Federal Board of Revenue (FBR) has issued latest tax rates on profit from bank deposits derived during the year 2022/2023.
The FBR issued the withholding tax card for tax year 2023 (July 01, 2022 to June 30, 2023) after amending the Income Tax Ordinance, 2001 through changes brought through Finance Act, 2022.
The FBR collects tax on profit on debt under section 151 of the Income Tax Ordinance, 2001. It issued the rates applicable for both persons on the Active Taxpayers List (ATL) and those who are not on the ATL.
According the latest rates, 15 per cent of the tax is applicable on the persons who are on the ATL and 30 per cent is to be paid by persons not on the ATL while receiving profit on debt falling under clause (a), (b), (c) or (d) of Sub-Section 1 of the Section 151.
The clauses a, b, c and d of the sub-section 1 of section 151 are:
(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 further noted that profit on debt on Sukuk by SPV or a company under sub-section (1A) of Section 151 of Income Tax Ordinance, 2001, the withholding tax rates shall be as follow:
— Company in case of ATL 25 per cent and non-ATL 50 per cent.
— Individual, Association of Person (AOP) return above Rs 1 million the tax rate for ATL shall be 12.5 per cent and in case of non-ATL the tax rate shall be 25 per cent.
— Individual, AOP return below one million rupees the tax rate shall be 10 per cent for ATL and in case of non-ATL the tax rate shall be 20 per cent.
The Sub-Section (1A) of Section 151 of the Income Tax Ordinance, 2001, is:
(1A) Every special purpose vehicle or a company, at the time of making payment of a return on investment in Sukuks to a Sukuk holder shall deduct tax from the gross amount of return on investment at the rate specified in Division IB of Part III of the First Schedule.
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