Profit after tax

The Federal Board of Revenue (FBR) has recently imposed a harsh and unjustified condition of deducting 20 percent tax on profits on saving certificates if the profit exceeds Rs500,000 in a year. It means that if certificate holders get a profit of Rs41,666 per month, they will have to pay a little over Rs8,000 in taxes per year. The profit after tax will be reduced to slightly above Rs30,000. It is highly unjustified that the government imposes a 20 percent tax. Also, account holders mention the amount of profit in their tax returns and pay tax on that profit.

Millions of retired people and widows have deposited their savings in government-backed saving schemes. Instead of offering them a reasonable rate of return, the government has introduced a harsh tax policy and enhanced the deduction rate from 10 percent to 20 percent – which is applicable to even filers. This step is not only highly unjustified but will likely encourage people to keep their money away from legal channels. The FBR should reconsider this policy and focus on offering saving schemes which encourage people to invest in such schemes.

Khawaja Tajammul Hussain

Karachi