INSTEAD of encouraging a culture of savings by providing more incentives to depositors, our governments have levied an exorbitant fixed withholding tax of 10 per cent on total profit from savings irrespective of the amount even if the profit accrued is one rupee.
To make matters worse for bigger depositors, the previous PML-N government imposed an outrageous withholding tax of 17.5pc on total profit for non-filers if its amount exceeds Rs500,000 per annum.
This punitive action on profit from savings, especially for the bigger depositors who are getting more than Rs500,000 profit per annum even if they are non-filers, is beyond comprehension.
If this continues, people will start withdrawals from banks and start investing in other non-revenue generating commodities such as gold, property, vehicles, etc., triggering runaway inflation. Profit on deposits should be treated by the government as just another form of income for the public which is currently subject to an unjust minimum tax of 10pc even if a poor person earns Rs100 as profit, whereas a 10pc income tax is considered a high bracket or slab.
Instead of rectifying this situation, the PTI government, which claims it has not added any additional tax burden on the common man and has provided relief to tax filers, has jacked up the withholding tax on profit exceeding Rs500,000 per annum for compliant tax-filers from 10pc to 15pc in the last budget.
On the other hand, the withholding tax on profit for non-filers has been hiked from 10pc to an outrageous 20pc. Whereas the irrational withholding tax of 17.5pc on the profit of non-filers exceeding Rs500,000 per annum, imposed by the PML-N government, has been jacked up to an unbelievable 30pc.
The government should give relief to the depositors.
Published in Dawn, February 9th, 2020