ISLAMABAD: Federal Board of Revenue (FBR) has said that persons deriving income from pensioners benefit accounts are required to pay income tax at the rate of 10 percent.
Similarly, the tax rate at 10 percent is applicable on the returns from Bahbood certificates, said an Income Tax Circular No. 06 issued by the FBR.
The FBR said that clarification had been sought from the board regarding tax treatment of yield or profit on investment in Bahbood certificates and pensioners benefit account.
As per Section 7B of the Income Tax Ordinance, 2001 a tax shall be imposed at the rate specified in Division IIIA of Part I of the First Schedule on every person, other than a company, who receives a profit on debt from any person mentioned in clauses (a) to (d) of sub-section (1) of Section 151.
The tax shall be computed by applying the relevant rate of tax on the gross amount of the profit on debt.
As per law, persons deriving income from yield/profit on investment in Bahbood certificates/ pensioners benefit account are chargeable to tax under 7B.
As per clause (36A) of the Part IV of the Second Schedule, amount paid as yield or profit on such accounts is not subject to withholding tax under Section 151. Therefore, the amount chargeable to tax under Section 7B as per rates specified in Division IIIA of Part I of the First Schedule is to be paid at the time of filing of return of income.
However, the FBR said, as per clause (6) of Part III of the Second Schedule, the tax payable on any amount paid as yield or profit on investment in Bahbood Saving Certificate or Pensioner Benefit Account shall not exceed 10 percent of such profit.
Although there are three progressive slabs of tax imposed under Section 7B with the lowest being 10 percent for profit on debt up to Rs25,000,000 and the highest rate for profit on debt exceeding Rs50,000,000 is Rs5,625,000 plus 15 percent of the amount exceeding Rs50,000,000, the rate of tax for Bahbood Saving Certificate of Pensioners Benefit Account is not to exceed 10 percent as per clause (6), Part III of the Second Schedule.
The rate of tax also cannot be lower than 10 percent because the minimum rate on the gross amount of profit on debt in Division IIIA of Part I of the First Schedule is 10 percent. Therefore, persons deriving income from Bahbood Certificates/Pensioners Benefit Account are required to pay tax at the rate of 10 percent on gross amount of profit on debt on such accounts.
