Non-ATL taxpayers will face substantially higher withholding tax rates on bank deposits, government securities and Sukuk profit under the Tax Year 2027 framework.
ISLAMABAD: The Federal Board of Revenue (FBR) has issued the withholding tax card for Tax Year 2027, prescribing different rates on profit on debt under Section 151 of the Income Tax Ordinance, 2001.
According to the withholding tax card, profit or yield paid by a banking company or financial institution on an account or deposit maintained with the institution will attract withholding tax of 20% for taxpayers on the Active Taxpayers List (ATL) and 40% for non-ATL taxpayers.
The same 20% ATL and 40% non-ATL rates will apply to yield or profit on government securities paid to any person other than an individual.
For profit on debt falling outside the specified categories, the FBR has prescribed a withholding tax rate of 15% for ATL taxpayers and 30% for non-ATL taxpayers.
Sukuk profit rates
The FBR has also notified separate withholding tax rates on profit on debt from Sukuk issued by a Special Purpose Vehicle (SPV) or company under sub-section (1A).
Where the Sukuk holder is a company, the withholding tax rate will be 25% for ATL taxpayers and 50% for non-ATL taxpayers.
For an individual or association of persons (AOP) holding Sukuk with a return on investment exceeding Rs1 million, the applicable rates will be 12.5% for ATL taxpayers and 25% for non-ATL taxpayers.
Where the return on investment is less than Rs1 million, the withholding tax rate will be 10% for ATL taxpayers and 20% for non-ATL taxpayers.
Higher rates for non-ATL taxpayers
The rates have been prescribed under Division-IA and Division-IB of Part-III of the First Schedule, read with Rule 1 of the Tenth Schedule of the Income Tax Ordinance.
The withholding tax card creates a clear distinction between taxpayers appearing on the ATL and those who are non-ATL, with substantially higher rates applicable to non-ATL taxpayers across the specified categories.
The rates will apply for Tax Year 2027 and cover profit or yield earned through bank deposits, government securities and specified Sukuk arrangements.
The differentiated rates underline the financial impact of maintaining active taxpayer status, while the separate treatment of Sukuk reflects the tax framework applicable to different types of profit-on-debt income.