Tax on Bank Profit in Pakistan 2026 - Savings Account Interest Tax

Bank profit — whether from a savings account, a fixed deposit, National Savings Certificates, or government securities — is taxable income in Pakistan under Section 7B of the Income Tax Ordinance 2001. Banks deduct withholding tax compliance at source, but many account holders do not realise that: (a) the WHT rate doubles if you are a non-filer, and (b) active filers can claim a refund if the WHT deducted exceeds their actual tax liability. This guide explains every rate, exemption, and filing step for income tax return filing 2026.

What Counts as “Profit on Debt” Under Section 7B

FBR uses the term profit on debt to cover all returns earned from lending money to banks or the government. Under Section 7B of ITO 2001, the following income is taxable:

• Profit on savings accounts and current accounts (conventional and Islamic banking)
• Interest / profit on fixed deposits and term deposits
• Profit on National Savings Certificates: Defence Savings Certificates (DSC), Special Savings Certificates (SSC), Regular Income Certificates (RIC)
• Yield on Treasury Bills (T-Bills) and Pakistan Investment Bonds (PIBs)
• Profit on Kisan Vikas Certificates and Behbood Savings Certificates
• Returns on Roshan Digital Accounts (with important exceptions for non-residents — see below)
• Profit distributed by cooperative societies and microfinance banks

In short: if any institution pays you a return for depositing or lending money, it falls under “profit on debt” and is subject to withholding tax at source.

Withholding Tax Rates on Bank Profit — 2026

The withholding tax rate depends on your filer status. Banks verify your status against FBR’s Active Taxpayer List (ATL) (ATL) before deducting:

Source: Section 7B, Income Tax Ordinance 2001

Adjustable vs Final Tax — What is the Difference?

For filers, bank profit WHT is adjustable. This means:

• The 15% deducted by the bank is treated as advance tax paid on your behalf
• When you file your return, your total income is calculated at slab rates
• If the slab tax on your bank profit is less than the 15% already deducted, FBR issues a refund
• Example: Your bank profit is Rs. 3 lakh and your total income puts you in the 0% slab. The Rs. 45,000 WHT deducted becomes a refundable credit

For non-filers, the 30% WHT is final — it cannot be refunded or adjusted, even if your income slab would have resulted in a lower rate. This is the single biggest financial penalty for not filing a return.

Worked Example: How Much Tax on Rs. 2 Lakh Bank Profit

These savings grow significantly for higher bank balances. A senior salaried person with Rs. 10 lakh in bank profit pays Rs. 100,000 as a filer vs Rs. 300,000 as a non-filer — a Rs. 200,000 annual difference.

National Savings Instruments — Tax Treatment

Pakistan’s National Savings Centre (NSC) manages some of the most popular savings products in the country. All carry the same profit-on-debt WHT:

National Savings collects WHT from each profit payment and remits it to FBR. The annual profit certificate from NSC shows the gross profit and WHT deducted — use this when filing your return.

Roshan Digital Account — Tax Position for Non-Residents

The State Bank of Pakistan’s Roshan Digital Account (RDA) allows overseas Pakistanis to hold PKR or foreign-currency accounts. Tax treatment:

• Non-resident account holders: Profit on RDA is exempt from Pakistani income tax provided the account holder is genuinely non-resident and funds were remitted from abroad. WHT is not deducted on the profit portion for qualifying non-residents.
• Resident account holders: If you are a Pakistani resident who opened an RDA, standard Section 7B WHT applies at 15% (filer) or 30% (non-filer).
• Profit must still be declared in the wealth statement if you hold an RDA balance.

The Rs. 500,000 Exemption — How to Claim It

If your total annual profit on debt from all banks and savings instruments combined is expected to remain below Rs. 500,000, you can submit a declaration to your bank to stop WHT deductions.

How to claim the exemption:

• Obtain the exemption declaration form (commonly called Form W or “Declaration of Non-Deduction of Tax”) from your bank branch or website
• Complete the form with your CNIC, NTN (if any), and confirmation that your total profit will not exceed Rs. 500,000
• Submit at the branch — the bank will stop deducting WHT from that date
• This exemption requires honesty: if your total profit exceeds Rs. 500,000, you become liable for the WHT plus any applicable penalty
• Senior citizens above 60 may qualify for the exemption at a lower income level — check with your bank

Islamic Banking — Is Mudaraba Profit Also Taxable?

Yes. FBR treats profit from Islamic banking products — whether from a Mudaraba current account, Murabaha arrangement, or Diminishing Musharaka — identically to conventional interest under Section 7B. Banks offering Sharia-compliant products deduct the same WHT rates.

This is a common misconception among Islamic bank account holders who assume their profits are tax-free. All profit on deposits — regardless of the banking model — is subject to withholding under Pakistani tax law.

How to Get Your Bank Profit Certificate

To file your return, you need a profit certificate showing gross profit earned and WHT deducted during the tax year (July 2025 to June 2026). Here is how to obtain it:

• Online banking apps: Most major banks (HBL, MCB, UBL, Meezan, Askari, Allied, Bank Alfalah) now allow you to download annual profit certificates or WHT certificates directly from the app under “Statements” or “Documents.”
• Bank branch: Visit your home branch with your CNIC and request the Annual Tax Deduction Statement for Tax Year 2026.
• IRIS pre-filled data: Log into iris.fbr.gov.pk and check Pre-filled Tax Information — Withholding Tax Credits. Many large banks submit data directly to FBR, so it may already appear.
• National Savings: NSC branches issue profit certificates on request. Online portal also shows deductions.

If you have accounts at multiple banks, collect a certificate from each. The total gross profit from all sources is what you declare in your return.

Step-by-Step: Declaring Bank Profit in Your FBR Return

Can Filers Get a Refund on Bank Profit WHT?

Yes — and this is one of the biggest advantages of being an active filer. Here is when a refund applies:

• Your total income from all sources (salary + bank profit + business) puts you in a tax slab below 15%
• For example: a salaried person earning Rs. 6 lakh/year (below the taxable threshold) but with Rs. 2 lakh bank profit has had Rs. 30,000 deducted. Since their total income is below the taxable threshold, they can file and claim the full Rs. 30,000 as a refund.
• Refunds are processed through IRIS and typically credited within 2–4 months to your bank account

Non-filers cannot claim any refund, regardless of their actual income level. This is why filing is beneficial even for those with income below the taxable threshold.

Bank Balances and the Wealth Statement

Beyond declaring profit income, your bank accounts must appear in your annual wealth statement:

• Declare the closing balance of every bank account (savings, current, Islamic) as of June 30, 2026
• Include National Savings balances separately under “Government Securities” in the wealth statement
• Joint accounts: declare your share of the balance
• Foreign currency accounts: declare in both PKR (at the June 30 exchange rate) and original currency

Filer vs Non-Filer: The Full Cost of Not Filing

Even after refund possibilities for low-income filers, the comparison is stark. NTN registration at Kamboh Associates costs Rs. 2,000. The first year of filing pays for itself many times over for anyone with meaningful bank balances.

Frequently Asked Questions