Tax Rates on Profit from Bank Deposits for year 2022-2023

The Federal Board of Revenue (FBR) has announced the Tax Rates on Profit from Bank Deposits for the year 2022-2023. Here you will find the Tax Rates on Profit from Bank Deposits for the financial year 2022-2023.

In the latest announcement, FBR issued the withholding tax rates for the tax year 2023 (July 01, 2022, to June 30, 2023) after amending the Income Tax Ordinance, 2001 through Finance Act, 2022.

The FBR collects tax on profit on debt under section 151 of the Income Tax Ordinance, 2001. These tax rates will be applicable for both active and non-active taxpayers.

According to FBR’s latest tax rates, 15 percent of the tax is applicable to the persons who are on the Active Taxpayer Lis (ATL) and 30 percent is to be paid by persons, not by the ATL. While receiving profit on debt falling under clauses (a), (b), (c) or (d) of Sub-Section 1 of Section 151 will be:

  1. a person pays yield on an account, deposit, or a certificate under the National Savings Scheme or Post Office Savings Account;
  2. a banking company or financial institution pays any profit on debt, being an account or deposit maintained with the company or institution;
  3. the Federal Government, a Provincial Government, or a Local Government pays to any person profit on any security other than that referred to in clause (a) issued by such Government or authority; or
  4. a banking company, a financial institution, a company referred to in sub-clauses (i) and (ii) of clause (b) of sub-section (2) of section 80, or a finance society pays any profit on any bond, certificate, debenture, security or instrument of any kind (other than a loan agreement between a borrower and a banking company or a development finance institution) to any person other than a financial institution.

The FBR further noted that profit on debt on Sukuk by SPV or a company under sub-section (1A) of Section 151 of Income Tax Ordinance, 2001, the withholding tax rates shall be as follow:

  • Company in case of ATL 25 percent and non-ATL 50 percent.
  • Individual, Association of Person (AOP) return above Rs 1 million the tax rate for ATL shall be 12.5 percent and in the case of non-ATL, the tax rate shall be 25 percent.
  • For an individual, AOP returns below one million rupees the tax rate shall be 10 percent for ATL and in the case of non-ATL, the tax rate shall be 20 percent.

According to Sub-Section (1A) of Section 151 of the Income Tax Ordinance, 2001, is:

(1A) Every special purpose vehicle or a company, at the time of making payment of a return on investment in Sukuks to a Sukuk holder shall deduct tax from the gross amount of return on investment at the rate specified in Division IB of Part III of the First Schedule.

These are the new tax rates on profit from bank deposits.

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