ON account of recent changes in tax rules applicable on National Savings Certificates (NSC), some serious questions have arisen. Answers to them are really important because millions of investors are involved. They have invested the bulk of their life savings and retirement benefits into such schemes. But they are now getting a shock owing to the exorbitantincreasein taxes.
There have been several years when inflation has been more than even the gross return, hence the real return was negative. In such cases, tax was paid despite loss to the investor. In normal times (e.g. with a return of 8pc and inHation of6pc),the realinterestis around 2pc only. Hence, the actual tax was already equal to 50pc of the net income (10pc of the gross). This is now 87.50pc (1.75pc divided by 2pc).
Is it right to arbitrarily increase taxes on an already highly-taxed income just to force investors to file returns when they mostly have no other source of income? It is highly unlikely that any businessman would invest in such schemes because they get much higher returns from investing in their own businesses.
How is distinction between filer and non-filer justified when tax on such schemes is considered `final tax` under the rules with no possibility of claiming deductionsforcostoffundsetcbyñlinga return? Isitjustiñed tolevy an additionaltax with a retrospective ef feet of up to 10 years in the past? DSCs and SSCs maturing now are being taxed at the new rates on the entire income for the period of investment even if maturity is just one-day old after introduction of the new rule.
Can rates be changed drastically as hasbeen done now? Last year, tax was increased by 50pc, and now it is 75pc higher! If yes, can the rates also be changed for certificates now being issued under the new rules for this or other unknown reasons? Or can investors assume that the net return assured at present will actually be paid on maturity? If taxratescan beincreasedfurther,is there any limit on such an increase? Now rates have been arbitrarily increased from 10pc to 17.50pc. Can they be increased to 20pc,40pc,80pcor100pc? In the interest of all investors, I appeal to the NSC and FBR (or the Ministry of Finance which governs them both) to reply to my questions.
