ISLAMABAD: The Federal Board of Revenue (FBR) has relaxed some major enforcement provisions of the Finance Act 2025 including provisions of arrest in tax fraud cases and cash deposits in the bank account of the seller would now be considered through banking channels.
The FBR has also announced that the withholding tax rate on profit on debt derived from sources such as National Saving Schemes or post office Savings Account etc. remains unchanged for 2025-26.
The FBR has relaxed these conditions through issuance of income and sales tax budget explanatory circulars issued on Monday.
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The income tax circular stated that for the purposes of section 21(s), it is clarified that when a person, whether an NTN holder or otherwise, deposits the cash against invoices in the bank account of the seller, the payment shall be treated as having taken place through banking channel and no disallowance of the expenditure will be made in this regard under this clause.
The FBR has further clarified that the tax rate on profit on debt derived from deposits in banking companies, financial institutions and investment in government securities, except the profit derived by individuals from government securities, have been increased from 15% to 20%.
The tax rate on profit on debt derived from sources such as National Saving Schemes or Post office Savings Account etc. remains unchanged. Necessary changes in this regard have been incorporated in Division lA of Part lll of the First Schedule. Prior to Finance Act, 2025 in Tenth Schedule the rate for non-filer persons were specified at 35% on profit on debt. Now this entry has been omitted and for tax year 2026 and onwards hundred percent increases in tax rates for non-filers persons deriving income from profit on debt will apply.
The new section 175AA of the Income Tax Ordinance 2001 envisages secure exchange of information allowing Board to share particulars of a taxpayer declared in its income tax/sales tax return as well as financial/wealth statement with scheduled banks through database algorithms for cross matching.
After needful has been performed, the scheduled banks will provide to the Board data of such bank transactions which is at variance with the given input of the Board. The implementation of this provision will be helpful in compliance risk management. The information will be kept confidential and only be used for tax purposes.
Copyright Business Recorder, 2025
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