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Budget FY21: Finance minister proposes TDS upon payment of interest and discount on bonds

  • Published at 07:08 pm June 11th, 2020
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Currently, investors pay 5% tax on the interest or coupon they will get till the maturity of any bond upfront when purchasing bonds

Finance Minister AHM Mustafa Kamal has proposed the abolition of deduction of source tax upfront on interest and discount on bonds, instead introducing Tax Deducted at Source (TDS) at the time of payment of interest and discount on bonds.

While placing the proposed budget for the 2020-21 fiscal year in parliament on Thursday, the finance minister also proposed the introduction of withholding tax deduction on the commission fixed by the Securities and Exchange Commission (SEC), instead of deducting withholding tax on the value of bond transactions.

Currently, investors pay 5% tax on the interest or coupon they will get till the maturity of any bond upfront when purchasing bonds. According to the proposed budget, the source tax would be imposed on the interest coupon or discount at the time of disbursement of interest to the investors’ accounts.

Finance Minister Kamal said: "I hope these measures will increase transactions of bonds in the capital market and facilitate the flourishing of a strong bond market in the country.”