The government on Monday announced a drastic Tax rate Increase on National Savings Scheme. The withholding tax has been increased from 10% to 20% for savings up to Rs. 500,000, while Savings over the amount will be subject to 30 % an increase from the current 17.5% for Non-Filers.
For tax filers, the applicable tax rate remains unchanged at 10% for savings up to Rs.500,000. However, on savings above Rs. 500,000, the applicable tax rate has been increased to 15%.
The withholding tax rate is applicable on the profit earned on the National Savings Schemes (NSS). NSS is one of the largest provider of funds to the government. The imposition of higher taxes on NSS Schemes is expected to slow down the Savings/Investments in its schemes.