I'm always excited to take on new projects and collaborate with innovative minds.
contact@abdulqadir.info
https://abdulqadir.info
28-Model Extension
Section 151 covers withholding tax on profit on debt from savings schemes, bank deposits, securities and bonds, with higher rates for non-filers. Gains on certain debt securities are also taxed under Section 151(1A).
Where;
151(1)(a): a person pays yield on an account, deposit or a certificate under the National Savings Scheme or Post Office Savings Account;
151(1)(b): a banking company or financial institution pays any profit on a debt, being an account or deposit maintained with the company or institution;
151(1)(c): the Federal Government, a Provincial Government or a Local Government pays to any person profit on any security other than that referred to in clause (a) issued by such Government or authority;
151(1)(d): a banking company, a financial institution, a company or a finance society pays any profit on any bond, certificate, debenture, security or instrument of any kind (other than a loan agreement between a borrower and a banking company or a development finance institution) to any person other than financial institution.
the payer of the profit shall deduct tax at the rate specified in DIVISION IA OF PART III OF THE FIRST SCHEDULE from the gross amount of the yield or profit paid as reduced by the amount of Zakat, if any, paid by the recipient under the Zakat and Ushr Ordinance, 1980 (XVII of 1980), at the time the profit is paid to the recipient.
WITHHOLDING TAX DEDUCTION / RATES | ||||||
|---|---|---|---|---|---|---|
|
|
| APPLICABLE TO CO / AOP / IND | TAX | ||
SR | UNDER | PARTICULARS / DESCRIPTION | FILER | NON | IND / AOP | CO |
1 | 151(1)(a) | Yield on an account, deposit or a certificate under the National Savings Scheme or Post office saving account | 15% | 30% | FTR* | NTR |
2 | 151(1)(b) | Yield or profit on a debt, being on an account or deposit maintained with a banking company or a financial institution | 20% | 40% | ||
3 | 151(1)(c) | In case of Individual; Yield or profit on any security issued by Federal Government, a Provincial Government or a local Government other than profit on National Saving Scheme or Post Office Saving account to any person | 15% | 30% | ||
In case of Company / AOP; Yield or profit on any security issued by Federal Government, a Provincial Government or a local Government other than profit on National Saving Scheme or Post Office Saving account to any person | 20% | 40% | ||||
4 | 151(1)(d) | Profit on any bond, certificate, debenture, security or instrument of any kind (excluding loan agreement between a borrower and a banking company or a development finance institution) issued by a banking company, a financial institution, company or a finance society, to any person other than a financial institution | 15% | 30% | ||
5 | - | In all cases, other than mentioned above clauses | 15% | 30% | ||
Where the profit derived by an individual exceeds five million rupees, the income shall be taxed under the normal tax regime, and any tax deducted at source shall be treated as adjustable. | ||||||
Every custodian of debt securities including a banking company responsible to maintain Investor Portfolio Securities (IPS) Account on behalf of holder of a debt security shall at the time of disposal of debt securities including government securities deduct tax at the rate specified in DIVISION IIIAA OF PART III OF THE FIRST SCHEDULE on the gross amount of capital gain arising to such holder and deposit the same in government treasury.
Provided that this section shall not apply on disposal of debt securities made through registered stock exchange and which are settled through NCCPL.
WITHHOLDING TAX DEDUCTION / RATES | |||||
|---|---|---|---|---|---|
SR | UNDER | PARTICULARS / DESCRIPTION | FILER | NON | TAX |
1 | 151(1A) | Return on investment in sukuk, excluding "The Second and Third Pakistan Sukuk Company", in case, sukuk holder is Company | 25% | 50% | FTR |
2 | Where the Return is more than 1 Million; Return on investment in sukuk, excluding "The Second and Third Pakistan Sukuk Company", in case, sukuk holder is Individual / AOP | 12.5% | 25% | ||
3 | Where the Return is less than 1 Million; Return on investment in sukuk, excluding "The Second and Third Pakistan Sukuk Company", in case, sukuk holder is Individual / AOP | 10% | 20% | ||
Section 151 of the Income Tax Ordinance, 2001 governs the withholding of tax on profit on debt earned from various financial instruments, including bank deposits, National Savings Schemes, government securities, and corporate debt instruments. Depending on the nature of the payer and the type of investment, tax is deducted at source at the rates prescribed in the First Schedule, with higher rates applicable to non-filers. Profit on debt exceeding Rs. 5 million for individuals is taxed under the normal tax regime, and any withholding becomes adjustable.
Section 151(1A) covers capital gains arising from the disposal of certain debt securities maintained through Investor Portfolio Securities (IPS) accounts. In such cases, custodians must withhold tax on the gross capital gain as per the specified rates, except where transactions are executed through a registered stock exchange and settled via NCCPL. Withholding rates vary based on whether the security holder is a company, individual, or AOP, and whether the return exceeds one million rupees.
Overall, Sections 151 and 151(1A) ensure proper and comprehensive tax collection on profit on debt and capital gains from debt instruments, strengthening compliance and promoting transparency in financial transactions.
