Karachi, November 2, 2024 – The Federal Board of Revenue (FBR) has announced a tax policy for prize bond winners who are not listed on the Active Taxpayers List (ATL).
Effective immediately, individuals failing to appear on the ATL will incur a steep 30% tax on their prize winnings, double the rate applicable to compliant taxpayers.
This announcement follows the FBR’s release of the ATL for the tax year 2024 on November 1, 2024. Taxpayers who are included in the ATL will benefit from a considerably lower tax rate of 15% on their prize bond winnings. This dual tax structure serves to incentivize registration as an active taxpayer while simultaneously enhancing government revenues from prize-related income.
According to the FBR, the imposition of advance tax is governed by Section 156 of the Income Tax Ordinance, 2001. This legislation not only pertains to prize bonds but also encompasses various forms of winnings including those from raffles, lotteries, quizzes, and promotional prizes offered by corporations. The FBR clarified that under sub-section (1) of this section, any entity responsible for awarding a prize must deduct tax from the gross amount at the rates specified in Division VI of Part III of the First Schedule.
Furthermore, in instances where the prize is not monetary, the awarding party is required to collect tax based on the fair market value of the prize. This ensures that all forms of winnings are subject to tax, maintaining fairness in the taxation system.
The FBR further outlined that for other types of winnings, such as those derived from raffles and promotions, the tax rates are set at 20% for ATL-listed individuals and a significantly higher 40% for those not included. This stark contrast emphasizes the government’s push towards encouraging tax compliance and supporting the national exchequer.
By implementing this revised tax framework, the FBR aims to close loopholes in the existing tax system while promoting a culture of accountability among citizens. As the deadline for tax compliance approaches, the onus now lies with individuals to ensure their registration on the ATL to mitigate excessive tax liabilities on their winnings. With these measures, the FBR not only seeks to enhance tax revenues but also to fortify the foundation of fiscal responsibility in the country.
