IN accordance with the Income Tax Ordinance 2001 provisions, the profit on National Savings Schemes (NSS) received by `non-filers` of income tax returns is to be taxedat10 percentincase the proßtisless than Rs500,000 in one tax year. If the profit exceeds this amount, then it is to be taxed at 17.5pc. These rates are effective from July 01, 2015.
One of my relatives has invested in an NSS product and approached me about a tax deduction on the profit paid to her recently. She is a senior citizen and a `non-filer` for tax purposes. I checked her profit coupon book which indicated the profit received by her was less than Rs 500,000. Consequently, I asked her toinquire from the savings centre about tax deduction at17.5pc instead of 10pc.
The officer at the savings centre refused to accept the fact that he had made a mistake. When he was informed about the different tax rates for `non-filers` he claimed that the Rs. 500,000 limit was determined by aggregating all profit payments from the time of initial investment, even those in prior years, which is wholly incorrect.
The officer was probably trying to conceal his error or ignorance because the income tax law does not specify any such procedure.
The prescribed criteria for determining the tax deduction in the case of non-filers is the amount of profit payment.
A hand-written notification at the centre only informed investors about the 17.5pc tax rate for non-filers instead of the two tax slabs for non-filers. The other staff at the centre also appeared to be clueless.
It is unfortunate that senior citizens are being deprived of their savings through incorrect application of tax law.
