ISLAMABAD: Minister of State for Finance Ali Perveiz Malik said Wednesday that there is no proposal under consideration on Advance-to-Deposit Ratio (ADR) tax exemption for banks.
Ali Perveiz Malik informed Senate Standing Committee on Finance that presently there is no such proposal under consideration in this regard.
Chairman Federal Board of Revenue (FBR) Rashid Mahmood informed the committee that it would be done next year. The tax status would remain the same in coming December 2024 as the tax department cannot estimate the expected ADR as on December 31, 2024.
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He stated that the banking companies follow calendar year as the tax year i.e. from January to December. The current tax year 2025 ends on December 31, 2024. As per half-yearly accounts filed by four banks for January to June 2024, the reported ADR (half-yearly) shows 21 percent to 46 percent for the reported ADR.
FBR Chairman stated that the ADR ratio goes up if banks extend more loans to the private sector than investing in government securities. The FBR cannot estimate the expected ADR as on December 31, 2024.
According to the tax authorities, there is no tax exemption related to ADR. However, the tax rate on the taxable income of a banking company is 39 percent, if the annual ADR of a banking company is more than 50 percent; the tax rate on the taxable income of a banking company is 49 percent instead of 39 percent, if the annual ADR is less than 50 percent, but more than 40 percent and the tax rate on the taxable income of a banking company is 55 percent instead of 39 percent, if the annual ADR of a banking company is upto 40 percent, he added.
Copyright Business Recorder, 2024
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