KARACHI: The tax authorities have been suggested to review withholding tax rates on profit on debt in forthcoming budget.
Overseas Investors Chamber of Commerce and Industry (OICC) in proposals for budget 2020/2021 said that through Finance Act, 2019, multiple withholding tax rates of profit on debt were introduced which are based on the profit threshold and active /in-active status of taxpayer (i.e. Profit less than Rs0.5 million is subject to tax at the rates 10 percent and 20 percent for active and in-active respectively.
Whereas, profit greater than Rs 0.5 million is subject to tax at the rates 15 percent and 30 percent for active and in-active filer respectively).
It has been provided that minimum tax rate on profit on debt is 15 percent as prescribed under section 7B of Income Tax Ordinance, 2001.
So, there is no need to tax the profit at reduced rate (i.e. 10 percent), if the person has to discharge his final tax liability on such higher rate i.e. 15 percent.
The OICCI suggested that prescribed threshold of withholding tax on profit should be deleted and there should be only two rates, for active and inactive taxpayers respectively.