TAX YEAR 2021: tax rate on profit on bank deposits

TAX YEAR 2021: tax rate on profit on bank deposits

KARACHI: Federal Board of Revenue (FBR) has updated rate of tax on profit on debt applicable during tax year 2021 (July 01, 2020 to June 30, 2021).

The FBR issued Income Tax Ordinance, 2001 (updated June 30, 2020) after incorporating amendments introduced through Finance Act, 2020. The FBR updated the rate of tax to be deducted under section 151 shall be 15 percent of the yield or profit:

Provided that the rate shall be 10 percent in cases where the taxpayer furnishes a certificate to the payer of profit that during the tax year yield or profit paid is rupees five hundred thousand rupees or less.

According to the Section 151 of the Ordinance, 2001, the 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 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.

(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.

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