What tax applies to profit on Behbood Savings Certificates and the Pensioners' Benefit Account, and is it final?

What does the law say?

Four provisions of the Income Tax Ordinance, 2001 decide how this profit is taxed, and they work together.

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

Is it a final tax?

No. Section 7B would normally tax profit on debt from a National Savings payer as a separate charge. Clause (103) removes this profit from section 7B. The profit is instead included in your income and taxed at the ordinary Division I slab rates, with the result capped at 5% of the profit. Because clause (36A) removes withholding, nothing is normally deducted when the profit is paid.

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

What are the Division I rates for tax year 2027?

For an individual whose salary is not more than seventy-five per cent of taxable income, clause (1) of Division I applies for tax year 2027 (1 July 2026 to 30 June 2027):

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

Where income chargeable under the head “Salary” is more than seventy-five per cent of taxable income, clause (2) and its own table apply instead.

Worked example (illustrative figures)

Each case assumes the person’s only income for tax year 2027 is profit on these savings, so clause (1) applies.

Case 1. Parveen, a widow in Rawalpindi, earns Rs. 1,000,000 profit on Bahbood Savings Certificates.

1. Division I tax: 15% x (Rs. 1,000,000 - Rs. 600,000) = 15% x Rs. 400,000 = Rs. 60,000.
2. Clause (6) cap: 5% x Rs. 1,000,000 = Rs. 50,000.
3. Tax payable: the lower figure, Rs. 50,000.

Case 2. Abdul Hameed, a retired headmaster in Sukkur, earns Rs. 700,000 profit on a Pensioner’s Benefit Account.

1. Division I tax: 15% x (Rs. 700,000 - Rs. 600,000) = 15% x Rs. 100,000 = Rs. 15,000.
2. Clause (6) cap: 5% x Rs. 700,000 = Rs. 35,000.
3. Tax payable: Rs. 15,000, because the slab tax is already below the cap.

Case 3. Profit of Rs. 550,000 with no other income falls in the 0% band, so no tax is payable.

What if I also have pension, rent or other income?

The profit is then added to taxable income with that other 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.

What if tax was deducted anyway?

If tax was deducted on this profit despite clause (36A), or you paid more than the capped liability, section 170(1) lets a taxpayer who has paid tax in excess of the amount properly chargeable apply to the Commissioner for a refund. Under section 170(2) the application is made in the prescribed form within three years of the later of the assessment order for that tax year or the date the tax was paid. Section 170(4) gives the Commissioner sixty days to decide.

What about the Shuhada Family Welfare Account?

Clauses (6) and (36A) name the Shuhada Family Welfare Account alongside the other two. 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 that account.

Common mistakes

• Treating the profit as final and leaving it out of the return. Clause (103) removes it from section 7B, so it is taxed in the normal computation.
• Applying 5% to all the profit. Five per cent is a ceiling, not a flat rate. When the slab tax is lower, as in Case 2, the lower amount applies.
• Expecting age to change the rate. The cap is attached to these products, not to the investor’s age.

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, 151 and 170, and the Division I tables in the First Schedule, which our site copy does not reproduce. Who may invest in Bahbood Savings Certificates, the Pensioner’s Benefit Account or the Shuhada Family Welfare Account, and the profit rates they pay, are set by National Savings rules that are outside this corpus.