Tax on Bank Profit in Pakistan 2026
Profit on Debt Withholding Tax Guide

Interest and profit from bank deposits is one of the most common income types for Pakistani savers — yet many people do not know the exact WHT rates that apply, how final tax works, or when they might be entitled to an exemption or refund. This guide covers every type of deposit income: commercial bank savings/term accounts, National Savings instruments, Roshan Digital Accounts, and prize bond winnings.

Section 7B — WHT on Bank Profit

Banks and financial institutions are required to deduct WHT on every profit payment to depositors. For income tax return filing 2026, the rates under Section 7B are:

National Savings Instruments — Tax Rates by Type

National Savings Centre (NSC) offers multiple savings products, each with specific WHT treatment:

National Savings instruments carry a lower WHT rate (10%) than commercial bank deposits (15% for filers). This makes them attractive for high-income savers who want to minimize their effective return after tax. The Behbood certificate's 0% rate makes it particularly valuable for eligible widows and senior citizens.

Roshan Digital Account — Bank Profit Rules

Roshan Digital Accounts (RDA) are special accounts for non-resident Pakistanis operated by Pakistani banks. The tax treatment of profit differs:

• RDA profit in Pakistani rupees (PKR account): Subject to Section 7B WHT at 15% (if NRP filer status maintained) or 30% (non-filer NRP)
• RDA profit in foreign currency (FCY account): Typically exempt from WHT — no deduction on profit earned on foreign currency deposits
• Profit repatriated abroad from RDA is not subject to additional Pakistani tax
• NRPs who become tax residents (183+ days in Pakistan) lose RDA preferential treatment for that year

Prize Bond Winnings — Tax Treatment

Prize bonds are issued by the Government of Pakistan through National Savings. Quarterly draws award prizes ranging from Rs. 1,500 to Rs. 40 million. Tax treatment:

Prize bond WHT is deducted by National Savings Centre at the time of paying the prize. This WHT is a final tax for individual filers — no further income tax is due and the prize is not included in your taxable income. For non-filers, 25% is deducted versus 15% — saving Rs. 10,000 on a Rs. 100,000 prize just from being on ATL.

Exemptions from Section 7B WHT

Certain depositors are exempt from Section 7B bank profit WHT:

• Behbood Certificate holders: Widows and senior citizens (60+) — full exemption on profit
• Tax-exempt institutions: Approved charities, educational institutions, and welfare organizations under Second Schedule
• Very small deposits: Some banks waive WHT on monthly profit below Rs. 500 (bank policy, not statutory)
• Foreign currency accounts: FCY deposits by residents — profit is exempt under SBP regulations to encourage USD savings

Declaring Bank Profit in Annual Tax Return

For individuals and AOPs where bank profit is final tax, the process in IRIS is:

1. Obtain annual profit statement from your bank showing total profit and WHT deducted.
2. In IRIS Form 114(I), go to Final/Fixed Tax → Section 7B.
3. Enter total bank profit amount and total WHT deducted.
4. IRIS shows this as final tax — it does not add the profit to your normal taxable income.
5. Bank profit also enters your wealth statement preparation reconciliation under income received (even though it's final-taxed, it contributes to explaining your closing wealth).

For companies, bank profit under Section 7B is adjustable — it is added to total corporate income and the 15% WHT is credited against corporate tax return. This means companies that have high bank profit alongside losses elsewhere benefit from the WHT credit as a refund.

National Savings vs Bank Deposits — Net Return After Tax

The NSC instruments beat bank deposits on an after-tax basis for most savers due to lower WHT, even when gross rates are similar. The Behbood certificate offers the best after-tax return for eligible holders.

Section 151 vs Section 7B — Which WHT Applies?

Two WHT sections govern profit income from financial instruments. Knowing which applies is important for correct return filing:

For most individual savers, the distinction between Section 7B and Section 151 is not practical — both result in 15% deduction and are final tax. The difference matters primarily for corporate entities where all investment income is adjustable.

Maximizing After-Tax Savings Returns in Pakistan

A sophisticated saver in Pakistan can optimize the after-tax return on their deposits through these strategies:

• Use NSC instruments over bank TDs when rates are comparable: NSC's 10% WHT vs bank's 15% WHT means you keep more net profit even at identical gross rates.
• Eligible widows and seniors should fully utilize Behbood certificates: The 0% WHT means full return is kept — no tax at all on profits.
• Maintain filer status: The difference between 15% (filer) and 30% (non-filer) on large deposits is significant. On Rs. 5 million at 18% annual profit (Rs. 900,000 profit), you save Rs. 135,000 in WHT just by being a filer.
• Roshan Digital Account FCY option for NRPs: Foreign currency profit is exempt from WHT — maximizes returns for overseas Pakistanis who can hold USD or EUR deposits.

Bank Profit and Wealth Statement Reconciliation

Even though bank profit is final-taxed and not included in your slab income, it plays an important role in your wealth statement reconciliation. Every year, your closing wealth must equal: opening wealth + all income received (including final-taxed income) − all expenditure.

Bank profit received during the year (net of WHT) counts as income in the reconciliation. If you received Rs. 300,000 in bank profit (net, after 15% WHT deducted = gross Rs. 352,941), the net Rs. 300,000 improves your reconciliation gap. Always include net bank profit received in the "Other Income" field of your wealth reconciliation even though it is not slab-taxed.

Frequently Asked Questions