ISLAMABAD: Federal Board of Revenue (FBR) has updated withholding tax card for dividend income to be applicable during Tax Year 2021 (2020-2021).
The FBR issued the withholding tax card 2020-2021 (updated up to June 30, 2020) after incorporating amendments made to Income Tax Ordinance, 2001 through Finance Act, 2020.
Under Section 150 of Income Tax Ordinance, 2001, every person paying dividend shall collect/deduct withholding tax at prescribed rates from recipient of dividend at the time the dividend is actually paid.
The tax shall be final under section 5 read with section 8 of the Income Tax Ordinance, 2001.
According to the updated withholding tax card:
Tax shall be deducted on the gross amount of dividend paid:
(a) In the case of dividend paid by Independent Power Purchasers (IPPs) whereas 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:
The tax rate shall be 7.5 percent and 15 percent for persons not appearing on Active Taxpayers List (ATL).
(b) In mutual funds and cases other than mentioned at (a) above and (ba) below
The tax rate shall be 15 percent and 30 percent for persons not appearing on the ATL.
(ba) In case of 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 of Chapter-III or claim of tax credits under Part-X of Chapter-III.
The tax rate shall be 25 percent and the rate shall be increased by 100 percent in case the person is not on the ATL.
Return on Investment in Sukuk under Section 150A
Special Purpose Vehicle, Company shall collect / deduct withholding tax at prescribed rates from Sukuk holders on payment of gross amount of return on investment at the time of actual payment
The tax shall be final under section 5AA read with section 8 of the Income Tax Ordinance, 2001.
On Payment of return on investment in Sukuks:
a) In case the Sukuk- holder is a company the tax rate shall be 25 percent and it shall be increased by 100 percent in case persons are not on the ATL.
b) In case the Sukuk – holder is an individual or an association of person, if the return on investment is more than one million, the tax rate shall be 12.5 percent and the rate shall be doubled in case persons not appearing on the ATL.
c) In case the Sukuk – holder is an individual and an association of person, if the return on investment is less than one million, the tax rate shall be 10 percent and will be doubled in case person is not on the ATL.