Islamabad: Federal Board of Revenue (FBR), on Wednesday, issued a circular instructing banks that since that they are required to withhold tax on profit on debt unless overseas Pakistanis produce an exemption certificate under Section 159 of the Income Tax Ordinance – a news source reported.
According to the details, the income tax circular stated that the Section 159(2) of Income Tax Ordinance, 2001 requires withholding agents to deduct full amount of tax in case the taxpayer does not produce tax exemption certificate under Section 159(1) of Income Tax Ordinance, 2001.
However, in order to incentivise remittances from overseas Pakistanis, profit on debt for a Rupee account with a scheduled bank in Pakistan is exempt from tax to the extent of the deposit that has been made exclusively from foreign exchange.
To qualify for such an exemption, the account holder is required to be a Pakistani citizen living abroad and profit on debt may be in no way attributable to local deposit in same account.
