Tax rates on Profit on Debt during TY22

Tax rates on Profit on Debt during TY22

The advance tax rates on on profit on debt during tax year 2022 are under the First Schedule of the Income Tax Ordinance, 2001.

The Federal Board of Revenue (FBR) issued the Income Tax Ordinance, 2001 updated up to June 30, 2021. The Ordinance incorporated amendments brought through Finance Act, 2021.

The rate of tax to be deducted under section 151 shall be 15% of the yield or profit.

Following is the text of Section 151 of Income Tax Ordinance, 2001:

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 10 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 payer of the profit shall deduct tax at the rate specified in Division IA of Part III of the First Schedule from the gross amount of the yield or profit paid as reduced by the amount of Zakat, if any, paid by the recipient under the Zakat and Ushr Ordinance, 1980 (XVII of 1980), at the time the profit is paid to the recipient.

(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.

(2) This section shall not apply to any profit on debt that is subject to sub-section (2) of section 152.

(3) Tax deductible under this section shall be a minimum tax on the profit on debt arising to a taxpayer, except where —

(a) taxpayer is a company; or

(b) profit on debt is taxable under section 7B.

(Disclaimer: The text of the above section is only for information. Team makes all efforts to provide the correct version of the text. However, the team is not responsible for any error or omission.)

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