Govt raises tax on prize bond and loan profits for non-filers

The federal government has raised withholding tax rates on winnings from prize bonds and profits on debt and has also implemented strict rules for non-filers as part of its most recent tax changes by the Federal Board of Revenue (FBR).

According to the new policy, individuals entered on the Active Taxpayer List (ATL) will remain taxed at 15% withholding tax on any winnings from any prize bonds.

Individuals who are not registered tax filers will be assessed with a withholding tax rate of 30%, which is double the ATL withholding tax. The same tax regime will apply to profits on debt and loans in the provisions of the tax law for investment, which is structured in Section 151, referred to as rewards are sets of taxes.

This is primarily to encourage more citizens to be active tax filers and to enable potential active tax filers for financial transparency, as these withholding taxes will apply to savings schemes for citizens (National Savings Schemes) and also any investment schemes where interest is earned.

In addition to the above, if any citizen wins above Rs5 million for profits on debt in a tax year, that will be classified as normal income, and anything over Rs5.6 million for profit on any debt will be taxed at 45%, and anything before Rs5.6 million will be taxed at a 40% normal tax rate. 

Notably, these business slab rates are put into play by the government as a measure to broaden the base of collection complaints in taxation.