‘Profit on debt’ CDNS to charge 30pc WHT on persons not appearing in ATL

ISLAMABAD: The Central Directorate of National Savings (CDNS) will charge 30 percent withholding tax on “profit on debt” from persons not appearing in the Active Taxpayers List (ATL) of the Federal Board of Revenue (FBR). In this connection, the CDNS Islamabad has issued revised rates of withholding tax on national saving schemes effective from July 1, 2021.

According to a communication of CDNS to its regional offices on Finance Act 2021, refer to the amendments made in Division-III of Part-I of First Schedule of the Income Tax Ordinance 2001 vide Finance Bill 2021 and explanation of important amendment made by the FBR.

Accordingly, the rate of tax for profit on debt imposed under Section 7B shall be 15 percent effective from July 1, 2021. However, persons not appearing in the ATL, the rate of tax required to be deducted or collected as the case may be, shall be increased by 100 percent of the rate specified in the First Schedule of the Income Tax Ordinance 2001.

The rate of withholding tax (irrespective of the date of investment and amount), would be 15 percent on persons appearing in the ATL and the rate of withholding tax (irrespective of the date of investment and amount), would be 30 percent on persons not appearing in the ATL, CDNs instructions added.

The FBR’s income tax explanatory circular said that the scope of separate block taxation on interest income has been reduced. Previously, interest income upto Rs36 million, in case of individuals and AOPS was chargeable to tax at the rates ranging from 15 percent to 20 percent under final tax regime.

By virtue of new amendments, the interest income upto Rs5 million shall be taxed at the rate of 15 percent under final tax regime.

If the interest income is more than Rs5 million, it shall be taxed under normal tax regime.

Uniform rate of withholding tax under Section 151 of the Ordinance on interest income has been introduced at 15 percent, the FBR added.

When contacted, a tax expert said that the said tax shall not apply to Bahbood certificates, pension and Shuhada accounts.

Under clause (36A), Part IV, Second Schedule, the provisions of clause (a) of sub-section (1) of Section 151 shall not apply in respect of any amount paid as yield or profit on investment in Bahbood Savings Certificate or Pensioner’s Benefit Account and Shuhada Family Welfare Account.

In this case, there is no withholding tax.

Moreover, under clause (6), Part III of the Second Schedule, the tax payable under clause (c) of sub-section (1) of Section 39, in respect of any amount paid as yield or profit on investment in Bahbood Savings Certificate or Pensioners Benefit Account and Shuhada Family Welfare Account shall not exceed 10 percent of such profit. Its tax is still there and not removed by Finance Act, 2021, he added.

Copyright Business Recorder, 2021