FBR Enforces 15% Tax on Passive Saving Income

KARACHI: The Federal Board of Revenue (FBR) has introduced a 15% tax on passive saving income, aiming to reduce the disparity between active and passive income taxation and encourage business investment.

In a recent media appearance, FBR Chairman Rashid Mahmood Langrial announced the introduction of a 15% tax on passive saving income as part of broader tax reforms. This policy targets income earned without active participation, such as interest, dividends, and rental income, which previously enjoyed lower tax rates compared to business earnings.

Langrial explained that while active income, such as business profits, is taxed at 29%, the 15% tax on passive saving income seeks to correct the imbalance that disincentivized productive economic activity.

“We are saying that a person who has Rs50 million in the bank will be taxed at 15%. This is an attempt to address the discrimination between active and passive income,” he said.

The new rate is intended to promote investment in active sectors by discouraging the stockpiling of wealth in low-effort income streams. According to Langrial, the move reflects the government’s larger strategy to realign tax policies in a way that supports growth, entrepreneurship, and documented economic participation.

He also addressed concerns regarding comparisons between income types and economic sectors, emphasizing that different income streams require nuanced taxation. Langrial clarified that this tax reform is not punitive but corrective, focusing on economic equity and sustainable revenue generation.