Section 35 of Income Tax Ordinance, 2001 has explained tax treatment on disposal of stock in trade. The Federal Board of Revenue (FBR) issued the Income Tax Ordinance, 2001 updated up to June 30, 2021.
(more…)Tag: Income Tax Ordinance 2001
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Method of accounting under income tax ordinance
KARACHI: The intricacies of accounting methods for income tax purposes are elucidated in Sections 32, 33, and 34 of the Income Tax Ordinance, 2001, as outlined by the Federal Board of Revenue (FBR).
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Tax expenditures against transfer of participatory reserve
Section 31 of Income Tax Ordinance, 2001 has allowed transfer of participatory reserve on certain circumstances.
The Federal Board of Revenue (FBR) issued the Income Tax Ordinance, 2001 updated up to June 30, 2021. The Ordinance incorporated amendments brought through Finance Act, 2021.
31. Transfer to participatory reserve.—(1) Subject to this section, a company shall be allowed a deduction for a tax year for any amount transferred by the company in the year to a participatory reserve created under section 66 of the Companies Act, 2017 (XIX of 2017) in accordance with an agreement relating to participatory redeemable capital entered into between the company and a banking company as defined in the Financial Institutions(Recovery of Finances) Ordinance,2001 (XLVI of 2001).
(2) The deduction allowed under subsection (1) for a tax year shall be limited to five per cent of the value of the company’s participatory redeemable capital.
(3) No deduction shall be allowed under subsection (1) if the amount of the tax exempted accumulation in the participatory reserve exceeds ten per cent of the amount of the participatory redeemable capital.
(4) Where any amount accumulated in the participatory reserve of a company has been allowed as a deduction under this section is applied by the company towards any purpose other than payment of share of profit on the participatory redeemable capital or towards any purpose not allowable for deduction or exemption under this Ordinance the amount so applied shall be included in the income from business of the company in the tax year in which it is so applied.
(Disclaimer: The text of above section is only for information. Team PkRevenue.com makes all efforts to provide the correct version of the text. However, the team PkRevenue.com is not responsible for any error or omission.)
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Expenditures on non-performing debts under tax law
In a significant development for banking companies, development finance institutions, and Non-Banking Finance Companies (NBFCs), Section 30 of the Income Tax Ordinance, 2001 now allows for the deduction of profits accrued on non-performing debts under certain conditions.
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Expenditures against bad debt allowed
The Federal Board of Revenue (FBR) has allowed expenditures against bad debt with certain conditions under Section 29 of Income Tax Ordinance, 2001.
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Expenditure against profit on debt allowed
Section 28 of Income Tax Ordinance, 2001 has allowed expenses to taxpayers against profit on debt to the extent used in business purpose.
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Expenses on employee training allowed tax adjustment
In a move to incentivize investment in employee development and welfare, Section 27 of the Income Tax Ordinance, 2001 allows for the adjustment of expenses incurred on employee training and facilities.
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Expenses on scientific research against tax liability
Section 26 of the Income Tax Ordinance, 2001, provides a significant incentive for businesses in Pakistan. The Federal Board of Revenue (FBR) has incorporated this provision, updated up to June 30, 2021, through the Finance Act, 2021, encouraging businesses to engage in scientific research.
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Tax treatment of pre-commencement expenditure
Section 25 of the Income Tax Ordinance, 2001 provides a valuable tax benefit by allowing deductions for pre-commencement expenditure.
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Banks withhold tax on export of IT services
KARACHI: Tax practitioners in Karachi have brought to light a concerning issue where banks are deducting withholding tax on proceeds from the exports of computer software and IT-enabled services, despite these being granted a 100% tax credit.
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