Karachi, August 4, 2023 – The Federal Board of Revenue (FBR) in Pakistan has announced updated income tax rates on the winning of prize bonds and lottery for the fiscal year 2023-24, in accordance with Section 156 of the Income Tax Ordinance, 2001.
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Under the revised tax structure, individuals falling under the Active Taxpayers List (ATL) will be subject to a withholding tax rate of 15 percent in case of winning a prize bond or crossword puzzle. However, for those who are not on the ATL, the tax rate will be higher at 30 percent.
For winnings from raffles, lotteries, quizzes, or prizes received through sales promotions by a company, individuals on the ATL will face a withholding tax rate of 20 percent. In contrast, the tax rate will increase substantially to 40 percent for those who are not on the ATL.
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These updated income tax rates have been introduced as part of the government’s efforts to ensure a fair and transparent taxation system while encouraging voluntary tax compliance. By incentivizing taxpayers to be on the Active Taxpayers List, the authorities aim to broaden the tax base and enhance revenue collection for national development initiatives.
It is important to note that the withholding tax mechanism means that the tax is deducted at the source, i.e., when the prize money is paid out. Consequently, winners will receive the net amount after the deduction of the applicable tax.
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This measure is expected to have an impact on the prize bond and lottery culture in Pakistan. As taxpayers on the ATL benefit from a lower tax rate, they may be more motivated to declare their income and assets, contributing to a stronger and more transparent economy.
The revised tax rates will be in effect for the entire fiscal year 2023-24, starting from July 1, 2023, and ending on June 30, 2024. The FBR encourages all concerned individuals to familiarize themselves with the new tax rates and comply with the tax laws to avoid any potential penalties or legal consequences.
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In conclusion, the FBR’s updated income tax rates on prize bond winnings and lottery for the fiscal year 2023-24 aim to promote tax compliance, enhance revenue collection, and foster economic growth in Pakistan. As the country moves forward, it is crucial for individuals to fulfill their tax obligations responsibly, contributing to the nation’s progress and prosperity.
