordinance 2001, the FBR has the mandate to determine income tax rates on such types of income.

 

Individuals registered on the Active Taxpayers List (ATL), which signifies that they file their tax returns regularly, will be subject to lower withholding tax rates. Those on the ATL will pay only 15% tax on prize bond winnings and 20% tax on winnings from raffles, lotteries, and promotional prizes.

 

In contrast, individuals not registered on the ATL, implying that they do not file regular tax returns or underreport their income, will pay significantly higher withholding tax rates of 30% on prize bond winnings and 40% on other types of winnings.

 

The withholding taxes will be deducted from the prize money at the time of payment, leaving the winners with the remaining net amount after taxes.

 

The aim of providing preferential tax rates to individuals on the ATL is to encourage more taxpayers to honestly disclose their income and assets. This could help broaden the tax base by bringing more taxpayers into the tax net, ultimately enabling the FBR to collect more revenue for government expenditures and development projects.

 

Overall, the revised tax rates signify the FBR's efforts to improve tax compliance and revenue collection, which are crucial for Pakistan's economy. For Pakistan to progress economically, citizens must responsibly fulfill their tax duties by paying appropriate taxes and filing complete tax returns. This would enable the government to generate sufficient funds to invest in social services, infrastructure, and other initiatives for the nation's development and prosperity.

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