High Value Prize Bonds Are Reportedly Used To Avoid Taxes in Pakistan

According to a report issued by the State Bank of Pakistan (SBP), the use of large denomination prize bonds has increased dramatically for the purpose of preventing deduction of withholding tax on non-cash banking transactions and to avoid declaring the undocumented income.

Details of the Report

Following the information in the report, investment in Rs. 40,000 and Rs. 25,000 has increased by 60% and 80% respectively, in comparison with the last financial year, after the imposition of withholding tax.


The investment in Rs. 40,000 bonds has increased by 15 billion compared to the previous year, and it now stands at 40 billion rupees. Investment in Rs. 25,000 and Rs. 15,000 bonds increased by 13 billion and 10 billion respectively. While the investments in high valued bonds increased drastically this year, the changes in the amount of investments in lower valued bonds weren’t much and are negligible.

The Effect of Increasing Withholding Tax

The Government imposed a withholding tax of 0.6% on all transactions in the years 2015/2016 for non-income tax return filers. The rate before that used to be 0.4%.

The effect of increasing withholding tax was that the inflow of prize bonds increased greatly during the financial years of 2015/2016 as mentioned earlier.

The SBP states that “Anecdotal evidence suggests that businesses have been using these instruments to settle their transactions instead of using banking instruments like demand drafts, cheques etc. This is the major reason why the increase was more pronounced for larger denomination bonds, including Rs. 40,000 and Rs. 25,000 bonds”

They further added that due to this, higher investments in prize bonds have come at the expense of bank deposit growth.

  • sai tarika ha , prize to nikalta nai ha wese , or ye ishaq dar ka bas nai chalta warna 2,3 percent withholding tax laga deta

  • bhai prize bond kagazka ka aik tukra ha. iss k badlay jo paisay ada kiay jatay hain wo hakomat ko he miltay hain. joo banda prize band layta ha wo ultimately government ko paisay he to dy rha ha. agr Mulk-o-Qoom ka itna he dard ha to in paiso ko qoom ke amanat samajh kr kahein achi jaga invest kr dain (jaisay Dam bananay may), na k in paiso ko baap ka paisa samajh k gaa88d tkk mineral water sy dhoi jae

  • Withholding tax is injustice to those who pay their taxes regularly. Government never refunds excess taxes paid. Recently, they have only allowed to settle payable taxes through previous year’s refundable amount. However, only a few people among salaried class need to pay extra tax on their income in addition to salaries.

  • close