Dividend Tax Calculator

When a PSX company pays a cash dividend, it deducts income tax before the money leaves its account. This is withholding tax under section 150 of the Income Tax Ordinance, and for individuals it is a final tax: what you receive is yours, and you owe nothing more on that dividend. The rate depends on two things, who pays the dividend and whether you are a filer.

You are a filer if you are on the FBR Active Taxpayers List (ATL) when the dividend is paid. Check it on the FBR website before a payout date, because the rate applied to you follows the list on the day.

The same dividend of Rs 100,000, taxed under each rule:

Almost every stock on the PSX falls in the first row. A company that pays no tax itself (because of exemptions, losses or tax credits) deducts the higher 25% rate from dividends.

You hold 1,000 shares of an ordinary listed company that declares a dividend of Rs 10 a share. The gross dividend is Rs 10,000.

The filer keeps Rs 1,500 more from the same dividend. For a portfolio paying Rs 200,000 a year in dividends the gap is Rs 30,000. Use the dividend calculator to project your dividend income.

The yield quoted for a stock is before tax, so the yield you actually earn is lower. On an ordinary listed company, a filer keeps 85% of every dividend rupee and a non-filer keeps 70%.

Keep this in mind when you compare dividend stocks with other income: profit on a bank deposit, for example, is also taxed at source, at a different rate (the fixed deposit calculator shows it). Compare the after-tax figures, not the headline ones. A payer type with a higher rate, such as a debt-heavy mutual fund at 25% for filers, gives up a bigger slice before the income reaches you. The dividend yield calculator gives the after-tax yield for any PSX stock.

A bonus issue gives you extra shares at no cost, but the shares are not tax-free. Under section 236Z the company must collect tax of 10% of the bonus shares' value for filers and 20% for non-filers, again a final tax. The Ordinance values the shares at the day-end price on the first day of book closure. By then the share already trades ex-bonus, so this calculator values them at the ex-bonus price, the same basis as the bonus shares calculator, which also takes the actual closing price.

Example: you hold 1,000 shares and the company declares a 20% bonus while the share trades at Rs 100. You are due 200 bonus shares and the price adjusts to Rs 83.33, so they are worth Rs 16,667. A filer pays Rs 1,667 (the equivalent of 20 shares withheld), a non-filer Rs 3,333. The company collects it either by holding back some of the bonus shares or by taking cash, deposits it with FBR within 15 days of the book closure and can sell withheld shares to recover the tax, so the shares credited to your CDC account can be fewer than announced. Fractions of a share are not issued.

• Your filer status on the day of payment. The Check your statement card compares the tax shown on your statement with the expected figure.
• The payer type. A power company, a REIT and a mutual fund each use a different rate from an ordinary company.
• The book closure. Only shareholders on the company's books at the book closure receive the dividend, so check the dates in the announcement.

If the shares are Shariah-compliant, you may also want to give part of the dividend to charity: see the dividend purification calculator. When you sell shares rather than collect dividends, the capital gains tax calculator applies instead.