The Federal Board of Revenue (FBR) has disclosed the tax rates applicable to profit on debt under section 7B of the Income Tax Ordinance, 2001, for the tax year 2022.
The announcement comes as part of the updated Income Tax Ordinance, 2001, which includes amendments introduced through the Finance Act, 2021.
As per the latest information available in the First Schedule of the Income Tax Ordinance, 2001, the tax rate for profit on debt, imposed under section 7B, has been set at 15%. This rate is specified in Division IIIA of Part I of the First Schedule, signaling the FBR’s commitment to providing clear guidelines for tax calculations related to profit on debt.
Section 7B of the Income Tax Ordinance, 2001, outlines the framework for taxing profit on debt. According to this section:
(1) Tax on profit on debt: Subject to the provisions of this Ordinance, a tax shall be imposed, at the rate specified in Division IIIA of Part I of the First Schedule, on every person, other than a company, who receives a profit on debt from any person mentioned in clauses (a) to (d) of sub-section (1) of section 151.
(2) Computation of tax: The tax imposed under sub-section (1) on a person, other than a company, who receives a profit on debt shall be computed by applying the relevant rate of tax to the gross amount of the profit on debt.
(3) Exceptions: This section shall not apply to a profit on debt that – (a) is exempt from tax under this Ordinance; or (b) exceeds five million Rupees.
The third subsection of the section introduces exceptions to the application of this tax on profit on debt. Notably, the tax will not be applicable to a profit on debt that is either exempt from tax under the Income Tax Ordinance, 2001, or exceeds the threshold of five million Rupees.
This announcement is a significant step towards providing clarity and transparency in the tax regime, ensuring that individuals and entities are aware of their tax obligations related to profit on debt for the tax year 2022.
As with any tax-related information, it is crucial for taxpayers to stay informed and seek professional advice to ensure compliance with the latest regulations. The FBR’s continuous efforts to update and refine the tax framework aim to create a more efficient and equitable tax system that contributes to the economic development of the country.
Note: The text of the above section is provided for informational purposes, and readers are encouraged to refer to the official documentation for the most accurate and up-to-date information.
