TAXATION

FBR clarification: good news for overseas Pakistanis for taking exemption from tax on profit on bank deposits

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Income Tax Circular Issued by FBR

Federal Board of Revenue (FBR) made it mandatory for overseas Pakistanis to seek income tax exemption on ‘profit on bank deposits’ received from remittances deposited in their local bank. Exemption Certificate needs to provide to the bank to avail exemption form tax. The FBR on Wednesday issued an Income Tax Circular Number 6 of 2020 here stating:

To encourage foreign remittances in to Pakistan

To encourage Pakistani nationals abroad but to have a Rupee account with a Scheduled Bank in Pakistan. Profit on bank deposits obtained from foreign exchange, especially deposits exempted from tax under Clause 79 of Part-I of Second Schedule to Income Tax Ordinance, 2001.

Under sub-section 2 of section 159 of the Income Tax Ordinance 2001, the taxpayer will be liable to pay the full amount of tax to the withholding agents in case of failure to produce the certificate for tax exemption under section 159 (1) of the Income Tax Ordinance 2001.

Overseas Pakistani must provide ‘Exemption Certificate”

The FBR circular further states that in order to be eligible for relief under this provision. The account holder must be a Pakistani citizen. Who is overseas Pakistani and the remittances must be deposited locally in the same account in any way.

Profit earned from deposits from foreign exchange

The income tax exemption available for any profit on bank deposits obtained from a Rupee account held with a Scheduled Bank in Pakistan by a Pakistani citizen abroad. where the amount deposited in the said account is from a non-resident person. Moreover, exclusively through foreign exchange in this account.

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