KARACHI: Tax authorities have collected Rs800 million under the head of profit on bank deposits during the first half of the current fiscal year, compared with Rs228 million in the corresponding period of the last year, registering a growth of 250 percent.
According to the data made available, the collection of profit on debt increased 250 percent to Rs800 million during July–December 2018, compared with Rs228 million in the corresponding period of the last year.
Sources in the Federal Board of Revenue (FBR) said challenging economic conditions and declining stock exchange encouraged people to deposit their money in the banking system.
The deposits of the banking system increased to record Rs13.35 trillion by the end of December 2018, registering eight percent growth, compared with Rs12.36 trillion in the same month of the last year.
Also Read: Non-filers of returns are not tax evaders
The increase in key policy rate by the State Bank of Pakistan (SBP) also persuades people to get higher returns on their savings through banking system, the sources said.
Last year, the State Bank increased the policy rate by 4.25 percent. The policy rate has been enhanced from 5.75 percent to 10 percent during the year 2018.
The banking companies are required to collect 10 percent, while paying profit to customers on their deposits or other saving schemes, the sources said.
The banks are also required to pay tax at 10 percent of the profit derived from investment in government securities.
However, tax collection under this head fell 31 percent to Rs982 million during July–December 2018, compared with Rs1.42 billion in the corresponding period of the last year.
The sources said due to lower interest rates during the last few years, the banks were reluctant to invest in government securities.
However, the investment in government securities will increase in the future due to higher interest rates.
The banks are anticipating more increase in interest rate by the central bank in the upcoming monetary policy.
The collection of tax from investment of banks in other securities also fell 15 percent to Rs170.34 million during the first half of the current fiscal year, compared with Rs201 million in the corresponding period of the last fiscal year.
The banks collect tax on all types of profit on debt under Section 151 of the Income Tax Ordinance, 2001. The combined collection under this head stood at Rs1.95 billion during the first six months of the current fiscal year, compared with Rs1.85 billion in the corresponding months of the last fiscal year.
(This news/article originally appeared in The News on January 23rd, 2019)