Karachi, July 30, 2024 – The Federal Board of Revenue (FBR) has issued a crucial clarification regarding tax credits for coal mining operations in Sindh. According to the latest Circular No. 1 of 2024-25, which outlines amendments made to the Income Tax Ordinance, 2001 through the Finance Act, 2024, a 100% tax credit is available for income exclusively derived from coal mining activities in Sindh.
The FBR’s clarification emphasizes that under Section 65F of the Income Tax Ordinance, 2001, the tax credit is specifically applicable to entities engaged in coal mining projects in Sindh, provided that the coal is supplied exclusively to power generation projects within the province. The recent amendments make it clear that the 100% tax credit is limited to income earned from these coal mining operations and does not extend to any other sources of income.
The Finance Act, 2024 has introduced an explanation to Section 65F, specifying that the tax credit is restricted to income derived solely from coal mining activities in Sindh, where the coal is used exclusively for power generation projects. This provision aims to ensure that the tax benefits are aligned with the intended support for coal mining operations that directly contribute to power generation in Sindh.
The FBR’s updated guidelines are designed to prevent any ambiguity regarding the eligibility for the tax credit and to ensure that the benefits are utilized in accordance with the regulations. By clarifying that the tax credit is not applicable to income from any other activities or sources beyond those specified, the FBR aims to maintain the focus of the tax incentive on supporting the coal mining sector’s contribution to the energy sector in Sindh.
This clarification is part of the FBR’s ongoing efforts to streamline tax regulations and ensure precise application of tax benefits, supporting targeted sectors while enhancing compliance with the updated tax laws.