More tax on NSS profits

The govt hikes the income tax rates on the profits made on savings schemes for National Savings

People save money for the rainy day, and the worst such days are in old age when more money is needed and working life stops when income shrinks, and expenses increase. Savings are a bargaining for the future. But such hopes have been largely belied as the government, in the next fiscal year’s budget, has hiked the income tax rates on the profits made on savings schemes of the Central Directorate for National Savings. However, the profits earned from Behbood Scheme, Pensioners Fund and Shuhada Fund have been exempted from the enhanced income tax rates. They will stay at 10%.

Most of those who invest in CDNS are small investors. However, those earning above a certain amount of profit and such non-filers are to be charged up to 30% tax. Those having invested in Behbood and other such schemes have been taxed so much in recent years that their profits have drastically declined. Till 2015, the rate of profit on Behbood Scheme was 14% and now it has dropped to around 8%, and this is a time when prices of all basic items and those of medicines have risen manifold. The minimum age for investing in Behbood Scheme is 60 years. So the lethal combination of ever-rising prices and a considerable reduction in profit from savings has made life difficult for the elderly.

Pakistan has one of the lowest savings-to-GDP ratios because it is a consumption-oriented society. The hike in income tax on NSS profits will further discourage savings, which is essential for capital formation and increasing investment. The amount invested in National Savings Schemes dropped by Rs100 billion during April-July of the previous financial year. Now a further fall is feared. Obviously, the government has increased the income tax under the IMF conditions. The IMF bailout package was sought after the state coffers had been found empty. The government should realise the looted money from fatted cows. It is incomprehensible why the common man is being forced to fill the vacant treasury by paying unbearable taxes.

Published in The Express Tribune, July 7^th, 2021.

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