KARACHI: The withholding tax collected on winning of prize bond shall be final tax liability either it is collected from person appeared on Active Taxpayers List (ATL) or not.
Sources in Federal Board of Revenue (FBR) said that the withholding tax collected on winning of prize bonds may not be adjusted against the total tax liability of a taxpayer.
Similarly, the withholding tax deducted on winning from a raffle, lottery or winning a quiz, prize offered by companies will also not be adjustable.
The collection of tax has been made under Section 156 of Income Tax Ordinance, 2001. While from tax year 2020 the withholding tax under this section has been increased by 100 percent for those persons not appearing on ATL.
Section 156: Prizes and winnings
Sub-Section (1): Every person paying 10[prize on] a prize bond, or winnings from a raffle, lottery, prize on winning a quiz, prize offered by companies for promotion of sale, or cross-word puzzle shall deduct tax from the gross amount paid at the rate specified in Division VI of Part III of the First Schedule.
Sub-Section (2): Where a prize, referred to in sub-section (1), is not in cash, the person while giving the prize shall collect tax on the fair market value of the prize.
Sub-Section (3): The tax deductible under sub-section (1) or collected under sub-section (2) shall be final tax on the income from prizes or winnings referred to in the said sub-sections.
The tax rate as specified under Division VI of Part III of the First Schedule of Income Tax Ordinance, 2001, shall be:
(1) The rate of tax to be deducted under section 156 on a prize on prize bond or cross-word puzzle shall be 15 percent of the gross amount paid.
(2) The rate of tax to be deducted under section 156 on winnings from a raffle, lottery, prize on winning a quiz, prize offered by a company for promotion of sale, shall be 20 percent of the gross amount paid.
However, with the introduction of Tenth Schedule of Income Tax Ordinance, 2001 the tax rate to be collected on such winning will be increased by 100 percent from persons not appearing on the ATL.
Therefore the tax rate on winning prize bond from person not appearing on ATL will be 30 percent. Similarly, the rate of tax will be 40 percent from persons wining winnings from a raffle, lottery, prize on winning a quiz, prize offered by a company for promotion of sale.