Bahbood Savings Certificates (BSCs) are a government-backed investment product in Pakistan, primarily designed to provide financial security to senior citizens, widows, and individuals with disabilities.
Introduced in 2003, these certificates offer attractive profit rates and tax exemptions, making them a popular choice among eligible investors. This comprehensive guide delves into the taxation aspects of BSCs as of 2025, providing clarity on eligibility, profit rates, tax liabilities, and more.
More Read: What is a National Savings Certificate (NSC)?
Eligibility Criteria for Bahbood Savings Certificates
As of 2025, the following individuals are eligible to invest in Bahbood Savings Certificates:
- Senior Citizens: Individuals aged 60 years and above.
- Widows: Unmarried women who have not remarried.
- Individuals with Disabilities: Persons holding a valid Computerized National Identity Card (CNIC) with a disability logo.
- Joint Accounts: Eligible senior citizens and widows can open joint accounts with each other.
These certificates are not available to widowers, ensuring that the benefits are targeted towards the intended groups.
Investment Details
- Denominations Available: Rs. 5,000, Rs. 10,000, Rs. 50,000, Rs. 100,000, Rs. 500,000, Rs. 1,000,000.
- Minimum Investment: Rs. 5,000.
- Maximum Investment:
- Individual: Rs. 7.5 million.
- Joint: Rs. 15 million.
- Maturity Period: 10 years.
- Profit Payment: Monthly, starting from the date of issue.
- Encashment Before Maturity: Allowed with service charges applicable if encashed within the first 4 years.
- Taxation: No withholding tax deducted at source
Profit Rates and Taxation
Current Profit Rate (As of February 2025)
The profit rate for Bahbood Savings Certificates is set at 13.58% per annum, translating to a monthly profit of approximately Rs. 1,131 on an investment of Rs. 100,000.
Taxation on Profits
Unlike other National Savings Schemes, the profits from Bahbood Savings Certificates are subject to a flat tax rate under the Income Tax Ordinance, 2001. The tax rates are as follows:
- Up to Rs. 25,000,000: 10% of the profit.
- Rs. 25,000,001 to Rs. 50,000,000: Rs. 2,500,000 + 12% of the amount exceeding Rs. 25,000,000.
- Above Rs. 50,000,000: Rs. 5,625,000 + 15% of the amount exceeding Rs. 50,000,000.
However, to alleviate the tax burden on investors, the Federal Board of Revenue (FBR) has implemented a concessionary tax rate of 10% on profits from Bahbood Savings Certificates, irrespective of the profit amount. This rate is applicable when the income from these certificates is properly declared in the individual’s income tax return.
Advance Tax on Profits
Advance tax is generally applicable on income exceeding Rs. 5 million from bank deposits under Section 147 of the Income Tax Ordinance. However, for Bahbood Savings Certificates, advance tax is not applicable if the total annual taxable income, including BSC profits, is less than Rs. 1 million. If the total income exceeds this threshold, advance tax becomes payable.
Tax Credit Mechanism
In cases where the average tax rate on an individual’s total income exceeds 5%, a tax credit mechanism is available to ensure that the effective tax rate on Bahbood Savings Certificates does not exceed 5%. This credit reduces the overall tax liability, benefiting investors with higher total incomes.
Zakat Exemption
Bahbood Savings Certificates are exempt from Zakat deductions, providing an additional benefit to investors who are subject to Zakat.
Frequently Asked Question
Can widowers invest in Bahbood Savings Certificates?
No, currently, only widows are eligible to invest in Bahbood Savings Certificates.
Is there any withholding tax on the profits from Bahbood Savings Certificates?
No, there is no withholding tax deducted at source on the profits from Bahbood Savings Certificates.
What is the maximum investment limit for an individual?
An individual can invest up to Rs. 7.5 million in Bahbood Savings Certificates.
Are the profits from Bahbood Savings Certificates subject to Zakat?
No, the profits are exempt from Zakat.
What is the maturity period of Bahbood Savings Certificates?
The maturity period is 10 years.
Can I encash my Bahbood Savings Certificates before maturity?
Yes, encashment before maturity is allowed, but service charges are applicable if encashed within the first 4 years.
How is the tax on Bahbood Savings Certificates calculated?
The tax is calculated at a flat rate of 10% on the profits, provided the income is properly declared in the income tax return.
Conclusion
Bahbood Savings Certificates offer a secure and tax-efficient investment option for eligible individuals in Pakistan. With attractive profit rates, tax exemptions, and a straightforward tax structure, they serve as a reliable source of income for senior citizens, widows,
