President Asif Ali Zardari promulgated the Income Tax (Amendment) Ordinance, 2024, which introduces changes to the Advance Deposit Ratio (ADR) for banks, projecting an estimated revenue of nearly Rs 70 billion by December 31, 2024.

Under the new ordinance, a tax rate of 44% will be applied to the banking sector for the tax year 2025. The Federal Board of Revenue (FBR) anticipates that this measure will help reduce its tax collection shortfall.

The ordinance amends both the First and Seventh Schedules of the Income Tax Ordinance, 2001, establishing specific tax rates for different types of companies.

For banking companies, the tax rates will be 44% for the tax year 2025, 43% for 2026, and 42% from 2027 onwards. Small companies will be taxed at 20%, while other companies will face a 29% tax rate.

Additionally, the ordinance clarifies that the “gross advances and deposits” used to calculate the gross advances to deposit ratio will be based on figures disclosed in the annual audited accounts at the end of the accounting period.

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From the tax year 2025 onward, the profits and gains of banking companies will be taxed according to Division-II of Part-I of the First Schedule, with the previous sub-rule not applicable for computing the tax liabilities of these companies.