The Federal Board of Revenue (FBR) has imposed a condition on Pakistani citizens earning profit on debt to submit a certificate on plain paper that total profit on debt received during the tax year from all investments has not exceeded Rs. 500,000 for paying a lower rate of 10 percent tax.
FBR has issued an income tax circular number 7 of 2020 here to clarify the issue of certificate submission by the earners of profit on debt.
The FBR’s circular revealed that the general rate of the tax deduction on profit on debt under section 151 of the Income Tax Ordinance, 2001 is 15% of the profit. However, the proviso to the Division IA of Part III of the First Schedule to the Income Tax Ordinance, 2001, provides that the tax rate shall be 10% in cases where the taxpayer furnishes a certificate to the payer of the profit on debt that during the tax year, total yield or profit payable in his case shall remain at Rs. 500,000/- or less.
Queries have been received regarding the nature or format of the above-referred certificate. It is clarified that the required certificate is to be furnished by the recipient of the profit on debt to the payer of such profit to the effect that total profit on debt received/receivable during the tax year from all investments in his case shall not exceed Rs. 500,000/-.
The requisite certificate can be submitted on plain paper, FBR added.