ISLAMABAD – The Central Directorate for National Savings has raised the income tax rates by 50 percent on the profits earned by making investments in National Savings Schemes (NSS).
Reports in local media cited that, the hike of 15% holding tax on the profits of National Savings Schemes will further discourage small investors from putting their investment in these schemes.
The rate for tax-for-profit on debt imposed under Section 7B of the Income Tax Ordinance shall be 15 percent, a notification issued by the CDNS reads. Individuals not appearing in the active taxpayers list will be charged at whopping 30 percent income tax rate, it added.
CDNS issued the notification after the government changed the tax rates in the current budget while the previous tax rates were 10 percent and 20 percent. The 15 and 30 percent income tax rates are for those who would earn a profit of up to PKR half million. If their profit soared then Rs500,000, they will be charged up to 35 percent.
Earlier, interest income of up to Rs36 million, in the case of individuals and association of persons, was chargeable to tax at rates ranging from 15% to 20% under the final tax regime.
With the new amendments; the interest income up to Rs5 million will be taxed at the rate of 15 percent under the final tax regime. If the interest income is more than Rs5 million, it will be taxed under the normal tax regime.
The revised profit-on-debt tax rates comes at a time when the CDNS is already struggling to retain its existing investment portfolio of Rs4.3 trillion due to certain decisions taken by the incumbent government.
Experts believe most of the investors in these schemes are small savers with an annual profit of less than Rs500,000 and non-filers, therefore, they will be charged up to 30 percent tax.
Investment in National Savings Schemes has already been declining with CDNS recording Rs86 billion outflow during the nine months of FY2021 as opposed to a net inflow Rs258 billion in the corresponding period a year earlier.
Reports quoting sources cited that NSS attracted less funds as government prohibited all kind of institutional funds from July last. Therefore, all funds maturing must have been encashed.
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