FBR Suggests 100% Increase in Tax on Bonus Shares for Non-ATL

FBR Suggests 100% Increase in Tax on Bonus Shares for Non-ATL

PkRevenue.com – The Federal Board of Revenue (FBR) has proposed a 100 percent increase in tax on bonus shares for individuals who are not listed on the Active Taxpayers List (ATL). The tax managers at the FBR have recommended amendments to the Income Tax Ordinance, 2001, to be implemented in the forthcoming budget for 2024-25.

The proposed changes target Section 236Z of the Income Tax Ordinance, 2001, which was introduced last year to tax bonus shares. Currently, the tax rate on bonus shares is specified within the section itself rather than being referenced in the First Schedule of the Ordinance. This has resulted in both ATL and non-ATL shareholders being subjected to the same tax rate on bonus shares.

According to the FBR, the existing Tenth Schedule of the Income Tax Ordinance provides for a 100 percent increase in withholding tax rates in relation to those specified in the First Schedule. However, since the rate for bonus shares is directly stipulated in Section 236Z, there has been no differential treatment between ATL and non-ATL taxpayers.

The FBR’s new proposal seeks to rectify this by imposing a higher tax rate on non-ATL individuals. Specifically, the tax chargeable on bonus shares for non-ATL persons would be doubled, increasing from the current rate of 10 percent to 20 percent. This adjustment is intended to create a clear distinction between compliant taxpayers (those on the ATL) and non-compliant ones, thereby incentivizing more individuals to register and maintain their status on the ATL.

This proposal comes as part of a broader strategy by the FBR to enhance tax revenue and enforce stricter compliance. By targeting bonus shares, which are often distributed by companies as a way of sharing profits without disbursing cash, the FBR aims to capture a segment of income that may otherwise evade appropriate taxation, especially from those who are not actively complying with tax regulations.

The suggested amendments are expected to be a topic of discussion in the upcoming budget sessions, where lawmakers will evaluate the potential impacts on taxpayers and the overall economy. If implemented, the increased tax rate on bonus shares for non-ATL individuals would mark a significant step in the FBR’s efforts to expand the tax base and ensure a fairer tax system.

Tax experts and stakeholders are advised to monitor these developments closely, as the proposed changes could have substantial implications for investment strategies and tax planning. The FBR encourages taxpayers to stay informed and consider the benefits of maintaining ATL status to avoid higher tax liabilities.