ISLAMABAD: Federal Board of Revenue (FBR) has asked banks to provide details of additional investment made into the government securities during the tax year 2019.
The sources in FBR on Tuesday said that a commissioner of Inland Revenue had been empowered to ask the banking companies to furnish details of the investment in the federal government securities so as to ascertain the applicability of enhanced rate of tax.
The FBR said that the rate of tax on taxable income of a banking company is 35 percent. “Through the Finance Act, 2019, a new rule 6C has been inserted to Seventh Schedule which provides tax rate of 37.5 percent on taxable income from federal government securities.”
As per this rule, the taxable income arising from additional income earned from additional investment in the federal government securities for the tax year 2020 and onwards shall be taxed at the rate of 37.5 percent.
“A banking company shall furnish a certificate from external auditor along with accounts while e-filing return of income certifying the amount of money invested in the federal government securities in the preceding tax year, additional investments made for the tax year and mark-up income earned from the additional investment for the tax year.”
The FBR defines ‘additional income earned’ as to mean mark-up income earned from additional investment in the federal government securities by the bank for the tax year.
The FBR also defines the term ‘additional investment’ as to mean average investment made in the federal government securities by the bank during the tax year, in addition to average investment held during the tax year 2019.
As per sub-rule (3) of the rule 6C, the Commission may require the banking company to furnish details of the investment in the federal government securities so as the ascertain the applicability of enhanced rate of tax.