Following are the salient features introduced to Income Tax Ordinance, 2001 through Finance Bill, 2023, according to Pakistan Budget 2023-24 revealed on Friday.
REVENUE MEASURES:
1. Rationalization of Super Tax under section 4C to apply on all persons across the board on income above Rs. 150 (million): insertion of additional three new income slabs of Rs. 350(million) to Rs. 400(million), Rs. 400(million) to Rs. 500(million) and Rs. 500(million) above to be taxed at 6%, 8% and 10% respectively.
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2. Re-imposition of 0.6% advance adjustable withholding tax on non-ATL persons on cash withdrawal.
3. 1% increase in withholding tax rates on supply of goods other than sale of rice, cotton seed or edible oils, on rendering of services including service subject to concessionary tax rate of 3% but excluding electronic and print media advertising services and on execution of contracts excluding sportsperson.
4. 0.5% increase in withholding tax rate for commercial importer on import of goods falling in Part III of Twelfth Schedule to the Income Tax Ordinance, 2001. 5. Re-imposition of 10% final withholding tax on issuance of bonus shares by a company (20% for non-ATL).
6. Increase in withholding tax rate from 1% to 5% on payment to non-resident through debit/credit or prepaid cards. (2% to 10% for Non-ATL person).
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7. Imposition of an adjustable advance tax at Rs. 200,000 at the time of issuance of work permit/visa on employment of a foreign domestic helper.
8. Imposition of additional tax at the rate not exceeding fifty percent on income profit and gains of a person or class of persons on account of extraordinary gains due to exogenous factors.
RELIEF MEASURES:
1. Continuation of concessionary fixed tax rate of 0.25% for IT & ITeS exports for Tax years 2024, 2025 and 2026.
2. Automated issuance of an exemption certificate for payment to a non-resident person within 30 days of application.
3. Withdrawal of Sales Tax return filing requirement for availing concessionary fixed tax rate of 0.25% for IT & ITeS exports.
4. Increase in business turnover limit of a manufacturer from Rs. 250 (million) to Rs. 800 (million) to qualify for concessionary tax regime for SMEs and inclusion of IT & ITeS in SMEs definition.
5. Concessionary tax rate of 20% on banking company’s income from additional advances to IT & ITeS sector instead of standard rate of 39%.
6. Enhancement of monetary limit of foreign remittance remitted from outside Pakistan from five million rupees to rupee equivalent of USD 100,000 for the purpose of section 111(4) which places bar on asking nature and source of unexplained income/assets.
7. Waiver of 2% final withholding tax on purchase of immovable property for nonresident individual POC/NICOP holder where immovable property is acquired through foreign remittances remitted from abroad.
8. 10% reduction in tax liability or Rs. 5 (million) whichever is lower for a builder and 10% reduction or Rs. 1 (million) whichever is lower for an individual for own construction of house for three years.
9. 50% reduction in tax liability for three years for youth entrepreneurship (maximum limit of Rs 2 million for Individual / AOP and Rs 5 million for a company). Youth is defined as a natural person upto the age of 30 years.
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10. Extension for two years for the purpose of concessionary tax rate of 20% for banking company’s income from additional advances to low cost housing, agriculture, and SMEs including IT & ITeS.
11. Encouraging export of commodities (Agriculture produce, gems, metals etc) through online platform by providing 1% concessionary final tax rate to indirect exporters.
12. Reduction of minimum tax liability on turnover from 1.25% to 1.0% for companies listed on Pakistan Stock Exchange.
13. Extension of exemption for one-year granted to a person to profits and gains on sale of immovable property or share of special purpose vehicle to any type of REIT scheme i.e. upto 30th June, 2024.
14. Extension of Income Tax exemption for one year i.e. upto 30th June, 2024 for resident persons of FATA/PATA.
15. Five years tax holiday for agro based industries being SMEs set up on or after 1st July, 2023 from tax year 2024 to tax year 2028.
STREAMLINING MEASURES:
1. Broadening the scope of definition of Permanent Establishment in Pakistan of nonresident person.
2. Streamlining the definition of Associates to make it more succinct and elaborate.
3. Bringing more clarity in carry forward regime of minimum tax on turnover.
4. Removal of technical mistake in banking sector super tax regime by substituting tax year 2022 with tax year 2023.
5. Insertion of enabling provision for computation, collection and payment of super tax under section 4C.
6. Introduction of enabling provision for the purpose of effecting recovery of outstanding non-tax revenue under any other statute or law by the Commissioner Inland Revenue.
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7. Giving effect to change of name from “Prime Minister’s Flood Relief Fund 2022” to “Prime Minister’s Relief Fund for Flood, Earthquake and Other Calamities”.
DOCUMENTATION MEASURES:
1. Re-imposition of advance adjustable withholding tax from persons not on ATL.
