Govt to abolish tax on banks’ profit

Despite severe economic challenges, the government may abolish up to a 15% additional income tax on the profits that banks make by extending loans to the cash-strapped finance ministry. This move could provide approximately Rs60 billion in benefits to a sector that earned Rs960 billion in profits last year. Senior government officials and banking industry sources informed The Express Tribune that an understanding has been reached between commercial banks and the federal government to abolish the Advances-to-Deposit rate-based income tax. These legal changes are likely to be made in the Income Tax Ordinance through the Finance Act 2024. Finance Minister Muhammad Aurangzeb, a former banker, will present the Finance Act in the National Assembly on Friday for approval. It is unusual for the government to provide around Rs60 billion in relief to one of the wealthiest sectors, particularly when it has imposed taxes on nearly every consumable good, increasing the tax burden on the poor and middle-income groups. About 27 banks made Rs960 billion in net profit in 2023.