Tax rate at 15 percent applicable on profit on debt: FBR

Tax rate at 15 percent applicable on profit on debt: FBR

ISLAMABAD: Federal Board of Revenue (FBR) on Wednesday said that the general rate of tax is 15 percent on yield on investments. However, it is reduced at 10 percent where annual profit is below Rs500,000.

The FBR issued Income Tax Circular No. 07 of 2020 to clarify tax rate under Section 151 of the Income Tax Ordinance, 2001.

The FBR said: “General rate of tax deduction on profit on dent under Section 151 of the Income Tax Ordinance, 2001 is 15 percent of the profit.

“However, provision to the Division IA of the Part III of the First Schedule to the Income Tax Ordinance, 2001, provides that tax rate shall be 10 percent in case where the taxpayer furnishes a certificate to the payer of the profit on debt that during the tax year, total yield or profit payable in this case shall remain at Rs500,000 or less.”

The FBR said that queries had been received regarding the nature or format of the certificate.

“The required certificate is to be furnished by the recipient of the profit on debt to the payer of such profit to the effect that total profit on debt received/receivable during the tax year from all investments in his case shall not exceed Rs500,000,” the FBR said, adding that the requisite certificate can be submitted on plain paper.

According to the withholding tax card for tax year 2021 issued by the FBR, the profit on debt may be on account of deposit, account or a certificate under the National Saving Schemes or Post office savings account.

Besides, the same rates shall be applicable on profit on debt paid by a banking company or financial institution on account or deposit maintained.

Furthermore, the tax rates are also applicable on profit on bonds, certificates, debentures, securities or instruments of any kind (other than loan agreements between borrowers and banking companies or development financial institutions.

The tax rate of 15 percent shall be increased by 100 percent to 30 percent for persons not appearing on Active Taxpayers List (ATL).

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