Tag: Finance Act 2019

  • Finance Act 2019: Capital gain tax on immovable properties exempted on holding period above 8 years

    Finance Act 2019: Capital gain tax on immovable properties exempted on holding period above 8 years

    KARACHI: The government has exempted the capital gain tax on immovable property where holding period is above eight years. The amendment has been brought through Finance Act, 2019 as it was proposed 10 years through Finance Bill 2019.

    According to commentary on Finance Act, 2019 by PwC A F Ferguson Chartered Accountants, prior to finance bill 2019, capital gains on disposal of immovable properties were taxable as a separate block of income at the rates specified in the First Schedule, determined on the basis of holding period of immovable property.

    The bill proposed to completely revamp the taxation of capital gains on disposal of immovable properties. It was proposed to tax gain on disposal of open plots as well as constructed properties at normal rates, subject to reduction in the amount of gain on the basis of holding period exceeding the specified thresholds.

    Through amended finance bill, the taxability of gain arising on disposal of immovable properties as separate block of income has been restored.

    However, the slab rates specified for such taxation are now based on the amount of gain, which are specified as under:

    1. Where the gain does not exceed Rs 5 million: 5 percent

    2. Where the gain exceeds Rs 5 million but does not exceed Rs 10 million: 10 percent

    3. Where the gain exceeds Rs 10 million but does not exceed Rs 15 million: 15 percent

    4. Where the gain exceeds Rs 15 million: 20 percent

    Further, the holding period of property for ascertaining capital gain has been reduced vis-à-vis that proposed in the finance bill as under:

    (a) For open plot of land, the gain chargeable to tax will be reduced by 25 percent if the holding period exceeds one year but does not exceed 8 years (as against 10 years proposed in the FB). Further, where the holding period exceeds 8 years (as against 10 years proposed in the FB), gain will be taken as zero.

    (b) For constructed properties, the gain chargeable to tax will be reduced by 25 percent if the holding period exceeds one year but does not exceed 4 years (as against 5 years proposed in the FB). Further, where the holding period exceeds 4 years (as against 5 years proposed in the FB), gain will be taken as zero.

  • FBR to question source of foreign remittances above Rs5 million

    FBR to question source of foreign remittances above Rs5 million

    ISLAMABAD: Federal Board of Revenue (FBR) will question the sources for all those foreign remittances exceeding Rs5 million in a year, which are transferred through normal banking channels.

    The government has tightened the unexplained inflows by making amendment to Income Tax Ordinance, 2001 through Finance Act, 2019.

    In the past the inflows of foreign remittances were free from questioning by the tax authorities and recipient in Pakistan were allowed to get the amount into their bank accounts.

    However, through Finance Act, 2018 the limit was introduced to Rs10 million received as foreign remittances and no question would be asked to any amount of foreign exchange remitted from outside Pakistan through normal banking channels that is encashed into rupees by a scheduled bank and a certificate from such bank is produced to that effect.

    This limit has been further reduced to Rs5 million through Finance Act, 2019 and now from July 01, 2019 the inflows would be monitored and FBR has been authorized to ask a persons receiving above Rs5 million in a year about the source of sender of the amount from outside.

    The relaxation for no questioning was allowed since 2004 and it was grossly misused as it had provided legal channel for bringing back untaxed money into Pakistan without questioning by the authorities.

    For the past several years tax authorities as well as stakeholders appealed the government to abolish this permanent amnesty or put condition that the remittances without question should only be received by relatives of the sender.

  • Finance Act 2019: SBP to assist Customs against illegal fund transfers

    Finance Act 2019: SBP to assist Customs against illegal fund transfers

    ISLAMABAD: State Bank of Pakistan (SBP) will assist customs authorities in prevention of illegal inward or outward transfers of funds.

    According to Finance Act, 2019 a new Section 32C has been inserted to Customs Act, 1969, which stated:

    “32C. Mis-declaration of value for illegal transfer of funds into or out of Pakistan.- (1) Without prejudice to any action that may be taken under this Act or any other law, for the time being in force, if any person overstates the value of imported goods or understates the value of exported goods or vice versa, or using other means including short-shipment, over-shipment, with a view to illegally transferring funds into or out of Pakistan, such person shall be served with a notice to show cause within a period of two years from the date of detection of such mis-declaration as to why penal action shall not be initiated:

    Provided that if goods have not been cleared from customs, such goods shall also be liable to be seized:

    Provided further that a team consisting of Additional Collector, duly assisted by an expert in the relevant field and an officer of State Bank of Pakistan (SBP) as specified, shall submit a report in writing with evidence for the Chief Collector. The said report shall also be furnished to the SBP for action, if any, under the law regulated by SBP.

    (2) Any proceedings under this section shall not be initiated without the explicit approval of the Board.”

    The Finance Act, 2019 also mentioned penalty for such offence:

    “Such person shall be liable to penalty not exceeding two hundred thousand rupees or three times the value of goods in respect of which such offence is committed whichever is greater; and such goods shall also be liable to confiscation; and upon conviction by a special judge he shall further be liable to imprisonment for a term not exceeding five years and to a fine which may extend upto one million rupees.”

  • Finance Act 2019: advance tax exempted on personal baggage mobile phones

    Finance Act 2019: advance tax exempted on personal baggage mobile phones

    ISLAMABAD: Federal Board of Revenue (FBR) has exempted the advance tax on mobile phone brought into Pakistan by passengers under Baggage Rules, 2006.

    The Finance Act, 2019 stated that the provisions of section 148 shall not apply on mobile phones brought in personal baggage under the Baggage Rules, 2006.

    The rate of advance tax to be collected by the Collector of Customs under section 148 shall be-

    S.No.C & F Value of mobile phone (in US Dollar)Tax

     

    (in Rs.)

       
    (1)(2)(3)
    1Up to 3070
    2Exceeding 30 and up to 100730
    3Exceeding 100 and up to 200930
    4Exceeding 200 and up to 350970
    5Exceeding 350 and up to 5003,000
    6Exceeding 5005,200

  • Finance Act 2019: Non-ATL persons to pay 100 percent more tax; income to be treated as concealed

    Finance Act 2019: Non-ATL persons to pay 100 percent more tax; income to be treated as concealed

    ISLAMABAD: Federal Board of Revenue (FBR) has notified rules for persons not appearing on the Active Taxpayers List (ATL). The rules have been approved and made part of statute through Finance Act, 2019.

    RULES FOR PERSONS NOT APPEARING IN THE ACTIVE TAXPAYERS’ LIST

    1. Rate of deduction or collection of tax: Where tax is required to be deducted or collected under any provision of this Ordinance from persons not appearing in the active taxpayers’ list, the rate of tax required to be deducted or collected, as the case may be, shall be increased by hundred percent of the rate specified in the First Schedule to this Ordinance.

    2. Persons not required to file return or statement:

    (1) Where the withholding agent or the person from whom tax is required to be collected or deducted is satisfied that a person not appearing in the active taxpayers’ list was not required to file a return of income under section 114, or a statement under sub-section (4) of section 115, as the case may be, he shall before collecting or deducting tax under this Ordinance, furnish to the Commissioner a notice in writing electronically setting out—

    (a) the name, CNIC or NTN and address of the person not appearing in the active taxpayers’ list;

    (b) the nature and amount of the transaction on which tax is required to be collected or deducted; and

    (c) reason on the basis of which it is considered that the person was not required to file return or statement, as the case may be.

    (2) The Commissioner, on receipt of a notice under sub-rule (1), shall within thirty days pass an order accepting the contention or making the order under sub-rule (3).

    (3) Where the withholding agent or the person from whom tax is required to be collected or deducted has notified the Commissioner under sub-rule (1) and the Commissioner has reasonable grounds to believe that the person not appearing in the active taxpayers’ list was required to file return or statement, as the case may be, the Commissioner may, by an order in writing, direct the withholding agent to deduct or collect tax under rule 1:

    Provided that in case the Commissioner does not pass any order within thirty days of receipt of notice under sub-rule (1), the Commissioner shall be deemed to have accepted the contention under sub-rule (2) and approval shall be treated to have been granted.

    3. Provisional assessment:

    (1) Where for a tax year a person’s tax has been collected or deducted in accordance with rule 1 and the person fails to file return of income or statement, as the case may be, for that tax year within the due date provided in section 118 or as extended by the Board, the Commissioner shall notwithstanding anything contained in sub-sections (3) and (4) of section 114 or sub-section (5) of section 115, within sixty days of the due date provided in section 118 or as extended by the Board make a provisional assessment of the taxable income of the person and issue a provisional assessment order specifying the taxable income assessed and tax due thereon.

    (2) In making the provisional assessment under sub-rule (1), the Commissioner shall impute taxable income on the amount of tax deducted or collected under rule 1 by treating the imputed income as concealed income for the purposes of clause (d) of sub-section (1) of section 111:

    “Provided that the provision of section 111 shall be applicable on unexplained income, asset or expenditure in excess of imputed income treated as concealed income under this rule.”

    “Explanation.— For the removal of doubt it is clarified that the imputable income so calculated or concealed income so determined shall not absolve the person so assessed, from requirement of filing of wealth statement under sub-section (1) of section 116, the nature and source of amounts subject to deduction or collection of tax under section 111, selection of audit under section 177 or 214C or subsequent amendment of assessment as provided in rule 8 and all the provisions of the Ordinance shall apply.”

    4. Finalization or abatement of provisional assessment:

    (1) The provisional assessment under rule 3, shall be treated as the final assessment order after the expiry of forty-five days from the date of service of order of provisional assessment and the provisions of this Ordinance shall apply accordingly.

    (2) The provisional assessment shall stand abated and shall be taken to be assessment finalized under sub-section (1) of section 120 where the returns of income and wealth statement for the relevant tax year and the preceding tax year along with prescribed forms, statements or documents are filed by the person within a period of forty-five days of receipt of provisional assessment order.

    (3) Where returns have been filed before provisional assessment or under sub-rule (2), the tax deducted or collected under rule 1 shall be adjustable against the tax payable in the return filed for the relevant tax year.

    5. Where the provisional assessment has been treated as final assessment under sub-rule (1) of rule 4, the Commissioner may within thirty days of the final assessment initiate proceedings for imposition of penalties under section 182 on account of non-furnishing of return and concealment of income.

    6. For the purposes of this Schedule, imputed income means:

    (a) income for individuals and association of persons which would have resulted in the amount of tax given in paragraph (1) of Division I of the First Schedule equal to the tax collected or deducted under rule 1 for not appearing in the active taxpayers’ list; or

    (b) income for companies which would have resulted in the amount of tax given in Division II of the First Schedule equal to the tax collected or deducted at the higher rate under rule 1 for not appearing in the active taxpayers’ list.

    7. Where the withholding agent fails to furnish in the withholding statement complete or accurate particulars of persons not appearing on active taxpayers’ list, the Commissioner shall initiate proceedings under sections 182 and 191 against the withholding agent within thirty days of filing of withholding statement under section 165.

    8. Amendment of assessment:

    (1) The Commissioner may amend an assessment order where the imputed income is less than the amount on which tax was deducted or collected under rule 1 or on the basis of definite information acquired from an audit or otherwise, the Commissioner is satisfied that—

    (a) any income chargeable to tax has escaped assessment; or

    (b) total income has been under-assessed, or assessed at too low a rate, or has been the subject of excessive relief or refund; or

    (c) any amount under a head of income has been misclassified.

    (2) Notwithstanding the provisions of sub-rule (1), where a provisional assessment has been treated as final assessment or where in response to the provisional assessment, return has been filed within forty- five days or where assessment has been amended under sub-rule (1) and the assessment order is considered erroneous in so far it is prejudicial to the interest of revenue, the Commissioner may, after making or causing to be made, such enquiries as he deems necessary, amend the assessment order.

    (3) For the purposes of sub-rule (1), “definite information” shall have the same meaning as defined in sub-section (8) of section 122.

    9. Provisions of Ordinance to apply—The provisions of this Ordinance not specifically dealt with in the aforesaid rules shall apply, mutatis mutandis, in the case of proceedings against the persons not appearing on active taxpayers’ list.

    10. The provisions of this Schedule shall not apply on tax collectible or deductible in case of the following sections:-

    (a) tax deducted under section 149;

    (b) tax deducted under section 152 other than sub-section (1), (1AA), (2), (2A)(b) and (2A)(c) of section 152

    (c) tax collected or deducted under section 154;

    (d) tax deducted under section 155;

    (e) tax deducted under section 156B.

    (f) tax deducted under section 231A;

    (g) tax deducted under section 231AA;

    (h) tax collected under section 233AA;

    (i) tax deducted under section 235;

    (j) tax deducted under section 235A;

    (k) tax collected under section 235B;

    (l) tax collected under section 236;

    (m) tax collected under section 236B;

    (n) tax collected under section 236D;

    (o) tax collected under section 236F;

    (p) tax collected under section 236I;

    (q) tax collected under section 236J;

    (r) tax collected under section 236L;

    (s) tax collected under section 236P;

    (t) tax collected under section 236Q;

    (u) tax collected under section 236R;

    (v) tax collected under section 236U;

    (w) tax collected under section 236V;

    (x) tax collected under section 236X.”

  • Finance Act 2019: Tax slabs for AOPs, business individuals

    Finance Act 2019: Tax slabs for AOPs, business individuals

    ISLAMABAD: Federal Board of Revenue (FBR) has notified tax rates on income derived by Association of Persons (AOPs) and business individuals during fiscal year 2019/2020.

    According to the Finance Act, 2019 following are the tax slabs to be applicable on the income of AOPs and business individuals for the tax year 2020:

    S. No Taxable Income Rate of Tax
    (1) (2) (3)
    1.Where taxable income does not exceed Rs. 400,0000%
    2.Where taxable income exceeds Rs. 400,000 but does not exceed Rs. 600,0005% of the amount exceeding Rs. 400,000
    3.Where taxable income exceeds Rs. 600,000 but does not exceed Rs. 1,200,000Rs. 10,000 plus 10% of the amount exceeding Rs. 600,000
    4.Where taxable income exceeds Rs. 1,200,000 but does not exceed Rs. 2,400,000Rs. 70,000 plus 15% of the amount exceeding Rs. 1,200,000
    5Where taxable income exceeds Rs. 2,400,000 but does not exceed Rs. 3,000,000Rs. 250,000 plus 20% of the amount exceeding Rs. 2,400,000
    6Where taxable income exceeds Rs. 3,000,000 but does not exceed Rs. 4,000,000Rs. 370,000 plus 25% of the amount exceeding Rs. 3,000,000
    7.Where taxable income exceeds Rs. 4,000,000 but does not exceed Rs. 6,000,000Rs. 620,000 plus 30% of the amount exceeding Rs. 4,000,000
    8.Where taxable income exceeds Rs. 6,000,000Rs. 1,220,000 plus 35% of the amount exceeding Rs. 6,000,000
  • Finance Act 2019: Tax slabs for salary income

    Finance Act 2019: Tax slabs for salary income

    ISLAMABAD: The Parliament has approved the Finance Bill 2019 to implement rate of income tax on salary income.

    The statutory exempt income has been enhanced to Rs600,000 for tax year 2020 through Finance Act, 2019.

    S.No Taxable Income Rate of Tax
    (1) (2) (3)
    1.Where taxable income does not exceed Rs. 600,0000%
    2.Where taxable income exceeds Rs. 600,000 but does not exceed Rs. 1,200,0005% of the amount exceeding Rs. 600,000
    3.Where taxable income exceeds Rs. 1,200,000 but does not exceed Rs. 1,800,000Rs. 30,000 plus 10% of the amount exceeding Rs. 1,200,000
    4.Where taxable income exceeds Rs. 1,800,000 but does not exceed Rs. 2,500,000Rs. 90,000 plus 15% of the amount exceeding Rs. 1,800,000
    5.Where taxable income exceeds Rs. 2,500,000 but does not exceed Rs. 3,500,000Rs. 195,000 plus 17.5% of the amount exceeding Rs. 2,500,000
    6.Where taxable income exceeds Rs. 3,500,000 but does not exceed Rs. 5,000,000Rs. 370,000 plus 20% of the amount exceeding Rs. 3,500,000
    7.Where taxable income exceeds Rs. 5,000,000 but does not exceed Rs. 8,000,000Rs. 670,000 plus 22.5% of the amount exceeding Rs. 5,000,000
    8.Where taxable income exceeds Rs. 8,000,000 but does not exceed Rs. 12,000,000Rs. 1,345,000 plus 25% of the amount exceeding Rs. 8,000,000
    9.Where taxable income exceeds Rs. 12,000,000 but does not exceed Rs.30,000,000Rs. 2,345,000 plus 27.5% of the amount exceeding Rs. 12,000,000
    10.Where taxable income exceeds Rs. 30,000,000 but does not exceed Rs.50,000,000Rs. 7,295,000 plus 30% of the amount exceeding Rs. 30,000,000
    11.Where taxable income exceeds Rs. 50,000,000 but does not exceed Rs.75,000,000Rs. 13,295,000 plus 32.5% of the amount exceeding Rs. 50,000,000
    12.Where taxable income exceeds Rs.75,000,000Rs. 21,420,000 plus 35% of the amount exceeding Rs. 75,000,000″;

    The tax slabs should be applicable on a person’s where the income of an individual chargeable under the head “salary” exceeds seventy-five per cent of his taxable income.