Category: Exclusive

Sales Tax Act 1990: 17 percent applicable on taxable supplies

KARACHI: A normal sales tax rate at 17 percent is applicable on taxable supplies made by registered person.

Federal Board of Revenue (FBR) issued recently the updated Sales Tax Act, 1990 under which its Section 3 explained the scope of tax.

Section 3: Scope of tax

Sub-Section (1): Subject to the provisions of this Act, there shall be charged, levied and paid a tax known as sales tax at the rate of seventeen percent of the value of–

(a) taxable supplies made by a registered person in the course or furtherance of any taxable activity carried on by him; and

(b) goods imported into Pakistan, irrespective of their final destination in territories of Pakistan.

Sub-Section (1A): Subject to the provision of sub section (6) of section 8 or any notification issued thereunder, where taxable supplies are made to a person who has not obtained registration number, there shall be charged, levied and paid a further tax at the rate of three percent of the value In addition to the rate specified in sub sections (1), (1B), (2), (5), (6) and section 4 provided that the Federal Govt. may, by notification in the official Gazette, specify the taxable supplies in respect of which the further tax shall not be charged, levied and paid.

Sub-Section (1B): The Board may, by notification in the Official Gazette, in lieu of levying and collecting tax under sub section (1) on taxable supplies, levy and collect tax –

(a) On the production capacity of plants, machinery, undertaking, establishments or installation producing on manufacturing such goods; or

(b) On fixed basis, as it may deem fit, from any person who is in a position to collect such tax due to the nature of the business.

Sub-Section (2): Notwithstanding the provisions of sub-section (1): –

(a) taxable supplies specified in the Third Schedule shall be charged to tax at the rate of seventeen per cent of the retail price or in case such supplies are also specified in the Eighth Schedule, at the rates specified therein and the retail price thereof, along with the amount of sales tax shall be legibly, prominently and indelibly printed or embossed by the manufacturer on each article, packet, container, package, cover or label, as the case may be;
Provided that the Federal Government, may, by notification in the official Gazette, exclude any taxable supply from the said Schedule or include any taxable supply therein;

(aa) goods specified in the Eighth schedule shall be charged to tax at such rates and subject to such conditions and limitations as specified therein; and

(b) the Federal Government may, subject to such conditions and restrictions as it may impose, by notification in the official Gazette, declare that in respect of any taxable goods, the tax shall be charged, collected and paid in such manner and at such higher or lower rate or rates as may be specified in the said notification.

Sub-Section (3): The liability to pay the tax shall be,-

(a) in the case of supply of goods, of the person making the supply, and

(b) in the case of goods imported into Pakistan, of the person importing the goods.

April 1, 2019
Income tax return filing may be allowed for a day or two

KARACHI: The income tax return filing may continue for next one or two days as last two days were on non-working days.

The FBR through Income Tax Circular No. 02 on March 15, 2019 extended the last date for filing annual returns for tax year 2018 up to March 31, 2019.

However, the last date is falling on Sunday and FBR had not arranged facility for making payment through banks.

Previously, the FBR planned to open the offices on March 29 and 30 to facilitate the taxpayers in making payment of duty and taxes.

However, State Bank of Pakistan issued a circular for facilitating payment by banks and NIFT on March 30.

According to tax experts the last date would be automatically moved to next date if the last date is falling on holiday under Section 10 of General Clauses Act, 1897.

Therefore, people would be allowed to file income tax returns on the next date of date filing automatically, if FBR does not further extend the date.

Previously, the last date of filing income tax returns was December 15, 2018, which was non-working day or weekend then the FBR allowed the return filing for another day.

Following is the press release issued by the FBR on December 15, 2018:

“Federal Board of Revenue (FBR) has allowed filing of Income Tax returns until 17th December 2018 because of the weekend falling on 15th December which was previously announced as the deadline for filing of returns.

“The statement issued by the Official Spokesperson FBR says that a number of queries have been received about extension of last date of filing of return but the return filing date is not being extended any further.

“However, since the last date of filing of return falls on a non-working day, hence as per General Clauses Act the closing date for filing of Income Tax returns falling on 15th December 2018 as per previous announcement is automatically extended to next working day i.e. Monday the 17th of December.

“The tax offices will be extending help in filing of returns on Monday till close of office hours and the returns will be received electronically till 12 midnight.

Moreover, the Commissioners are also authorized to grant extension for a period up to 15 days on case-to-case basis. Although the receipt of return will not be blocked after due date, yet as per existing law, the names of persons who fail to file return by the closing date (or by the date extended by the Commissioners) will not be put on the Active Taxpayers List.”

March 31, 2019
Income Tax Ordinance 2001: Income from pension funds tax exempted

KARACHI: The government has allowed tax exemption to the income derived by pensioners invested in various schemes, including pension funds.

The Second Schedule of Income Tax Ordinance, 2001 allowed tax exemption to the income derived by pensioners.

The following exemptions are available to the pensioners:

Any payment from a provident fund to which the Provident Funds Act, 1925 applies.

The accumulated balance due and becoming payable to an employee participating in a recognized provident fund.

The accumulated balance up to 50 percent received from the voluntary pension system offered by a pension fund manager under the Voluntary Pension System Rules, 2005 at the time of eligible person’s-

(a) retirement; or

(b) disability rendering him unable to work.

The amounts received as monthly installment from an income payment plan invested out of the accumulated balance of an individual pension accounts with a pension fund manager or an approved annuity plan or another individual pension account of eligible person or the survivors pension account maintained with any other pension fund manager as specified in the Voluntary Pension System Rules 2005 shall be exempt from tax provided accumulated balance is invested for a period of ten years:

Provided that where any amount is exempted under this clause and subsequently it is discovered, on the basis of documents or otherwise, by the Commissioner that any of the conditions specified in this clause were not fulfilled, the exemption originally allowed shall be deemed to have been wrongly allowed and the Commissioner may, notwithstanding anything contained in this Ordinance, re-compute the tax payable by the taxpayer for the relevant years and the provisions of this Ordinance shall, so far as may be, apply accordingly.

Any withdrawal of accumulated balance from approved pension fund that represent the transfer of balance of approved provident fund to the said approved pension fund under the Voluntary Pension System Rules , 2005.

Any benevolent grant paid from the Benevolent Fund to the employees or members of their families in accordance with the provisions of the Central Employee Benevolent Fund and Group Insurance Act, 1969.

Any payment from an approved superannuation fund made on the death of a beneficiary or in lieu of or in commutation of any annuity, or by way of refund of contribution on the death of a beneficiary.

Any income of a person representing the sums received by him as a worker from out of the Workers Participation Fund established under the Companies Profits (Workers Participation) Act, 1968.

March 29, 2019
Income Tax Ordinance 2001: total exemption on payment of pension, retirement

KARACHI: Any income representing any payment received by way of gratuity or commutation of pension by an employee on his retirement is exempted from income tax.

The Second Schedule of Income Tax Ordinance, 2001 explained the exemption from total income.

Any income representing any payment received by way of gratuity or commutation of pension by an employee on his retirement or, in the event of his death, by his heirs as does not exceed –

(i) in the case of an employee of the Government, a Local Government, a statutory body or corporation established by any law for the time being in force, the amount receivable in accordance with the rules and conditions of the employee’s services;

(ii) any amount receivable from any gratuity fund approved by the Commissioner in accordance with the rules in Part III of the Sixth Schedule;

(iii) in the case of any other employee, the amount not exceeding three hundred thousand rupees receivable under any scheme applicable to all employees of the employer and approved by the Board for the purposes of this sub-clause; and

(iv) in the case of any employee to whom sub-clause (i), (ii) and (iii) do not apply, fifty per cent of the amount receivable or seventy-five thousand rupees, whichever is the less:

Provided that nothing in this sub-clause shall apply –

(a) to any payment which is not received in Pakistan;

(b) to any payment received from a company by a director of such company who is not a regular employee of such company;

(c) to any payment received by an employee who is not a resident individual; and to any gratuity received by an employee who has already received any gratuity from the same or any other employer.

March 27, 2019
Income Tax Ordinance 2001: Corporate tax rate to be reduced to 25pc

The government of Pakistan has undertaken a strategic initiative to gradually reduce corporate income tax rates, aiming to bring them down to 25% by the tax year 2023 and onwards.
(more…)

March 26, 2019

Tax rates for salary, business individuals

KARACHI: Following are the tax rates for individuals under First Schedule of Income Tax Ordinance, 2001.

The tax rate as updated through Finance Supplementary (Amendment) Act, 2018 to Income Tax Ordinance, 2001, issued by Federal Board of Revenue (FBR).

Rates of tax for individuals

(1) The rates of tax imposed on the taxable income of every individual, not being an individual to which paragraph (1A) of this Division applies, shall be as set out in the following table, namely:—

Table

S. No.	Taxable Income	Rate of Tax
01	Where the taxable income does not exceed Rs. 400,000	0 percent
02	Where the taxable income exceeds Rs. 400,000 but does not exceed Rs. 800,000	Rs1,000
03	Where the taxable income exceeds Rs. 800,000 but does not exceed Rs. 1,200,000	Rs2,000
04	Where the taxable income exceeds Rs.1,200,000 but does not exceed Rs. 2,400,000	5 percent of the amount exceeding Rs. 1,200,000
05	Where the taxable income exceeds Rs. 2,400,000 but does not exceed Rs. 3,000,000	60,000 + 15 percent of the amount exceeding Rs. 2,400,000
06	Where the taxable income exceeds Rs. 3,000,000 but does not exceed Rs. 4,000,000	150,000 + 20 percent of the amount exceeding Rs. 3,000,000
07	Where the taxable income exceeds Rs. 4,000,000 but does not exceed Rs. 5,000,000	350,000 + 25 percent of the amount exceeding Rs. 4,000,000
08	Where the taxable income exceeds Rs. 5,000,000	600,000 + 29 percent of the amount exceeding Rs. 5,000,000

Provided that where the taxable income exceeds eight hundred thousand rupees the minimum tax payable shall be two thousand rupees.

Salary persons

(1A) Where the income of an individual chargeable under the head “salary” exceeds fifty per cent of his taxable income, the rates of tax to be applied shall be as set out in the following table, namely:—

Table

S.No.	Taxable Income	Rate of Tax
01	Where the taxable income does not exceed Rs. 400,000	0 percent
02	Where the taxable income exceeds Rs. 400,000 but does not exceed Rs. 800,000	Rs1,000
03	Where the taxable income exceeds Rs. 800,000 but does not exceed Rs. 1,200,000	Rs2,000
04	Where the taxable income exceeds Rs. 1,200,000 but does not exceed Rs. 2,500,000	5 percent of the amount exceeding Rs. 1,200,000
05	Where the taxable income exceeds Rs.2,500,000 but does not exceed Rs. 4,000,000	65,000 + 15 percent of the amount exceeding Rs. 2,500,000
06	Where the taxable income exceeds Rs. 4,000,000 but does not exceed Rs. 8,000,000	290,000 + 20 percent of the amount exceeding Rs. 4,000,000
07	Where the taxable income exceeds Rs. 8,000,000	1,090,000 + 25 percent of the amount exceeding Rs. 8,000,000

Provided that where the taxable income exceeds eight hundred thousand rupees the minimum tax payable shall be two thousand rupees.

March 25, 2019

FBR estimates Rs50 billion income tax loss from salary

The Federal Board of Revenue (FBR) has recently presented a comprehensive revenue position to the finance ministry, highlighting an estimated loss of Rs50 billion resulting from the downward revision of tax rates on salary income.
(more…)

March 24, 2019
Income Tax Ordinance 2001: advance tax on paying education fee abroad

KARACHI: Foreign exchange companies are responsible for collecting advance tax on remitting abroad the education related expenses.

The Federal Board of Revenue (FBR) recently updated Income Tax Ordinance, 2001 under which Section 236R explained the advance tax on remitting amount abroad for education expenses.

Section 236R: Collection of advance tax on education related expenses remitted abroad

Sub-Section (1): There shall be collected advance tax at the rate specified in Division XXIIV of Part-IV of the First Schedule on the amount of education related expenses remitted abroad.

Rate of collection of tax under section 236R shall be 5percent of the amount of total education related expenses.

Sub-Section (2): Banks, financial institutions, foreign exchange companies or any other person responsible for remitting foreign currency abroad shall collect advance tax from the payer of education related expenses.

Sub-Section (3): Tax collected under this section shall be adjustable against the income of the person remitting payment of education related expenses.

Sub-Section (4): For the purpose of this section, “education related expenses” includes tuition fee, boarding and lodging expenses, any payment for distant learning to any institution or university in a foreign country and any other expense related or attributable to foreign education.

March 24, 2019
Advance tax on dealers, commission agents

KARACHI: Every market committee has been required to collect advance tax from dealers, commission agents under income tax laws.

The Federal Board of Revenue (FBR) recently updated Income Tax Ordinance, 2001 under which advance tax is collectable from dealers, commission agents and arhatis under Section 236J.

Section 236J: Advance tax on dealers, commission agents and arhatis etc

Sub-Section (1): Every market committee shall collect advance tax from dealers, commission agents or arhatis, etc. at the rates specified in Division XVII of Part-IV of the First Schedule at the time of issuance or renewal of licences.

The rate of collection of tax under section 236J shall be as follows:

Group Amount of tax
(per annum)
Group or Class A: Rs. 10,000
Group or Class B: Rs. 7,500
Group or Class C: Rs. 5,000
Any other category: Rs. 5,000

Sub-Section (2): The advance tax collected under sub-section (1) shall be adjustable.

Sub-Section (4): In this section “market committee” includes any committee or body formed under any provincial or local law made for the purposes of establishing, regulating or organizing agricultural, livestock and other commodity markets.

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March 23, 2019
Income Tax Ordinance 2001: return filers can claim tax adjustment paid on educational fee

KARACHI: Income tax return filers can claim adjustment of advance tax paid on educational fee.

According to updated Income Tax Ordinance, 2001 issued by Federal Board of Revenue (FBR) the advance tax collected on education fee under Section 236I is adjustable against total income tax liability of a taxpayer.

Section 236I: Collection of advance tax by educational institutions

Sub-Section (1): There shall be collected advance tax at the rate specified in Division XVI of Part-IV of the First Schedule on the amount of fee paid to an educational institution.

The rate of collection of tax under section 236I shall be 5 percent of the amount of fee.

Sub-Section (2): The person preparing fee voucher or challan shall charge advance tax under sub-section (1) in the manner the fee is charged.

Sub-Section (3): Advance tax under this section shall not be collected from a person on an amount which is paid by way of scholarship or where annual fee does not exceed two hundred thousand rupees.

Sub-Section (4): The term “fee” includes, tuition fee and all charges received by the educational institution, by whatever name called, excluding the amount which is refundable.

Sub-Section (5): Tax collected under this section shall be adjustable against the tax liability of either of the parents or guardian making payment of the fee.

Sub-Section (6): Advance tax under this section shall not be collected from a person who is a non-resident and,—

(i) furnishes copy of passport as an evidence to the educational institution that during previous tax year, his stay in Pakistan was less than one hundred eighty-three days;

(ii) furnishes a certificate that he has no Pakistan-source income; and
(iii) the fee is remitted directly from abroad through normal banking channels to the bank account of the educational institution.

March 21, 2019

Group	Amount of tax (per annum)
Group or Class A:	Rs. 10,000
Group or Class B:	Rs. 7,500
Group or Class C:	Rs. 5,000
Any other category:	Rs. 5,000