FBR Imposed WHT Profit on Saving Certificates

The Federal Revenue Board (FBR) charges filers with a 15% withholding tax and non-filers with the profit from saving certificates as a 30 per cent withholding tax.

Without Bahbood Savings Certificates or Pensioner Benefits Account, the withholding tax is applicable to several National Savings Schemes (NSS) programmes.

The FBR amended the retirement tax on proceeds on savings certificates with effect from 1 July 2021 under the Financing Act 2021 in accordance with the Central Directorate for National Savings (CDNS).

With the FBR ruling, small investors who are not on the list of active taxpayer will bear an additional financing burden (ATL).

Roughly 99 percent of NSS small investors do not receive filers, as ATL does not have a yearly profit of less than Rs. 500,000. However, each month, regardless of their investment limit, customers are obliged to pay 30% on earnings from savings certificates.

The withholding tax previously was 10% for filers and 20% for not-filers for profits of up to Rs. 500,000, whilst the withholding tax for filing companies was 15% and for non-filers it was 30% for profits beyond Rs. 500,000.

Over time, investments in NSS decreased, as CDNS reported an outflow of Rs. 86 billion against net influx of Rs. 258 billion during the same period in FY 19-20 in the first nine months of FY 20-21.

The government stopped all types of institutional funds last July as a result of the deposit of all maturing funds, is one of the factors behind falling NSS investments.

Another cause is the termination of prize bonds, which led to a significant encashment of Rs. 40,000, Rs. 25,000, Rs. 15,000 andRs. 7,500.

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