Sunday Jul 04, 2021
ISLAMABAD: The Federal Board of Revenue (FBR) has imposed a uniform withholding tax of 15% on filers and 30% on non-filers on the profit they avail on saving certificates, transferring the financial burden on small investors who do not exist on active taxpayers list (ATL), showed a notification issued on Saturday.
The new rates are applicable on various instruments of National Savings Schemes (NSS) apart from profits on Bahbood savings certificates and pensioner benefit account, said officials.
In a notification, the Central Directorate of National Savings (CDNS) announced the government revised the rates of withholding tax on NSS with effect from July 1, 2021 under the Finance Act 2021/22.
“The rate of tax on profit on debt imposed under the Section 7B shall be 15% effective from 1-7-2021. However, [for] person not appearing into active taxpayers list, the rate of tax required to be deducted or collected as maybe shall be increased by hundred percent of the rate specified in the first schedule of the said ordinance,” CDNS said in a statement.
“Now [for] the person appearing into ATL, the uniform rate of 15% of withholding tax will be charged irrespective of date of investment and amount.
For person not appearing into ATL, the FBR will charge 30% WHT irrespective of date of investment and amount.”
The revision means that the the tax burden on NSS investors has been doubled.
Close to 98 to 99% small investors who rely on saving certificates do not exist on ATL.
This means, that despite the investment limit, they will have to pay 30% on their profits on monthly basis.
Most of NSS investors are small savers with annual profit less than 500,000 and they are non-filers. Therefore, they will be charged with additional 10 percent tax, according to the new law.
“It is an utterly unjustified move of the government because small investors would not be able to become filers in the complex tax system,” Zafar Sheikh, ex-director general of CDNS told The News.
“Institutional investment was barred and now small investors were made scapegoat… it seemed that some groups with vested interest want to annihilate CDNS,” Sheikh said, referring to the last year’s ban which sliced an estimated Rs650 billion institutional funds off the NSS.
Previously rate of WHT was 10% for profit up to Rs500,000 for filers and 20% for non-filers while profit beyond Rs500,000 was taxed at 15% for filers and 30% for non-filers.
Investment in NSS 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, according to an official estimate.
CDNS sources said NSS attracted less funds as government prohibited all kind of institutional funds from July last. Therefore, all funds maturing must have been encashed.