Govt increases tax rate on profits from bank deposits

KARACHI: The federal government has increased the income tax rate to 15 percent from the existing 10 percent on the income generated from the profits on bank deposits, sources in the Federal Board of Revenue (FBR) said on Monday.

Through the Finance Bill, 2021, a major change has been made by increasing the tax rate on income derived through profits from the bank deposits, the sources added.

Currently, a reduced rate of 10 percent withholding tax on profits from bank deposits has been allowed in the cases where the taxpayer furnishes a certificate to the payer of profit that during the tax year the yield or profit paid is Rs500,000 or less.

Therefore, the rate of withholding tax even on yield or profit of Rs500,000 or less in a tax year would be 15 percent from July 1, 2021.

They said tax treatment on profits from other savings and investment schemes would also be changed with the application of the proposed amendment.

The finance bill also proposed changes in income by way of profits on debt of non-corporate persons not exceeding Rs36 million, which is currently subject to tax at reduced rates of a certain slab. Where the profit on debt exceeds Rs36 million, the entire amount is taxable at the normal tax rate. The threshold of Rs36 million is proposed to be reduced to Rs5 million, the sources added.

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