In short
Banks and National Savings deduct 20% withholding tax on profit for persons on the Active Taxpayers List and 40% for non-filers under section 151. From 21 October 2026 Behbood pays 12.96% with no withholding, Regular Income Certificates 12.12% and Special Savings 12%. On PKR 2 million a filer nets PKR 16,000 a month from a 12% bank deposit, PKR 16,160 from RIC and PKR 21,600 from Behbood if eligible; banks also deduct 2.5% zakat on 1 Ramadan unless a CZ-50 declaration is filed.
Putting a lump sum into a bank term deposit or a National Savings certificate looks like a choice between two profit rates, but the net result depends on three deductions: withholding tax at 20% or 40% depending on filer status, zakat at 2.5% on 1 Ramadan, and in some schemes a penalty for early encashment. This guide sets out the section 151 withholding rules, the National Savings rates in force from 21 October 2026, the special treatment of Behbood certificates and how zakat is taken, then compares a one-year bank deposit, Regular Income Certificates and Behbood on PKR 2 million.
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Withholding tax on profit: section 151
Banks pay profit on PLS savings accounts at a declared, variable rate and on term deposits (TDRs) at a rate usually fixed for the tenure. Whatever the product, the bank deducts income tax at source under section 151 of the Income Tax Ordinance before paying you.
| Status | Withholding from 1 July 2026 | Rate until 30 June 2026 |
|---|---|---|
| On the Active Taxpayers List (filer) | 20% | 15% |
| Not on the ATL (non-filer) | 40% | 35% |
The Finance Act 2026 raised both rates by five points. The deduction appears on your profit statement and is credited in your return; for individuals it has been treated as a final tax on profit on debt up to PKR 5 million a year, with larger amounts taxed at normal rates. Islamic banks’ mudarabah profit is treated the same way. Being on the ATL therefore keeps four fifths of your gross profit instead of three fifths, which on a 12% deposit is the difference between a 9.6% and a 7.2% net return. The same 20%/40% split applies to dividends at 15%/30% under section 150; the withholding tax calculator covers both.
National Savings rates from 21 October 2026
The Central Directorate of National Savings (CDNS) sells government-backed certificates through its centres, Pakistan Post and banks, and revises rates every two months in line with Pakistan Investment Bond yields. The rate on a certificate is fixed at purchase for its term. The 21 October 2026 revision raised most schemes.
| Scheme | Rate | Payout | Term | Withholding |
|---|---|---|---|---|
| Behbood Savings Certificates | 12.96% (was 12.72%) | Monthly | 10 years | None; max 5% in the return |
| Pensioners’ Benefit Account | 12.96% | Monthly | 10 years | None; max 5% in the return |
| Regular Income Certificates (RIC) | 12.12% (was 11.76%) | Monthly | 5 years | 20% / 40% |
| Special Savings Certificates (SSC) | 12% (was 11.6%) | Six-monthly | 3 years | 20% / 40% |
| Sarwa Islamic Term Account | 11.84% (was 11.33%) | Monthly | 1 year | 20% / 40% |
| Short Term Savings Certificates | 11.12% (was 10.8%) | At maturity | 1 year | 20% / 40% |
| Savings Account | 10% | Six-monthly | None | 20% / 40% |
| Defence Savings Certificates | 88% at 6 years to 215% at 10 years, cumulative | At maturity | 10 years | 20% / 40% |
Behbood is restricted to citizens aged 60 or over, widows and persons with disabilities, capped at PKR 7.5 million per person (PKR 15 million joint); the Pensioners’ Benefit Account is for retired government and armed-forces employees and their families. The other schemes are open to everyone. RIC and Defence certificates pay a lower scale if encashed early, and SSC pays no profit in the first six months. The National Savings profit calculator applies the current rate and withholding for each scheme.
Zakat deduction on 1 Ramadan
Under the Zakat and Ushr Ordinance, banks deduct 2.5% of the balance in savings and PLS accounts above the announced nisab on the first of Ramadan, unless the holder has filed a CZ-50 exemption declaration beforehand or keeps a current account. Most National Savings schemes are deducted the same way; Behbood and the Pensioners’ Benefit Account are exempt. On PKR 2 million that is PKR 50,000 taken once a year, more than three months of net profit from a 12% deposit, so the timing of a deposit relative to Ramadan matters. The deduction counts as zakat already paid against whatever you calculate yourself: nisab is 7.5 tola of gold or 52.5 tola of silver, and most Pakistani scholars apply the silver figure to mixed assets. The zakat calculator and gold zakat calculator work the full figure.
Worked example: PKR 2 million
PKR 2,000,000 placed for one year by a filer; non-filer figures in brackets. Profit is simple, not compounded.
Bank term deposit at 12%. Gross = 2,000,000 × 12% = PKR 240,000 a year, PKR 20,000 a month. Withholding 20% = PKR 4,000 a month. Net PKR 16,000 a month, PKR 192,000 a year, a 9.6% net yield (non-filer: PKR 12,000 a month, PKR 144,000).
Regular Income Certificates at 12.12%. Gross PKR 242,400, PKR 20,200 a month. Withholding PKR 4,040. Net PKR 16,160 a month, PKR 193,920 a year, 9.70% net (non-filer: PKR 12,120 a month). The term is five years, so this only beats the one-year deposit if you can leave the money, and a one-year Short Term certificate at 11.12% nets PKR 14,827 a month, below the bank.
Behbood at 12.96%, if eligible. Gross PKR 259,200, PKR 21,600 a month with no withholding. Even at the maximum 5% charged in the return, PKR 12,960 a year, the net is PKR 246,240, 12.3%. Behbood is also exempt from the Ramadan zakat deduction.
Zakat. On the bank deposit or RIC, 1 Ramadan takes 2.5% of PKR 2,000,000 = PKR 50,000 unless a CZ-50 is filed, reducing the filer’s first-year net on the bank deposit from PKR 192,000 to PKR 142,000.
Choosing between them
For an ordinary filer the one-year bank deposit and RIC are within PKR 160 a month of each other on PKR 2 million; the real differences are liquidity (one year against five, with an early-encashment scale on RIC) and protection (National Savings are a direct obligation of the Government of Pakistan with no limit, while bank deposits are covered by the Deposit Protection Corporation only up to PKR 1 million per depositor). For anyone eligible, Behbood or the Pensioners’ Benefit Account dominates: a higher gross rate, no withholding, no zakat deduction and a 5% ceiling in the return. Defence Savings Certificates suit a lump sum that is not needed for six to ten years; 215% at ten years is about 12.2% a year compounded before the 20% withholding on the profit at maturity. The Finance Act 2026 rate rise makes filing worth more than ever: on PKR 2 million at 12% the ATL saves PKR 48,000 a year.
What people get wrong
- Comparing gross rates. A 12.96% Behbood rate with no withholding beats a 14% bank rate for a filer (11.2% net) and every rate for a non-filer.
- Ignoring the Ramadan deduction. 2.5% of the principal is roughly a quarter of a year’s net profit at today’s rates; file the CZ-50 if you pay zakat directly.
- Assuming the withholding is the whole tax. For individuals it is final only up to PKR 5 million of profit a year; above that the profit is taxed at normal slabs in the return.
- Locking into RIC for a small premium. The rate on a certificate is fixed for the term, which is good when rates fall and costly when they rise; a one-year deposit resets sooner.
- Letting ATL status lapse. The bank applies 40% from the next profit payment; a return filed late still restores the 20% rate only once the name is back on the list.
Frequently asked questions
What is the monthly profit on PKR 10 lakh in a bank?
At 12% a year PKR 1,000,000 earns PKR 10,000 a month gross: PKR 8,000 net for a filer after 20% withholding and PKR 6,000 for a non-filer after 40%.
Is National Savings profit taxable?
Yes, 20% is withheld for filers and 40% for non-filers under section 151, except Behbood, Pensioners’ Benefit and Shuhada accounts, which have no withholding and are taxed at up to 5% in the return.
Can I buy Behbood certificates under 60?
Only widows and persons with disabilities qualify below 60. Others can use Regular Income or Special Savings Certificates, which are open to all.
Does withholding apply to Islamic bank profit?
Yes. Profit on mudarabah savings and term certificates is treated as profit on debt for withholding at the same 20% or 40% rates.
How do I stop the bank deducting zakat?
File the CZ-50 declaration with the bank before Ramadan, or hold the funds in a current account. The 2.5% already deducted can otherwise be counted against the zakat you calculate yourself.
Sources
- FBR — Withholding Tax Rates Card TY2027 (Finance Act 2026), section 151 profit on debt and section 150 dividends (checked 25 and 26 October 2026).
- Central Directorate of National Savings — scheme rates effective 21 October 2026, as announced by CDNS and reported by ProPakistani and Pakistan Observer (checked 26 October 2026); CDNS revises rates every two months.
- Zakat and Ushr Ordinance — 2.5% bank deduction on 1 Ramadan, CZ-50 exemption; nisab 7.5 tola gold or 52.5 tola silver (checked 1 October 2026). Standard computation, not a religious ruling.