ISLAMABAD – The Federal Board of Revenue (FBR) is considering a two percent increase in the tax rate on profit earned from deposits placed in commercial banks and savings schemes as the government is engaged with the IMF to provide relief to salaried class in upcoming budget 2025-26.
Reports said a proposal has been made to increase the tax rate for both filers and non-filers in the upcoming budget.
However, the IMF has not yet given final approval to this proposal as it has sought details of various tax proposals to compensate for the losses resulting from providing relief to salaried and other sectors.
As the size of the formal sector is shrinking, there has been a decline in tax revenue collection following the high rates imposed in the previous fiscal year 2024-25 under the IMF program.
An expert told media that if the tax rate is increased, it will make life difficult for those who rely on profit income earned from their deposited savings in banks and savings schemes. Similarly, commercial banks will also suffer because their deposits may decrease due to hike in tax rate.
It is recalled that the current tax rate on interest income for filers was 15%, while for non-filers it had been increased to 35%.
Another economic expert opposed the proposal of increasing tax on profits earned by people on deposits in commercial banks and savings schemes.
He said the 15% rate on interest income was already quite high because bank deposits—on which interest is earned—are generated from income that was already subject to tax at the time of earning.
Furthermore, he argued that this 15% rate only applies to those individuals whose annual interest income is limited to Rs5 million.
He clarified that if the annual interest income exceeds Rs 5 million, then the applicable normal tax rate is imposed on the total income (including interest income), and general tax must be paid on the entire income.
