Tag: profit on debt

ISLAMABAD: Federal Board of Revenue (FBR) has explained levy of withholding tax on profit on debt for tax year 2019/2020 applicable from July 01, 2019.

The FBR said that every person, other than a company, receiving profit on debt from persons mentioned in clause (a) to (d) of sub-section (1) of Section 151 are separately taxed at the rates provided in Division IIIA of Part I of the First Schedule.

The section 151 explains:

151. Profit on debt. — (1) Where –

(a) a person pays yield on an account, deposit or a certificate under the National Savings Scheme or Post Office Savings Account;

(b) a banking company or financial institution pays any profit on a debt, being an account or deposit maintained with the company or institution;

(c) the Federal Government, a Provincial Government or a Local Government pays to any person profit on any security other than that referred to in clause (a) issued by such Government or authority; or

(d) a banking company, a financial institution, a company referred to in sub-clauses (i) and (ii) of clause (b) of sub-section (2) of section 80, or a finance society pays any profit on any bond, certificate, debenture, security or instrument of any kind (other than a loan agreement between a borrower and a banking company or a development finance institution) to any person other than financial institution.

The FBR said that prior to the Finance Act, 2019, the rates were 10 percent where profit on debt was up to Rs5 million, 15 percent where profit on debt was more than Rs5 million but not more than Rs25 million and 15 percent where profit of debt exceeding Rs25 million.

Through Finance Act, 2019, the rates of imposition of tax under Section 7B mentioned in Division IIIA, Part I of the First Schedule have been enhanced as:

01. Where profit on debt does not exceed Rs5 million, the tax rate shall be 15 percent;

02. Where profit on debt exceeds Rs5 million but does not exceed Rs25 million, the tax rate shall be 17.5 percent; and

03. Where profit on debt exceeds Rs25 million but does not exceed Rs36 million, the tax rate shall be 20 percent.

The FBR said that where the profit on debt exceeds Rs36 million in a tax year, section 7B will not be applicable and the profit on debt will not be separately taxed for persons other than companies.

In such cases, profit on debt will be chargeable to tax under the head ‘income from other sources’ under section 39 and tax shall be imposed at the rates specified in paragraph (1) or (2), as the case may be, of Division I, Part I of the First Schedule.

KARACHI: Federal Board of Revenue (FBR) has directed banks to provide details of all those persons receiving interests above Rs500,000 in a year on their deposits.

The FBR sources said that an amendment has been introduced to Section 165A of Income Tax Ordinance, 2001 through Finance Act, 2019 and tightened laws regarding information providing by banks about their depositors.

Prior to amendment the clause (d) of the Ordinance, the banks were required to provide a list of persons receiving profit on debt exceeding Rs1 million for filers and Rs500,000 for non-filers and tax deduction thereon during preceding financial year.

However, after the amendment, now the banks are required to provide list of all those persons receiving profit on debt exceeding Rs500,000 – irrespective of filers and non-filers – and tax deduction thereon during preceding financial year.

Through the Finance Act, 2019 the term non-filers has been abolished and a new Tenth Schedule has been introduced under which persons appearing on Active Taxpayers List (ATL) would be subject to reduced rate of withholding tax rates.

Another amendment has been made through the Finance Act, 2019 to clause (a) of Section 165A of the Income Tax Ordinance, 2001, under which the banks are now required to provide a list of persons containing particulars of cash withdrawals exceeding Rs50,00 in a day and tax deducted thereon aggregating to Rs1 million or more during each preceding calendar month.

The amendment deleted the words ‘for filers and non-filers’ due to elimination of term ‘non-filers’.

However, banks would remain required to provide the details under clause (b) of Section 165A of the Ordinance, including a list containing particulars of deposits aggregating rupees ten million or more made during the preceding calendar month.

Meanwhile under clause (c), the banks are required to provide a list to FBR of payments made by any person against bills raised in respect of a credit card issued to that person, aggregating to rupees two hundred thousand or more during the preceding calendar month.