A significant alteration to the income tax rate on profits from national saving schemes has been introduced through the Finance Act, 2021. As of July 01, 2021, individuals not listed on the Active Taxpayers List (ATL) are now subject to a 30% withholding income tax rate on profits earned from saving schemes.
The Central Directorate of National Savings (CDNS) issued a notification, highlighting the revised withholding tax rates on national saving schemes, which came into effect from the start of July 2021. These changes are a result of amendments made to the Income Tax Ordinance, 2001, through the Finance Act, 2021.
According to the notification, the rate of tax for profits on debt, imposed under Section 7B, has been adjusted to 15% effective from July 01, 2021. However, for individuals not appearing on the ATL, the applicable tax rate for deduction or collection, as the case may be, will be increased by a hundred percent of the specified rate.
This means that those individuals who are not currently listed on the ATL will now face a higher withholding tax rate of 30% on their profits from national saving schemes, reflecting a doubling of the standard rate of 15%.
The move is part of the government’s broader efforts to incentivize tax compliance and encourage individuals to be included in the ATL. Being on the ATL signifies that an individual is a registered taxpayer and fulfills their tax obligations regularly. The revised withholding tax rate for non-ATL individuals aims to create a distinction between those who actively contribute to the tax system and those who are not yet compliant.
National saving schemes have been a popular investment choice for individuals seeking secure and government-backed avenues for their savings. The adjustment in the withholding tax rates aligns with the government’s strategy to streamline taxation policies, promote transparency, and enhance revenue collection.
It is important for individuals to be aware of these changes and take necessary actions, such as getting listed on the ATL, to optimize their tax implications. While the higher withholding tax rate applies to non-ATL individuals, those on the ATL will continue to be subject to the standard 15% withholding tax rate on profits from national saving schemes.
These changes underscore the dynamic nature of tax policies and the government’s commitment to adapt them to achieve broader economic objectives. As individuals navigate their investment decisions, staying informed about tax regulations and compliance requirements becomes crucial to managing their financial affairs effectively.
