ISLAMABAD: The Finance Act, 2021 has abolished the withholding tax on banking transactions that were applicable under Income Tax Ordinance, 2001.
Following are the details of relief measures announced in the Finance Act, 2021:
Deletion of 12 withholding taxes
| Provision | Description |
| 153B | Collection of tax on payment of royalty to residents |
| 231A | Collection of tax on cash withdrawal |
| 231AA | Collection of tax on banking instruments |
| 236P | Collection of tax on banking transactions other than through cash |
| 236Y | Collection of tax from persons remitting amounts abroad through credit or debit or prepaid cards. |
| 236B | Collection of tax on domestic air travel |
| 236L | Collection of tax on international air travel |
| 236V | Collection of tax on extraction of minerals |
| 233A | Collection of tax from members by a stock exchange registered in Pakistan |
| 233AA | Collection of tax on marginal financing by NCCPL |
| 234A | Collection of tax from CNG stations |
| 236HA | Collection of tax on certain petroleum products |
Merging of 3 withholding taxes with other existing provisions
| Provision | Description | Merged with |
| 150A | Deduction of tax on return on investment in Sukuks | Proposed to be merged in section 151 for residents and in section 152 for non-residents which deal with such payments |
| 152A | Deduction of tax on payments for foreign produced commercials | To be merged with section 152 which deals with payments to non-residents |
| 236S | Collection of tax on dividend in specie | To be merged with section 150 which deals with dividend |
Reduction in generalized rate on Minimum Tax on Turnover basis and increase in threshold for individuals and AOPs for chargeability of minimum tax
Broadening of scope of IT services by inclusion of cloud computing and data storage services
Exemption to Special Economic Zone Enterprises from payment of minimum tax
Ten year tax exemption for Special Technology Zone Authority, Zone Developers and Zone Enterprises
Tax exemption on the import of capital goods and dividend income of private funds from investment in special technology zone enterprise
Introduction of special tax regime for manufacturing SMEs
Exemption from tax on income of deep conversion new refineries and BMR projects of existing refineries for 20 and 10 years respectively
Reduced rate of withholding tax of 3% on oilfield services, warehousing services, logistic services, collateral management services and telecommunication services
Inclusion of telecommunication services in definition of industrial undertaking
Exemption to Electronic warehousing receipts traded on Pakistan Mercantile Exchange
Allowance of provincial WWF and WPPF as a deductible allowance while calculating income
Adjustment of business loss against property income
Unconditional grant of exemption from tax to certain organizations
Withdrawal of power of Commissioner to reject advance tax estimates presented by taxpayer
Non recognition of gain/loss on disposal of assets to non-residents under gift from relative, inheritance and agreement to live apart
Reduction in tax rate on capital gain tax on disposal of securities from 15% to 12.5%
Withdrawal of power of tax authorities to conduct inquiry under section 122(5A)
Inclusion of live animals, raw hides and unpackaged meat in definition of agriculture produce
Reduction in tax liability by 25% for women entrepreneurs
Exemption from tax on import of books and agriculture equipment
Exemption from tax for bagasse fired power generating units and reduced rate of tax on dividend income from such projects
Withholding tax rate for oil tanker services reduced from 3% to 2%
Extension in time limits for availing tax benefits under section 100D and Eleventh Schedule vide Income Tax (Amendment) Ordinance 2021 dated 21.02.2021 made part of the bill.
Tax exemptions and concessions for Roshan digital accounts and implementation of electric vehicles and mobile phone policy implemented vide Tax Laws (Amendment) Ordinance, 2021 dated 11.02.2021 made part of bill
