ISLAMABAD: Section 6 of Income Tax Ordinance, 2001 deals with tax chargeability on certain payments made to non-residents.
(more…)Tag: Income Tax Ordinance 2001
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Section 5 of Income Tax Ordinance, 2001
ISLAMABAD: Section 5 of Income Tax Ordinance, 2001 deals with income of a persons who receives dividend from a company.
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Section 4B of Income Tax Ordinance, 2001: super tax
ISLAMABAD: The Section 4B of the Income Tax Ordinance, 2001 deals with super tax for rehabilitation of temporarily displaced persons. The Federal Board of Revenue (FBR) issued the updated Income Tax Ordinance, 2001.
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Section 4 of Income Tax Ordinance, 2001: tax on taxable income
ISLAMABAD: The Federal Board of Revenue (FBR) issued the updated Income Tax Ordinance, 2001 after incorporating amendments brought through Finance Act, 2021. The Section 4 of the Income Tax Ordinance, 2001 deals with tax on taxable income.
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Section 2 of Income Tax Ordinance, 2001 amended through Finance Act, 2021
The Federal Board of Revenue (FBR) notified updated Section 2 of Income Tax Ordinance, 2001 amended through Finance Act, 2021.
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Section 203A to result in corruption, harassment: FPCCI
KARACHI: Nasir Khan, acting president of Federation of Pakistan Chambers of Commerce and Industry (FPCCI) on Wednesday said that the government has not incorporated practical, business-friendly and growth-promoting proposals of FPCCI in the budget; sent well before the Budget 2021-22.
He maintained that it is a gross negligence on government’s part to ignore the apex representative body of Pakistan’s business, industrial and trade community.
Nasir Khan also criticized the Section 203A of Income Tax Ordinance, 2001 introduced through the budget 2021/2022, which empowers and expands the discretionary powers of FBR.
He added that it will only result in increase in corruption and harassment. He added that although Section 203A has been amended through introduction of slabs; but, still FPCCI is of the view that powers to arrest and prosecute will create fearful and discouraging environment for SMEs.
He said that Section 203A is equivalent to NAB’s law and provision should be added to make FBR accountable; if it cannot establish any corruption or tax evasion. This Section 203A also violates basic rights and the honourable Supreme Court should intervene to protect the businessmen of the country.
Acting President of FPCCI also pointed out that a blanket exemption for FED has been given to FATA and PATA; without surveying and quantifying the genuine needs and total demand of FATA and PATA population.
This will render industries in adjacent regions and all over the country uncompetitive in comparison to those industrial units which are exempt from FED in FATA and PATA. He added that there is a strong possibility that industrial units may exploit the FED exemption and utilize it to produce for regions other than FATA and PATA. He also added that there must be a strict mechanism to avoid misuse of the FED exemption and subsequent prosecution.
Nasir Khan also expressed his shock that FPCCI sent its recommendations on tax system reforms and simplification of tax rates to Prime Minister and he instructed FBR to have a consultative process with FPCCI; but, FBR did not start that process. He also mentioned that Shaukat Tarin promised that the budget will not be made without consulting FPCCI; but, unfortunately, that promise was also not kept.
Nasir Khan has suggested that corporate courts should be established in the country to counter and balance the weak policies of the successive governments and ensure protection to SMEs.
Nasir Khan mentioned that surprisingly FBR has made a banker the head of its Budget Anomalies Committees; who has no understanding of trade, SMEs and economic affairs.
Zakaria Usman, Convener Budget Advisory Council of FPCCI, said that the government should ensure consistency of policies to encourage investment in the country.
FPCCI demands that the Honourable Prime Minister of Pakistan must intervene and resolve the issues that are anti-business and anti-growth. FPCCI is ever-ready to resolve all outstanding issues through discussion and a mutually-beneficial dialogue.
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FBR categorizes heads of income for tax collection
The Federal Board of Revenue (FBR) in Pakistan has outlined five distinct heads of income for the purpose of tax collection from both individuals and corporate entities.
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Domestic electricity consumers to pay tax on monthly bill above Rs25,000
ISLAMABAD: The tax authorities have imposed tax on domestic electricity consumers – whose monthly bill is Rs25,000 and above.
According to a commentary on budget 2021/2022 by KPMG Taseer Hadi & Co. currently, tax collection on domestic consumers of electricity is prescribed under section 235A of Income Tax Ordinance, 2001 whereby 7.5 per cent advance tax is required to be collected if the monthly electricity bill is of Rs. 75,000 or more.
Such advance tax is adjustable against tax liability of such person. Whereas, tax collection on commercial and industrial consumer of electricity is prescribed under section 235 of the Income Tax Ordinance, 2001.
The Finance Bill 2021 proposed to withdraw section 235A and also proposes to insert requirement of tax collection on domestic consumers of electricity in section 235 based on following criteria:
—if the consumer’s name is not appearing in Active Taxpayers List (ATL);
—monthly bill is Rs. 25,000 or more;
—tax rate will be 7.5 per cent;
—tax collection on annual bill amount up to Rs360,000 will be minimum tax;
—tax collection on monthly bill over and above Rs. 30,000 will be adjustable against tax liability of a person.
The Bill further proposed to exclude those persons whose entire income is subject to final tax or minimum tax regime under any provisions of the Income Tax Ordinance, 2001 from the application of the above section.
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Finance Bill amends concealment of income definition
ISLAMABAD: The Finance Bill, 2021 has proposed to redefine the concealment of income by including suppression of receipts liable to tax.
According to budget 2021/2022 documents, the Finance Bill 2021 proposed to make amendment in the Income Tax Ordinance, 2001 regarding concealment of income.
The proposed amendment explains concealment of income includes –
“(a) the suppression of any item of receipt liable to tax in whole or in part, or failure to disclose income chargeable to tax;
(b) claiming any deduction or any expenditure not actually incurred; and
(c) any act referred to in sub-section (1) of section 111 of Income Tax Ordinance, 2001.
Explanation.- For the removal of doubt, it is clarified that where any item of receipt declared by the taxpayer is claimed as exempt from tax, or where any deduction in respect of any expenditure is claimed, mere disallowance of such claim shall not constitute concealment of income or the furnishing of inaccurate particulars of income, unless it is proved that the taxpayer deliberately claimed exemption from tax in respect of the aforesaid item of receipt or claimed deduction in respect of such expenditure not actually incurred by him.”
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Budget 2021/2022: salient features of measures taken in income tax
ISLAMABAD: The federal government on Friday announced budget for fiscal year 2021/2022 and notified relief and revenue measures in income tax.
REVENUE MEASURES
• Special regime for export of services at par with export of goods to be taxed @ 1% under final tax regime.
• Elimination of block taxation of property income and shift to normal tax regime.
• Reduction of block taxation on capital gain on disposal of immoveable properties if gain exceeds Rs. 20 million.
• Reduction in block taxation on interest income, if it exceeds Rs. 5 million.
• Tax on “on” money on vehicles, if vehicle is disposed without registration.
• Expansion of scope of withholding tax collection from supply chain below manufacturers and importers of specified sectors (sections 236G and 236H).
• Reduction in threshold of monthly electricity bill for withholding tax on electricity consumption from 75,000 to 25,000 from domestic users not appearing on Active Taxpayers’ list.
• Removal of requirement of issuance of separate notice in concealment cases.
• Withholding of tax on rental income of sub-lessee.
• Broadening of scope of withholding agents for the purpose of collection of withholding tax on commission income (section 233).
• Streamlining withholding tax collection on sale and purchase of immoveable property (section 236C and 236K).
• Rationalization of withholding tax regime for exporters.
• Taxability of profit on debt component of GP fund and other such funds.
• Withdrawal of personal income tax exemptions.
• During the current financial year, Tax Laws (Second Amendment) Ordinance, 2021was promulgated to implement corporate income tax reforms to provide level playing field to all businesses. Certain tax credits, concessions and exemptions were withdrawn. The provisions of the Ordinance have been made part of the Finance Bill.
RELIEF MEASURES
• Deletion of 12 withholding taxes
Sections of Income Tax Ordinance, 2001
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
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 10 years.
• 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.
• 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.
STREAMLING MEASURES
• Strengthening mechanism of Alternate dispute resolution.
• Elimination of requirement of filing of application for automated issuance of refund.
• Introduction of time limitation for disposal of show cause notices.
• Recording of e-hearing to be admissible evidence.
• Automated issuance of exemption certificates if application is not disposed by Commissioner within 15 days.
• Removal of requirement of updating tax profile.
• Clarity regarding taxation of income of co-operative societies from sale and services to its own members.
• Delegation of power of Federal Government to Board with the approval of Federal Minister in-charge.
• Extension of time limitation for issuance of notice for filing of return in case of foreign income or foreign assets.
• Time limitation for completion of assessment in pursuance of orders of the Commissioner.
• Streamlining measure for monitoring of withholding taxes requiring taxpayers to file online statement along with reconciliation.
• Establishment of Directorate of compliance Risk Management in FBR.
DOCUMENTATION MEASURES
• Tax credit on installation of point of sale machines.
• Notification of business bank accounts made mandatory.
• Measures for the documentation of business of used cars.
• Harmonization of procedure for investigation and prosecution of offences under domestic tax laws.