You can cash yours by May 31, 2021
The government has discontinued the Rs25,000 denomination prize bonds with immediate effect. It will no longer issue these bonds while those in possession can be cashed or replaced with other bonds by May 31, 2021.
If you currently have this particular bond, you have till May 2021 to avail one of three choices. You can cash it any time, convert it into either a Special Savings Certificate or Defence Savings Certificate or convert it into a Premium Prize Bond.
People who have these Rs25,000 bonds can cash it or convert them to premium prize bonds of the same denomination by the given deadline. Alternatively, they can get them replaced with Special Savings Certificates or Defense Savings Certificates.
If your prize bond has won the draw, you can obtain the prize money by submitting the prize bond to the SBP along with a copy of your identity card.
In case you choose to convert these standard bonds to premium prize bonds, you will participate in a draw. It offers two prizes of Rs30 million each as the first prize. The second prize of Rs10 million consists of five separate prizes. Another 700 prizes of Rs300,000 are part of the third prize.
By issuing bonds, the government aims to encourage a culture of saving among people and, at the same time, utilise these savings to finance their own needs as opposed to borrowing from banks, which is expensive.
The process is simple: visit either an NBP, HBL, UBL, MCB, ABL or Bank Alfalah branch or visit the banking service corporation office of any of the State Bank of Pakistan’s 16 field offices. The government offers prize bonds in eight denominations with Rs100 being the cheapest and Rs40,000 the most expensive.
You will, however, need to check which branches of the above banks are dealing with this issue. There are two SBP offices in Karachi, including one in the main SBP building. You can also visit one of the 376 branches of the Directorate of National Savings.
Genuine investors were interested in buying the Rs25,000 bond because of the high prize money it offered, but it was also a favourite for those who wanted to wash their dirty money and dodge the taxman. These are the people who evade taxes.
So here is how it worked: they first bought the bonds from anyone willing to sell them and in doing so, got rid of their cash. If they were to deposit the same cash into their bank accounts, they would be required to explain the source of income and likely land in trouble with the government.
So, they then had prize bonds which could be taken to commercial banks, SBP field offices or branches of National Savings and be cashed. This cash comes from a prize bond backed by the government and is thus clean and good to land in a bank.
If asked to explain its source, they could say they got it from selling their prize bond. This is one reason why these bonds were being used as a currency. You can think of a Rs25,000 bond as a Rs25,000 note because it can be cashed any time. Many people don’t want to go through the hassle of cashing their bonds through official channels so they sell it to anyone willing to pay cash – and the ones who want to clean their dirty money don’t mind paying a bit extra.
This is a much simpler version of what happens in the market. Usually, these bonds are traded multiple times (it changes too many hands) before they can be cashed. Since the bonds are not registered in the bearer’s name, it is difficult to trace them.
This is why the government is offering Premium Bonds, which have to be registered in someone’s name. So, by discontinuing the regular Rs25,000 prize bonds, the government has further tightened the noose around tax evaders. The government also discontinued the Rs40,000 standard prize bonds in June 2019 on the same grounds and offered similar alternatives to investors.