KARACHI: The government has increased income tax on profits earned by non-filers from the national savings certificates by 100 percent to push up the number of filers of returns.
The Central Directorate of National Savings (CDNS) said withholding tax (WHT) rate on profits by non-filers of tax returns investing up to Rs500,000 increased to 20 percent from 10 percent in the last fiscal year. Non-filers investing above Rs500,000 have to pay 30 percent withholding tax as opposed to 17.5 percent earlier.
The objective is to tighten grip on non-filers investing in the national savings schemes (NSS). An individual who is not required to file returns may be exempted from the increased tax rate applicable on non-filers.
Number of tax filers is lurking below two million despite the government’s measures to discourage non-filing through higher withholding tax rates on financial transactions. The Federal Board of Revenue (FBR) has so far issued more than four million national tax numbers (NTN) and all the NTN holders are required to file income tax returns.
Withholding tax rate for filers with investment exceeding Rs500,000 have also been increased. Tax filers have to pay 10 percent withholding tax on investment of up to Rs500,000 in savings certificates, while they have to pay 15 percent withholding tax on investment above Rs500,000. In the last fiscal year, only one tax slab of 10 percent was applicable.
The CDNS is a premier financial institution offering retail government securities and savings products (known as national savings scheme) to small savers through diversified product mix. The institution has investor base of seven million and portfolio, which is around 30 percent of total banking deposits of nearly Rs12 trillion. Its share in domestic debt of government is around 19 percent. Most of its products are designed for low-income segments of the society.
The CDNS last week announced up to 2.3 percent increase in rates of returns for national savings certificates in line with the increase in interest rates.
The central bank kept on pushing up interest rates since January 2018. The government announced the rates of NSS after every two months. It was the sixth raise since June last year.
(This news/article originally appeared in The News on July 10th, 2019)