Uniform income tax rate applied on dividend income

ISLAMABAD: The income tax rates on dividend income on various shares of companies have been increased to make an uniform rate applicable for tax year 2020 and onwards.

Sources in Federal Board of Revenue (FBR) said that the various rates of dividend rates had been uniformed at 15 percent.

Prior to budget 2019/2020 dividend income is not part of income under normal tax regime and is subject to separate taxation. The standard rate of tax on dividend income is now 15 percent.

The previous tax rate of 7.5 percent on dividend received on shares of a company set up for power generation or on shares of a company supplying coal exclusively to power generation projects has been increased to 15 percent.

Further, tax rate of dividend which was charged at 25 percent for persons receiving dividend from companies which enjoy exemption of tax on income or where no tax is payable due to availability of tax credits or due to brought forward business or depreciation losses.

Previously the rate of tax on dividend received by a person from a mutual fund was 10 percent and 12.5 percent. Persons those were receiving dividend from stock fund is also taxed 12.5 percent.

Furthermore dividend received by a person from a development REIT scheme was reduced by 50 percent of the normal rate.

Now all these rates are being enhanced to 15 percent, the FBR said.

For withholding tax on dividend also a standard rate of 15 percent is being applied for persons receiving income.

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