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Rs7bn tax collected on savings schemes

— File Photo

KARACHI: Collection of withholding tax on National Savings Schemes (NSS) registered a growth of over 162 per cent during the first eight months of this fiscal year compared to the collection made in the same period last year.

The total collection of withholding tax on the profit of multiple savings schemes jumped to Rs7.1 billion in July-February 2012-13 from Rs2.7bn in the corresponding period last year, Zafar M. Shaikh, Director General, National Savings Organisation (NSO), informed Dawn over telephone from Islamabad.

The NSS deposits witnessed a phenomenal growth of over 112 per cent to Rs289bn during July-February of this fiscal year, compared to Rs188bn invested in the NSS in the entire 2011-12. However, the sharp rise in the withholding tax collection on NSS is interesting.

“The withholding tax collection improved primarily due to computerisation of over 100 out of 337 branches of the NSO,” said Zafar.

Better yields on NSS, compared to banks and other options, attracted huge investments from the savers.

JS Research issued a report on Friday which noted that the banks deposit base did not widen in first quarter (Jan-March) of this calendar year, which also indicates flow of excess liquidity towards the NSS.

“As the first quarter 2013 draws to a close, we review Pakistan banking sector numbers where aggregate deposits witnessed meagre growth of one per cent on quarter-on-quarter basis, while credit offtake remained flat at Rs3.9 trillion,” said the report.

Investing in NSS became more attractive for the investors particularly after the fall of policy interest rate which vastly impa- cted the rate of return on bank deposits which lead to a dip in the profitability of banks.

About 90 per cent investment of banks is in government papers which witnessed a 4 per cent slash during past 20 months.

Zafar Shaikh said the first phase of computerisation had been completed at a cost of Rs380 million and for second phase a sum of Rs900m were required. He said the PC-1 of the second phase would be considered on April 20.

The NSO head believes that the withholding tax collection from the NSS can be doubled by improving efficiency of the organisation through computerisation.

The National Savings is a key player in domestic debt management arena, which is manifested by its portfolio of over Rs1.85 trillion with an extensive outreach to over 6 million investors.