National Savings to give lower tax rate on profits up to Rs. 500,000

February 2, 2021

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Official statement from the Central Directorate of National Savings (CDNS) has made it clear that people making earning less than 500,000 rupees in Profit Income from National Savings Schemes must present a certificate to receive a reduced income tax rate of 10 percent.

At present, the rate of income tax on Profit under the National Savings System is 15%. However, the rate would lower to 10% if the annual profit amounts up to Rs 500,000 and the person making profit provides evidence that his or her income from savings plans should not exceed the minimum.

Officials said the tax rate will be 15% if annual income exceeds Rs 500,000 under the schemes. However, the 15% rate is only available to people who are on the Active Taxpayer List (ATL) of FBR. In other cases, when a person is not listed on ATL, the tax rate is 30%. In this regard, Amendments to the 2001 Income Tax Law have been made and circulated to all concerned. In the Finance Act of 2020, Section 151 of the Income Tax Ordinance of 2001 was amended regarding gains on arrears.

Section 151 (1) (a) states that for income from profits (earnings from debt) in an account, deposit, or certificate under the National Savings Plan or Post Office Savings Account, the tax rate should be 10% of total income/profits. Payable up to Rs 500,000. Tax rate above Rs 500,000 is 15% of gross profit / profit paid. For people who are not from ATL, the applicable tax rate will be increased by 100%.