The government has implemented higher withholding tax rates on prize bond winnings and profit from debt or interest income under National Savings Schemes, particularly targeting individuals who are not on the Federal Board of Revenue’s (FBR) Active Taxpayers List (ATL).
According to the revised policy, taxpayers listed on the ATL will now pay 15 percent withholding tax on any prize bond winnings. In contrast, non-filers will face a significantly higher rate of 30 percent, essentially double the amount charged to compliant taxpayers.
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The same tax structure applies to profits earned on debt or loan interest (under Section 151 of the Income Tax Ordinance). Filers will pay a 15 percent tax on any such earnings, while non-filers will once again be taxed at 30 percent.
Additionally, individuals earning over Rs. 5 million in profit on debt in a tax year will be subject to normal income tax slab rates. For those earning above Rs. 5.6 million, the applicable tax rate will be 45 percent. For profits below this threshold but still exceeding Rs. 5 million, a 40 percent tax will apply.
These changes are aimed at encouraging tax compliance while increasing revenue collection from non-filers who benefit from savings instruments and investment income.
