Tax Exemption on Profit on Debt for Non-Residents in Pakistan

Profit on debt earned on a qualifying Non-Resident Rupee Value Account (NRVA) or Non-Resident Business Value Account (NRBVA) is exempt from income tax in Pakistan when the account is funded exclusively through foreign exchange remitted into that account.

This exemption is provided by clause (79) of Part I of the Second Schedule to the Income Tax Ordinance, 2001. The Finance Act, 2026 updated the provision to cover NRVA and NRBVA accounts maintained under the State Bank of Pakistan scheme.

Current Tax Exemption Under Clause (79)

Clause (79) exempts profit on debt derived from a rupee account held with a scheduled bank in Pakistan by a person maintaining an NRVA or NRBVA, provided that deposits in the account are made exclusively from foreign exchange remitted into the account.

The exemption therefore depends on the account type and the source of its deposits. It is not a general exemption for every Pakistani rupee account held by a person living abroad.

Conditions for the Exemption

The profit qualifies for exemption when all the following conditions are satisfied:

• The account is an NRVA or NRBVA maintained under the applicable State Bank of Pakistan scheme.
• The account is held with a scheduled bank in Pakistan.
• Deposits are made exclusively from foreign exchange remitted into that account.
• The profit is earned on the balance of that qualifying account.

Local deposits, transfers that do not qualify as foreign exchange remittances, or profit earned through an ordinary rupee account do not fall within clause (79) merely because the account holder is non-resident.

Is an FBR Exemption Certificate Required?

No. A separate exemption certificate under section 159 is not required for profit that is directly covered by clause (79).

Clause (5AC) of Part II of the Second Schedule sets the withholding rate at zero percent for profit on debt covered by clauses (78) and (79) of Part I. The bank should therefore apply zero withholding when its records confirm that the profit is from a qualifying account.

The previous version of this article stated that the account holder had to obtain an exemption certificate from the Commissioner. That statement is not correct under the current law and has been removed.

What Is the Difference Between an NRVA and an Ordinary Rupee Account?

An NRVA is a designated value account maintained under the State Bank of Pakistan framework for eligible non-resident customers. An NRBVA is the corresponding business value account. These accounts are designed to receive eligible foreign remittances and support permitted investments and transactions in Pakistan.

An ordinary Pakistani rupee current, savings or deposit account is not automatically treated as an NRVA or NRBVA. The customer should confirm the formal account classification with the bank instead of relying only on the account currency or the account holder’s residence outside Pakistan.

Foreign Currency Accounts Under Clause (78)

Clause (78) separately exempts qualifying profit on foreign currency accounts and specified certificates maintained under State Bank of Pakistan foreign currency account schemes by non-resident individuals, non-resident associations of persons and non-resident companies.

Clause (79), by contrast, deals with profit on qualifying rupee-denominated NRVA and NRBVA accounts funded exclusively through foreign exchange remittances. Both categories have a zero-percent withholding rate under clause (5AC), but their statutory conditions are different.

Government Securities Are Treated Separately

The clause (79) exemption for profit on the qualifying bank account should not be confused with profit earned on a Government of Pakistan debt instrument purchased through that account.

Clause (5AA) of Part II of the Second Schedule generally applies a 10% final withholding tax to profit on debt from a conventional or Shariah-compliant debt instrument issued by the Federal Government under the Public Debt Act, 1944 when it is purchased exclusively through specified foreign or non-resident accounts, including FCVA, FCBVA, NRVA and NRBVA.

The investment product and the account balance must therefore be reviewed separately. Profit credited on a qualifying NRVA or NRBVA account can be exempt under clause (79), while profit from a government debt instrument can be subject to the separate 10% final-tax rule.

Does the Account Holder Need to File an Income Tax Return?

Clause (114A) of Part IV of the Second Schedule provides limited relief from the return-filing requirement in section 114(1)(ae) and from registration under section 181 for a person maintaining an FCVA, FCBVA, NRVA or NRBVA.

This relief applies only when the person has no Pakistan-source taxable income other than the categories listed in clause (114A), including specified profit on debt, qualifying investment income, and certain capital gains or dividends linked to those accounts.

The provision does not create a blanket exemption from filing. A return can still be required under another part of section 114 because of business income, property, taxable income, asset ownership, prior registration, or another applicable condition. The person’s complete Pakistan tax position must be reviewed.

What If the Bank Deducts Tax?

If a bank deducts tax from profit that appears to qualify under clause (79), the account holder should first obtain:

• the account-opening and account-classification documents;
• bank statements showing the source of deposits;
• the profit certificate and withholding-tax certificate; and
• confirmation that the account is formally classified as an NRVA or NRBVA.

The account holder should then ask the bank to review the deduction against clause (79) of Part I and clause (5AC) of Part II of the Second Schedule. Any refund or tax-return treatment should be determined after reviewing the person’s filing status and complete income position.

Frequently Asked Questions

Is profit on every bank account held by a non-resident exempt?

No. The exemption discussed here applies to qualifying profit on an NRVA or NRBVA funded exclusively through foreign exchange remitted into that account. An ordinary rupee account does not qualify automatically.

Is Pakistani citizenship required under clause (79)?

The current text of clause (79) refers to a person maintaining an NRVA or NRBVA under the State Bank scheme. Eligibility to open and operate a particular account remains subject to the applicable State Bank and bank requirements.

Can local funds be deposited into the account?

Clause (79) requires deposits in the qualifying account to be made exclusively from foreign exchange remitted into that account. Mixing local funds can place the exemption at risk.

Does the bank deduct withholding tax from qualifying profit?

The statutory withholding rate is zero percent for profit covered by clause (79), under clause (5AC) of Part II of the Second Schedule.

Is profit from Naya Pakistan Certificates completely exempt?

No. Profit from qualifying Government of Pakistan debt instruments is generally subject to a separate 10% final withholding tax under clause (5AA). It should not be treated as exempt account profit under clause (79).

Does an NRVA holder always avoid filing an income tax return?

No. Clause (114A) provides limited relief, subject to its conditions. Other income, assets, activities or filing provisions can still create a return-filing obligation.

Get Help With a Non-Resident Account Tax Issue

4SYTE can review the account classification, remittance history, profit certificate, tax deduction and return-filing position to determine the correct treatment under the current law. Contact us for assistance.

Last reviewed: October 2026. Primary sources: Income Tax Ordinance, 2001 amended up to 30 June 2026; Finance Act, 2026; and FBR Circular No. 2 of 2026-27.