ISLAMABAD: Winning a prize bond can bring a substantial cash reward, but winners do not receive the full prize amount. A portion of the winnings is deducted as withholding tax, with the rate depending on whether the winner is a tax filer or a non-filer.
Under the government’s rules, people included in the Active Taxpayers List (ATL) pay 15 per cent withholding tax on prize money, while non-filers face a 30 per cent deduction. This difference can have a significant impact on the amount a winner receives.
For example, if a person wins the first prize of Rs3 million on a Rs1,500 prize bond, a filer would pay Rs450,000 in tax and receive Rs2.55 million. A non-filer would pay Rs900,000 in tax and receive Rs2.1 million.
Prize bonds remain a popular savings option in Pakistan. They allow people to keep their invested amount while also giving them a chance to win large cash prizes through regular draws. The draws are held every three months, providing bond holders with several opportunities to win.
Another reason for the popularity of prize bonds is their interest-free structure. They are considered an option for people looking for savings and investment opportunities without conventional interest.
However, anyone who wins a prize should keep the applicable tax deduction in mind when calculating the amount they will actually receive. The winner’s tax status can make a considerable difference, particularly in the case of larger prizes.
Read also: Big news for citizens holding prize bonds worth Rs 1500
