ISLAMABAD: Banks shall pay 37.5 percent income tax on profit from investment in government securities, according to proposals made through Finance Bill, 2019.
The Federal Board of Revenue (FBR) in explanation to the Finance Bill, 2019 said that banks are earning substantial profits on account of incremental exposure to government securities.
Therefore profit from such government securities as is in excess of twenty percent of total profit before tax is being taxed separately at the rate of 37.5 percent.
The FBR further said that banks generally do not offer for taxation the provisions which were previously allowed but later on reversed. Therefore reversal of provisions already allowed is being made taxable by inserting an explanation in the Seventh Schedule.
Banks are also allowed to claim deduction in respect of provisions classified as “doubtful” and “loss”. Now only deductions only in respect of provisions classified as “loss” are to be allowed.