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Category: Budget 2021-2022

  • Finance Act, 2021: Taxpayers given three months to update business bank accounts

    Finance Act, 2021: Taxpayers given three months to update business bank accounts

    ISLAMABAD: Declaring business bank accounts has become mandatory from July 01, 2021 otherwise a monetary penalty would be imposed. However, taxpayers have been given to update their registration profile along with business bank accounts up to September 30, 2021.

    According to the Finance Act, 2021 a new definition has been included in the Income Tax Ordinance, 2001 in which business bank account means a bank account utilized by the taxpayer for business transaction declared to the Commissioner through original or modified registration form prescribed under section 181.

    A Section 114A has been inserted through the Finance Act, 2021 under which every taxpayer will require to declare to the Commissioner the bank account utilized by the taxpayer for business transactions.

    Business bank account shall be declared through original or modified registration form prescribed under section 181.

    The Finance Act 2021 further imposed monetary penalty for not declaring the business bank account. Where any person fails to declare business bank account(s), in his registration application or fails to amend his registration profile to declare existing business bank account(s) willfully: Such person shall pay a penalty of Rs. 10,000 for each day of default since the date of submission of application for registration or date of opening of undeclared business bank account whichever is later:

    Provided that if penalty worked out as aforesaid is less than Rs.100,000 for each undeclared bank account, such person shall pay a penalty of Rs.100,000 for each undeclared business bank account:

    Provided further that this provision shall be applicable from the first day of October, 2021 during which period the taxpayer may update their registration forms.

  • Third-party to conduct audit of 15 million potential taxpayers: Shaukat Tarin

    Third-party to conduct audit of 15 million potential taxpayers: Shaukat Tarin

    Finance Minister Shaukat Tarin announced on Tuesday that the government is set to launch Universal Self-Assessment, a third-party approach, for auditing 15 million potential taxpayers.

    (more…)
  • National Assembly approves budget, finance bill 2021

    National Assembly approves budget, finance bill 2021

    ISLAMABAD: The National Assembly on Tuesday approved federal budget 2021-2022 and Finance Bill 2021.

    After over a two-week long debate, the National Assembly on Tuesday passed the federal budget with a total outlay of Rs 8.487 trillion, with around 19 percent additional allocations as compared to last year’s Rs 7.137 trillion.

    The Finance Bill 2021-22 was moved before the parliament by Finance Minister, Shaukat Tarin, which was passed with majority vote.

    Some amendments in the bill proposed by the Members of National Assembly were accommodated by the house, whereas some others were rejected.

  • National Assembly may pass Finance Bill 2021 on June 29

    National Assembly may pass Finance Bill 2021 on June 29

    ISLAMABAD: The National Assembly will meet on Tuesday June 29, 2021 in which Shaukat Fayaz Ahmed Tarin, Minister for Finance and Revenue to move the Finance Bill 2021 with certain amendments for approval from the house.

    A notification issued by the National Assembly Secretariat stated that the assembly will meet on Tuesday June 29, 2021 at 11:30AM.

    Finance Minister Shaukat Tarin to move that a bill to give effect to the financial proposals of the federal government for the year beginning on the first day of July 2021 and to amend certain laws [The Finance Bill, 2021], be taken into consideration at once.

    “Further, the finance minister to move that a bill to give effect to the financial proposals of the federal government for the year beginning on the first day of July, 2021 and to amend certain laws [The Finance Bill, 2021], be passed,” according to the notification.

  • Tax officials given arrest powers on concealment above Rs200 million; changes made to Finance Bill 2021

    Tax officials given arrest powers on concealment above Rs200 million; changes made to Finance Bill 2021

    ISLAMABAD: The government has reviewed the proposal related to power of tax officials to arrest persons under criminal proceedings for concealment of income.

    The power to make arrest may be restricted to concealment of Rs200 million and above, sources in Federal Board of Revenue (FBR) said.

    Through Finance Bill 2021, it is proposed to substitute the Section 203 which at present deals with procedure of appeal against the order of a Special Judge.

    The Bill proposed to substitute section 203A which provides that an authorized officer may arrest a person as per the provisions of the Code of Criminal Procedure, 1898 on the basis of material evidence and he has a reason to believe that person has committed an offence of concealment of income or an offence warranting prosecution.

    Further, where a person commits an offence, the Chief Commissioner with the prior approval of the Board either before or after the institution of any proceedings for recovery of tax, compound the offence if such person pays the tax due along with such default surcharge and penalty.

    Accordingly, existing section 202 is proposed to be deleted from the statute.

    If the person suspected of committing an offence or concealment is a company, every director or officer of that company whom the authorized officer has reason to believe that he is personally responsible for actions of the company contributing to offence or concealment of income or any offence, shall be liable to arrest.

    Provided that any arrest shall not absolve the company from the liabilities of payment of tax, default surcharge and penalty.

    The sources said that the after this proposal the business community strongly reacted and termed it immense discretionary powers to the tax authorities.

    The government realizing the sensitivity of the situation made changes it its actual proposal and now the power of tax officials has be restricted in those cases where concealment is abve Rs200 million.

    The government will present the Finance Bill 2021 after making certain changes before the Parliament for approval.

  • FBR to confiscate goods without brand licensing

    FBR to confiscate goods without brand licensing

    In a bid to enhance regulatory oversight and combat counterfeiting, the proposal to make brand licensing mandatory for manufacturers of specified goods has been put forward. In the event of non-compliance, the Federal Board of Revenue (FBR) is poised to be empowered with the authority to confiscate such items.

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  • Tax amendments made for income of salaried persons, individuals

    Tax amendments made for income of salaried persons, individuals

    KARACHI: The Finance Bill, 2021 has proposed certain amendments in Income Tax Ordinance, 2001 related to income of salaried persons and business individuals.

    According to a presentation made at post budget 2021/2022 webinar of Karachi Tax Bar Association (KTBA) the major changes proposed through the Finance Bill 2021, are:

    — Interest income above Rs5 million taxable at normal rates (previously Rs. 36 million); withholding @15 percent (previously 10 percent) for interest income below Rs. 500,000.

    — Exemption for medical allowance / reimbursement withdrawn, which needs to be reconsidered.

    — Interest income distributed by Provident Fund above Rs. 500,000 taxed @ 10 percent – conflict with 6th Schedule needs to be addressed.

    — Rental income taxable at normal rate.

    — No tax on transfer of assets via gift / inheritance etc. to non-resident relatives.

    — Giftee allowed to claim FMV of gifted assets, after a holding period of 2 years.

    — Individuals have been made a withholding agent for payment of commission (having turnover of Rs. 100 million).

  • Final tax regime allowed for export of services

    Final tax regime allowed for export of services

    KARACHI: The Finance Bill 2021 has proposed a final tax regime for export of IT and IT enabled services.

    According to commentary on budget 2021/2022 released by KPMG Taseer Hadi & Co. currently, tax deduction on foreign proceeds from export of goods are taxed at 1 percent which is considered as final tax.

    The Finance Bill proposes similar taxation regime for following specified services:

    —Export of IT and IT enabled services where tax credit under section 65F is not available;

    —Services or technical services rendered outside Pakistan or exported from Pakistan;

    —royalty, commission or fees derived by a resident company from a foreign enterprise in consideration for the use outside Pakistan of any patent, invention, model, design, secret process or formula or similar property right, or information concerning industrial, commercial or scientific knowledge, experience or skill made available or provided to such enterprise;

    —construction contracts executed outside Pakistan; and

    —other services rendered outside Pakistan as notified by the Board from time to time.

    The tax deductible will be final tax subject to following conditions:

    (i) Income tax return has been filed;

    (ii) withholding tax statements for the relevant tax year have been filed;

    (iii) sales tax returns under Federal or Provincial laws have been filed, if required under the law; and

    (iv) no credit for foreign taxes paid shall be allowed.

    The Bill also proposes an option for taxation under Normal Tax Regime which is to be exercised every year at the time of filing of income tax return.

    The Bill proposes while explaining the nature and source of any amount, investment, money, valuable article, expenditure, referred to in section 111, a taxpayer takes into account any source of income under this section, he shall not be entitled to take credit of a sum that can be reasonably attributed to the business activity under this section.

  • Finance Bill proposes blanket powers to tax machinery: KTBA

    Finance Bill proposes blanket powers to tax machinery: KTBA

    KARACHI: The federal government through Finance Bill, 2021 proposed certain amendments in tax law, which will give blanket powers to tax machinery, said Zeeshan Merchant, President, Karachi Tax Bar Association (KTBA).

    Merchant was addressing at the post budget 2021/2022 seminar held on Thursday.

    “We at KTBA feel that the FBR is actively pursuing the policy to create a friendly relationship between the taxpayers and the tax collectors,” he said, adding that we feel certain amendments proposed in the law have given blanket powers to the tax machinery.

    Merchant said that the government had presented the budget, which had ingredients of both a sense of direction though based on certain assumption and some measures to increase the tax base.

    KTBA president said that the bar was grateful to the government for timely action taken after the issues highlighted by the KTBA and now it is heard that certain proposed amendments would have now be drafted.

    While discussing the budget, he said that senior citizens had not been taken care of and they were treated at par with normal taxpayers.

    He said that the bill had proposed to omit section 114A of the Income Tax Ordinance, 2001. But it should be clarified by the tax authorities that nothing requires to be done in this regard.

    He said that the discretionary power had been give to assistant commissioner to arrest a person for concealment of assets.

    Zeeshan Merchant said that nothing has been done to bring retailers into the tax net like an effort has been made in SMEs sector.

    He highlighted that the budget had some positive measures, included: increase in minimum tax threshold from Rs10 million to Rs100 million; reduction in minimum tax rate from 1.5 percent to 1.25 percent; minimum tax not to levy in case of losses; distributors brought in the fold of minimum tax; exemptions allowed for those availing tax credit; separate tax regime for SMEs.

  • Finance Bill 2021: tax treatment of capital gain on disposal of immovable properties

    Finance Bill 2021: tax treatment of capital gain on disposal of immovable properties

    KARACHI: The Finance Bill 2021 has proposed various changes to Income Tax Ordinance, 2021 to capital gain tax on disposal of immovable properties.

    In its commentary on budget 2021/2022, KPMG Taseer Hadi & Co. Chartered Accountants said that taxation of gain on disposal Gain on disposal of immovable property is currently taxable on separately provided slab rates by computing the such gain on the basis of holding period as envisaged under sub-sections (1A) read with (3A) of section 37.

    The Finance Bill 2021 proposes to provide for taxability of gain on disposal of immovable property where such gain exceeds Rs. 5 million as normal capital gain subject to tax under applicable tax rates provided under normal slab rates or corporate tax rates.

    However, benefit of holding period shall still be taken into account while computing the taxable capital gain.

    Amendment has also been proposed to tax this gain at 5 percent instead of existing slab rates varying from 2.5 percent to 10 percent. Thus, the gain below Rs. 5 million computed by taking benefit of holding period shall be subject to tax @ 5 percent.

    The Finance Bill also proposes to insert explanation in sub-section (1A) of section 37 that where a person purchases and sells immovable property in the ordinary course of business, such gain shall be taxable as business income and not as capital gain.

    This fiction has always remained subject matter of dispute though eventually decided by the court upholding the stance of tax authorities that such gain should be taxed as business income.

    Currently under section 37(4A) where a capital asset becomes the property of the person inter-alia through gift, the fair market value of the asset, on the date of its transferor acquisition by the person shall be treated to be the cost of the asset.

    This historically as bestowed two-pronged benefits i.e. exempting gain on such disposal from tax in the hands of transferor and simultaneously entitling the transferee to a revalued cost to be claimed as deduction on subsequent sale.

    The bill proposed that if the capital asset acquired through gift is disposed of within two years of its acquisition and the Commissioner is satisfied that this constitutes a tax avoidance scheme then the recipient of the gift shall be treated to have acquired the asset for a cost equal to the cost for the person disposing the asset i.e. the historical cost.