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).
(more…)Tag: Income Tax Ordinance 2001
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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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Motor vehicle tax rates for year 2021-2022
Federal Board of Revenue (FBR) has issued tax rates on motor vehicles for year 2021/2022. The authorities collect motor vehicle tax under Section 234 of Income Tax Ordinance, 2001.
Under this section any person at the time of collecting motor vehicle tax shall also collect advance tax at the rates specified in Division III of Part IV of the First Schedule.
Rates of collection of tax under section 234,—
(1) In case of goods transport vehicles, tax of two rupees and fifty paisa per kilogram of the laden weight shall be charged .
(1A) In the case of goods transport vehicles with laden weight of 8120 kilograms or more, advance tax after a period of ten years from the date of first registration of vehicle in Pakistan shall be collected at the rate of twelve hundred rupees per annum;
(2) In the case of passenger transport vehicles plying for hire with registered seating capacity of—
S.No. Capacity Rs per seat per annum (i) Four or more persons but less than ten persons. 50 (ii) Ten or more persons but less than twenty persons. 100 (iii) Twenty persons or more. 300 (3) In case of other private motor vehicles shall be as set out in the following Table, namely:-
S. No. Engine capacity Tax (1) (2) (3) 1. upto 1000cc Rs. 800 2. 1001cc to 1199cc Rs. 1,500 3. 1200cc to 1299cc Rs. 1,750 4. 1300cc to 1499cc Rs. 2,500 5. 1500cc to 1599cc Rs. 3,750 6. 1600cc to 1999cc Rs. 4,500 7. 2000cc & above Rs. 10,000 (4) where the motor vehicle tax is collected in lump sum,
S. No. Engine capacity Tax (1) (2) (3) 1. upto 1000cc Rs. 10,000 2. 1001cc to 1199cc Rs. 18,000 3. 1200cc to 1299cc Rs. 20,000 4. 1300cc to 1499cc Rs. 30,000 5. 1500cc to 1599cc Rs. 45,000 6. 1600cc to 1999cc Rs. 60,000 7. 2000cc & above Rs. 120,000 The rate of tax shall be increased by 100 per cent in case person is not on the Active Taxpayers List (ATL).
(The rates are given as per Income Tax Ordinance, 2001 updated up to June 30, 2021. Team Pkrevenue.com is endeavored to provide correct data. However, the team Pkrevenue.com shall not responsible for any omission.)