On Monday night, President Asif Ali Zardari promulgated the Income Tax (Amendment) Ordinance, 2024, which introduces changes to the Advance Deposit Ratio (ADR) of banks. This move is expected to generate an estimated revenue of nearly Rs 70 billion by December 31, 2024.
Under the new ordinance, the banking sector will be taxed at 44% for the tax year 2025. The Federal Board of Revenue (FBR) anticipates that this measure will help reduce the tax collection shortfall.
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The ordinance amends the First and Seventh Schedules of the Income Tax Ordinance, 2001, specifying the tax rates for banks. For the 2025 tax year, banks will face a 44% tax rate, which will decrease to 43% in 2026, and 42% from 2027 onwards. Small companies will be taxed at 20%, and other companies at 29%.
Additionally, the ordinance clarifies the definition of “gross advances and deposits,” which will be used to calculate the banking sector’s ADR. The profits of banking companies will be taxed under Division-II of Part-I of the First Schedule starting from the 2025 tax year.
