FBR imposes flat 10% Income Tax on Bahbood & Pensioners Certificates

Karachi (October 11, 2017):- Federal Board of Revenue (FBR) has imposed a flat 10 percent tax on income from Bahbood Savings certificates and pensioners account, two major investment opportunities for senior citizens and widows.
“Persons deriving income from Bahbood Certificates and Pensioners Benefit Account are required to pay tax at the rate of 10 percent on gross amount of profit on debt on such accounts,” the FBR said in a notice.
Analysts said the uniform tax rate will boost investment in saving certificates offered by the National Savings. Further, they said the tax rate on financial derivatives will not be more or less than 10 percent under the concessionary rates and so such instruments continue to maintain their competitive advantage over other debts charged with variable tax rates.
FBR has progressive tax slabs for profit on debt under Section 7-B of Income Tax Ordinance 2001. There is 10 percent tax on income from debt up to Rs. 25 million, while the rate is 15 percent on debt exceeding Rs. 50 million.
State-run Central Directorate of National Savings (CDNS) recorded Rs. 5.43 billion investment in its Bahbood certificates in July, while inflows in Pensioners’ Benefit Account amounted to Rs. 1.37 billion during the month, CDNS latest data showed. Total investment in National Savings schemes stood at Rs. 12.03 billion in July.
CDNS logged deposits in Bahbood Savings Certificates and Pensioners’ benefit account at Rs. 755 billion and Rs. 255 billion, respectively as of July 2017. Total deposits in all its schemes, including prize bonds, stood at Rs. 3.44 trillion till July-end.
FBR said it has received several request for explaining the tax treatment for yield or profit on investment in Bahbood certificates and pensioners benefit accounts. It said Section 7-B of Income Tax Ordinance 2001 explained the applicable rates for profit on debt on an individual, other than a company. The revenue body said individuals deriving income from yield/profit on investment in Bahbood certificates/pensioners benefit accounts are taxed under Section 7-B of the ordinance.
The FBR further said the income tax is not subject to withholding tax. “Therefore, the amount chargeable to tax under Section 7-B is to be paid at the time of filing of returns of income,” the FBR added. The revenue body said the concessionary tax rates are applicable on gains. “Any amount paid as yield or profit on investment in Bahbood certificate or pensioners benefit account shall not exceed 10 percent of such profit,” FBR said.

Source: www.thenews.com.pk

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