TAX YEAR 2021: rate of advance tax on dividends

ISLAMABAD: Federal Board of Revenue (FBR) has updated rate of advance tax on dividends for tax year 2021 (July 01, 2020 to June 30, 2021).

The FBR issued Income Tax Ordinance, 2001 (updated up to June 30, 2020) after incorporating amendment brought through Finance Act, 2020.

The FBR updated the rate of tax to be deducted under section 150 and 236S:

(a) 7.5 percent in case of dividend paid by Independent Power Producers where such dividend is a pass through item under an Implementation Agreement or Power Purchase Agreement or Energy Purchase Agreement and is required to be reimbursed by Central Power Purchasing Agency (CPPA-G) or its predecessor or successor entity.

(b) 15 percent in mutual funds and cases other than those mentioned in clauses (a) and (ba); and

(ba) 25 percent in case of a person receiving dividend from a company where no tax is payable by such company, due to exemption of income or carry forward of business losses under Part VIII Chapter III or claim of tax credits under Part X of Chapter III.

According to Section 150: Dividends — Every person paying a dividend shall deduct tax from the gross amount of the dividend paid at the rate specified in Division I of Part III of the First Schedule.

According to 236S: Dividend in specie — Every person making payment of dividend-in-specie shall collect tax from the gross amount of the dividend in specie paid at the rate specified in Division I of Part III of the First Schedule.

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