ISLAMABAD (Kashmir English): Important details regarding tax deductions for citizens holding prize bonds in Pakistan have been revealed while receiving prize money, and new instructions have also been issued to commercial banks in this regard.
Prize bonds are considered a popular source of savings and investment in the country, while citizens get the opportunity to win prizes worth millions and crores of rupees through their lottery.
According to government rules, withholding tax is levied on the prize money won in prize bond lottery.
However, the rate of this tax varies according to the tax status of the person winning the prize, that is, separate rates are fixed for filers and non-filers.
Individuals included in the active tax payers list have to pay 15 percent withholding tax on the prize money received from prize bonds.
For example, if a filer wins the first prize of Rs 3 million in a prize bond draw worth Rs 1,500, then Rs 4.5 million will be deducted from the total prize money as tax.
Thus, after tax deduction on the prize of Rs 3 million, the winner will be paid Rs 2.5 million.
On the other hand, for individuals not included in the active taxpayers list, i.e. non-filers, a 30% withholding tax is levied on the prize money of the prize bond.
To put the same example in front, a non-filer who wins a prize of Rs 3 million will be charged Rs 9 million as tax, after which he will receive a prize money of Rs 2.1 million.
There is a clear difference in the tax rate for filers and non-filers on the prize money of the prize bond, due to which it is important for citizens holding prize bonds to be aware of their tax status.
There may be a significant difference in the net amount received by a filer and a non-filer in the event of winning a prize of the same value, as withholding tax is deducted at a higher rate from a non-filer than from a filer.
Citizens are advised to consider their tax status and relevant government laws when receiving prize bond prize money, so as to obtain accurate information about tax deductions and the amount of prize receivable.
