What tax applies to profit on Behbood Savings Certificates and the Shuhada Family Welfare Account?

What does the law say?

Behbood profit is taxed, but under its own rules in the Second Schedule to the Income Tax Ordinance, 2001. The Ordinance spells the certificate “Bahbood”.

1. Section 39(1)(c) lists “profit on debt” under the head “Income from Other Sources”. Profit on these certificates and accounts is profit on debt.
2. Clause (6) of Part III of the Second Schedule says the tax payable under section 39(1)(c) “in respect of any amount paid as yield or profit on investment in Bahbood Savings Certificate or Pensioners Benefit Account and Shuhada Family Welfare Account shall not exceed 5% of such profit.”
3. Clause (36A) of Part IV of the Second Schedule says section 151(1)(a) “shall not apply” to yield or profit on Bahbood Savings Certificates, the Pensioner’s Benefit Account and the Shuhada Family Welfare Account. Section 151(1)(a) is the rule that otherwise makes a payer deduct tax when it “pays yield on an account, deposit or a certificate under the National Savings Scheme”.
4. Clause (103) of Part IV says section 7B “shall not apply” to yield or profit on Bahbood Savings Certificates or the Pensioner’s Benefit Account, provided tax on it is paid at the rates in Division I of Part I of the First Schedule, subject to clause (6) of Part III.

The Pensioners’ Benefit Account shares these rules. It is covered in our pensioners and senior citizens section, so this page concentrates on Bahbood Savings Certificates and the Shuhada Family Welfare Account.

How does it work in practice?

Nothing is deducted when the profit is paid, because clause (36A) switches off section 151(1)(a). The profit is not taxed separately at the 15% National Savings rate under section 7B, because clause (103) switches section 7B off for Bahbood certificates. Instead, the profit is taxed as income from other sources at the Division I slab rates, and the result cannot be more than 5% of the profit.

For tax year 2027, clause (1) of Division I sets these rates for an individual whose salary is not more than seventy-five per cent of taxable income:

Taxable income	Rate of tax
Up to Rs. 600,000	0%
Rs. 600,000 to Rs. 1,200,000	15% of the amount exceeding Rs. 600,000
Rs. 1,200,000 to Rs. 1,600,000	Rs. 90,000 + 20% of the amount exceeding Rs. 1,200,000
Rs. 1,600,000 to Rs. 3,200,000	Rs. 170,000 + 30% of the amount exceeding Rs. 1,600,000
Rs. 3,200,000 to Rs. 5,600,000	Rs. 650,000 + 40% of the amount exceeding Rs. 3,200,000
Above Rs. 5,600,000	Rs. 1,610,000 + 45% of the amount exceeding Rs. 5,600,000

The cap was 10% until the Finance Act, 2022 substituted 5%, according to the footnote to clause (6).

Worked example (illustrative figures)

Each case assumes the profit is the person’s only income for tax year 2027.

Case 1. Shamim, a widow in Multan, earns Rs. 1,100,000 profit on Bahbood Savings Certificates.

1. Division I tax: 15% x (Rs. 1,100,000 - Rs. 600,000) = 15% x Rs. 500,000 = Rs. 75,000.
2. Clause (6) cap: 5% x Rs. 1,100,000 = Rs. 55,000.
3. Tax payable: the lower figure, Rs. 55,000.

Case 2. The family of a shaheed in Kohat earns Rs. 650,000 profit on a Shuhada Family Welfare Account, held by his mother.

1. Division I tax: 15% x (Rs. 650,000 - Rs. 600,000) = 15% x Rs. 50,000 = Rs. 7,500.
2. Clause (6) cap: 5% x Rs. 650,000 = Rs. 32,500.
3. Tax payable: Rs. 7,500, because the slab tax is already below the cap.

Case 3. Abdul Rasheed, aged 72, in Quetta, earns Rs. 2,000,000 on Bahbood Savings Certificates.

1. Division I tax: Rs. 170,000 + 30% x (Rs. 2,000,000 - Rs. 1,600,000) = Rs. 170,000 + Rs. 120,000 = Rs. 290,000.
2. Clause (6) cap: 5% x Rs. 2,000,000 = Rs. 100,000.
3. Tax payable: Rs. 100,000.

What if I have other income too?

The profit is then added to your other taxable income, and the slab tax is worked out on the total. Clause (6) caps the tax on the profit at 5% of the profit, but the Ordinance does not set out a method for splitting the total slab tax between the profit and the other income. This page does not supply one.

Is the Shuhada Family Welfare Account outside section 7B too?

Clauses (6) and (36A) name the Shuhada Family Welfare Account. Clause (103), which takes profit out of section 7B, names only Bahbood Savings Certificates and the Pensioner’s Benefit Account. The text does not explain the difference, and this page does not decide whether section 7B reaches the Shuhada account.

Common mistakes

• Treating 5% as a flat rate. It is a ceiling. In Case 2 the slab tax is lower and applies.
• Assuming the 15% National Savings rate applies. Clause (36A) removes the deduction and clause (103) removes section 7B for Bahbood certificates.
• Leaving the profit out of the return. With no deduction at source and no section 7B, the tax is worked out in the return.

What to check in the official text

Read clause (6) of Part III and clauses (36A) and (103) of Part IV of the Second Schedule, sections 7B, 39 and 151, and the Division I tables of the First Schedule in the source PDF, which our site copy does not reproduce as tables. Who may invest in Bahbood Savings Certificates or open a Shuhada Family Welfare Account, and the profit rates paid, are set by National Savings rules outside this corpus.