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Tag: Income Tax Ordinance 2001

  • Return filing mandatory for Pakistanis having foreign assets

    Return filing mandatory for Pakistanis having foreign assets

    ISLAMABAD: Pakistanis having income and assets abroad are required to file annual income tax return under Section 114 of the Income Tax Ordinance, 2001.

    According to Section 114 of the Ordinance the return filing is mandatory for: “(x) is a resident person being an individual required to file foreign income and assets statement under section 116A.”

    The Section 116A of the Ordinance was introduced through Finance Act, 2018.

    According to this section every resident taxpayer being an individual having foreign income of not less than ten thousand United States dollars or having foreign assets with a value of not less than one hundred thousand United States dollars shall furnish a statement, hereinafter referred to as the foreign income and assets statement, in the prescribed form and verified in the prescribed manner giving particulars of—

    (a) the person’s total foreign assets and liabilities as on the last day of the tax year;

    (b) any foreign assets transferred by the person to any other person during the tax year and the consideration for the said transfer; and

    (c) complete particulars of foreign income, the expenditure derived during the tax year and the expenditure wholly and necessarily for the purposes of deriving the said income.

  • FBR explains fair market value of property, assets

    FBR explains fair market value of property, assets

    ISLAMABAD: Federal Board of Revenue (FBR) explained fair market value, which is the price which the property or asset would ordinarily fetch on sale or supply in the open market at that time.

    The FBR issued Income Tax Ordinance, 2001 (updated up to June 30, 2020) which explains the fair market value through Section 68.

    Following is the text of Section 68 of the Ordinance, explaining the fair market value:

    Section 68. Fair market value.—

    (1) For the purposes of this Ordinance, the fair market value of any property or rent, asset, service, benefit or perquisite at a particular time shall be the price which the property or rent, asset, service, benefit or perquisite would ordinarily fetch on sale or supply in the open market at that time.

    (2) The fair market value of any property or rent, asset, service, benefit or perquisite shall be determined without regard to any restriction on transfer or to the fact that it is not otherwise convertible to cash.

    (3) Where the price “other than the price of immoveable property” referred to in sub-section (1) is not ordinarily ascertainable, such price may be determined by the Commissioner.

    (4) Notwithstanding anything contained in sub-sections (1) and (3), the Board may, from time to time, by notification in the official Gazette, determine the fair market value of immovable property of the area or areas as may be specified in the notification.

    (5) Where the fair market value of any immovable property of an area or areas has not been determined by the Board in the notification referred to in sub-section (4), the fair market value of such immovable property shall be deemed to be the value fixed by the District Officer (Revenue) or provincial or any other authority authorized in this behalf for the purposes of stamp duty.

    (6) In respect of immovable property—

    (i) component A of the formula in sub-section (2) of section 37;

    (ii) “consideration received” as mentioned in Division X of Part IV of First Schedule;

    (iii) “value of immovable property” as mentioned in Divisions XVIII of Part IV of the First Schedule; and

    (iv) valuation for the purposes of section 111,shall not be less than the fair market value as determined under sub-section (4) or (5).

    Explanation.—(1)For the removal of doubt, it is clarified that the fair market value as determined under sub-section (4) or(5) shall be for carrying out the purposes of this Ordinance only.

  • Rate of tax on payment through debt, credit cards

    Rate of tax on payment through debt, credit cards

    The Federal Board of Revenue (FBR) has announced updates to the rate of income tax applicable to payments made abroad through credit or debit cards during the tax year 2021 (July 01, 2020, to June 30, 2021).

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  • Rate of advance income tax on education fee

    Rate of advance income tax on education fee

    ISLAMABAD: Federal Board of Revenue (FBR) has updated rate of advance income tax to be collected by educational at the time of preparing fee challan during tax year 2021 (July 01, 2020 to June 30, 2021).

    The FBR issued Income Tax Ordinance, 2001 (updated up to June 30, 2020) after incorporating amendments brought through Finance Act, 2020.

    The FBR updated the rate of collection of tax under section 236I of Income Tax Ordinance, 2001, which shall be 5 percent of the amount of fee.

    Following is the text of Section 236I under which the advance tax to be collected by educational institutions:

    236I. Collection of advance tax by educational institutions.— (1) There shall be collected advance tax from a person not appearing on the active taxpayers’ list at the rate specified in Division XVI of Part-IV of the First Schedule on the amount of fee paid to an educational institution.

    (2) The person preparing fee voucher or challan shall charge advance tax under sub-section (1) in the manner the fee is charged.

    (3) Advance tax under this section shall not be collected from a person on an amount which is paid by way of scholarship or where annual fee does not exceed two hundred thousand rupees.

    (4) The term “fee” includes, tuition fee and all charges received by the educational institution, by whatever name called, excluding the amount which is refundable.

    (5) Tax collected under this section shall be adjustable against the tax liability of either of the parents or guardian making payment of the fee.

    (6) Advance tax under this section shall not be collected from a person who is a non-resident and,—

    (i) furnishes copy of passport as an evidence to the educational institution that during previous tax year, his stay in Pakistan was less than one hundred eighty-three days;

    (ii) furnishes a certificate that he has no Pakistan-source income; and

    (iii) the fee is remitted directly from abroad through normal banking channels to the bank account of the educational institution.

  • Income tax rate on sale of petroleum products

    Income tax rate on sale of petroleum products

    The Federal Board of Revenue (FBR) has recently announced an update to the rate of income tax on the sale of certain petroleum products for the tax year 2021, spanning from July 01, 2020, to June 30, 2021.

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  • Advance tax rate on sale to retailers updated

    Advance tax rate on sale to retailers updated

    ISLAMABAD: Federal Board of Revenue (FBR) has updated rate of advance income tax on sale to retailers during tax year 2021 (July 01, 2020 to June 30, 2020).

    The FBR issued Income Tax Ordinance, 2001 (updated up to June 30, 2020) after incorporating amendment brought through Finance Act, 2020.

    The rate of collection of tax under section 236H on the gross amount of sales shall be:

    The rate of advance tax on sale of electronics shall be one percent. The rate of advance tax in case of sales to other goods shall be 0.5 percent.

    Following is the text of Section 236H of Income Tax Ordinance, 2001:

    236H. Advance tax on sales to retailers.— (1) Every manufacturer, distributor, dealer, wholesaler or commercial importer of electronics, sugar, cement, iron and steel products, motorcycles, pesticides, cigarettes, glass, textile, beverages, paint or foam sector, at the time of sale to retailers, and every distributor or dealer to another wholesaler in respect of the said sectors, shall collect advance tax at the rate specified in Division XV of Part IV of the First Schedule, from the aforesaid person to whom such sales have been made.

    (2) Credit for the tax collected under sub-section (1) shall be allowed in computing the tax due by the retailer on the taxable income for the tax year in which the tax was collected.

  • Rate of tax on sale to distributors, dealers and wholesalers

    Rate of tax on sale to distributors, dealers and wholesalers

    ISLAMABAD: Federal Board of Revenue (FBR) has updated rate of advance income tax on sale to distributors, dealers and wholesalers during tax year 2021 (July 01, 2020 to June 30, 2020).

    The FBR issued Income Tax Ordinance, 2001 (updated up to June 30, 2020) after incorporating amendment brought through Finance Act, 2020.

    The FBR updated the rate of advance income tax on sale to distributors, dealers and wholesalers under Section 236G of Income Tax Ordinance, 2001.

    The rate of collection of tax under section 236G shall be at 0.7 percent on sale of fertilizers and 0.1 percent on sale of other than fertilizers/

    The text of section 236G is as follow:

    Section 236G. Advance tax on sales to distributors, dealers and wholesalers.—

    (1) Every manufacturer or commercial importer of electronics, sugar, cement, iron and steel products, fertilizer, motorcycles, pesticides, cigarettes, glass, textile, beverages, paint or foam sector, at the time of sale to distributors, dealers and wholesalers, shall collect advance tax at the rate specified in Division XIV of Part IV of the First Schedule, from the aforesaid person to whom such sales have been made.

    (2) Credit for tax collected under sub-section (1) shall be allowed in computing the tax due by the distributor, dealer or wholesaler on the taxable income for the tax year in which the tax was collected.

  • Rate of advance tax on sale, purchase of immovable properties

    Rate of advance tax on sale, purchase of immovable properties

    ISLAMABAD: Federal Board of Revenue (FBR) has updated rate of advance tax on sale and purchase of immovable properties during tax year 2021 (July 01, 2020 to June 30, 2021).

    The FBR issued Income Tax Ordinance, 2001 (Updated up to June 30, 2020) after incorporating amendments introduced through Finance Act, 2020.

    The FBR updated the rate of tax to be collected under section 236C of Income Tax Ordinance, 2001. The advance tax rate shall be one percent of the gross amount of the consideration received.

    The rate of advance tax shall be two percent on a person for not appearing on Active Taxpayers List (ATL).

    Following is the text of Section 236C of the Ordinance:

    236C. Advance Tax on sale or transfer of immovable Property.—(1) Any person responsible for registering, recording or attesting transfer of any immovable property shall at the time of registering, recording or attesting the transfer shall collect from the seller or transferor advance tax at the rate specified in Division X of Part IV of the First Schedule:

    Explanation,—For removal of doubt, it is clarified that the person responsible for registering, recording or attesting transfer includes person responsible for registering, recording or attesting transfer for local authority, housing authority, housing society, co-operative society and registrar of properties.

    Provided that this sub-section shall not apply to a seller, being the dependant of a Shaheed belonging to Pakistan Armed Forces or a person who dies while in the service of the Pakistan Armed Forces or the service of Federal or Provincial Government, in respect of first sale of immovable property acquired from or allotted by the Federal Government or Provincial Government or any authority duly certified by the official allotment authority, and the property acquired or allotted is in recognition of or for services rendered by the Shaheed or the person who dies in service.

    (2) The Advance tax collected under sub-section (1) shall be adjustable.

    Provided that where immovable property referred to in sub-section (1) is acquired and disposed of within the same tax year, the tax collected under this section shall be minimum tax.

    (3) Advance tax under sub-section (1) shall not be collected if the immovable property is held for a period exceeding four years.

    The FBR also updated rate of advance tax on purchase of immovable properties. The rate of tax to be collected under section 236K shall be one percent of the fair market value.

    The advance tax rate shall be two percent on a person for not appearing on Active Taxpayers List (ATL).

    The text of Section 236K of Income Tax Ordinance, 2001:

    236K. Advance tax on purchase or transfer of immovable property.—(1)Any person responsible for registering, recording or attesting transfer of any immovable property shall at the time of registering, recording or attesting the transfer shall collect from the purchaser or transferee advance tax at the rate specified in Division XVIII of Part IV of the First Schedule.

    Explanation,—For removal of doubt, it is clarified that the person responsible for registering, recording or attesting transfer includes person responsible for registering, recording or attesting transfer for local authority, housing authority, housing society, co-operative society and registrar of properties.

    (2) The advance tax collected under sub-section (1) shall be adjustable.

    (3) Any person responsible for collecting payments in installments for purchase or allotment of any immovable property where the transfer is to be effected after making payment of all installments, shall at the time of collecting installments collect from the allotee or transferee advance tax at the rate specified in Division XVIII of Part IV of the First Schedule.

    (4) Nothing contained in this section shall apply to a scheme introduced by the Federal Government, or Provincial Government or an Authority established under a Federal or Provincial law for expatriate Pakistanis:

    “Provided that the mode of payment by the expatriate Pakistanis in the said scheme or schemes shall be in the foreign exchange remitted from outside Pakistan through normal banking channels.”

  • Tax Year 2021: rate of tax on cash withdrawal from banks

    Tax Year 2021: rate of tax on cash withdrawal from banks

    ISLAMABAD: Federal Board of Revenue (FBR) has updated rate of income tax to be deducted at the time of cash withdrawal from banks during tax year 2021 (July 01, 2020 to June 30, 2021).

    The FBR issued Income Tax Ordinance, 2001 (updated up to June 30, 2020) after incorporating amendments brought through Finance Act, 2020.

    The FBR updated the rate of tax to be deducted under section 231A of Income Tax Ordinance shall be 0.6 percent of the cash amount withdrawn, for the person whose name is not appearing in the active taxpayers’ list.

    The text of Section 231A is as follow:

    231A. Cash withdrawal from a bank.—(1) Every banking company shall deduct tax at the rate specified in Division VI of Part IV of the First Schedule, if the payment for cash withdrawal, or the sum total of the payments for cash withdrawal in a day, exceeds fifty thousand rupees.

    “Explanation.- For removal of doubt, it is clarified that the said fifty thousand rupees shall be aggregate withdrawals from all the bank accounts in a single day.”

    The FBR also updated the rate of tax to be deducted under section 231AA shall be at the rate of 0.6 percent of the transactions for the person whose name is not appearing in the active taxpayers’ list.

    Following is the text of Section 231AA of the Ordinance is:

    231AA. Advance tax on transactions in bank.— (1) Every banking company, non-banking financial institution, exchange company or any authorized dealer of foreign exchange shall collect advance tax at the time of sale against cash of any instrument, including Demand Draft, Pay Order, CDR, STDR, SDR, RTC, or any other instrument of bearer nature or on receipt of cash on cancellation of any of these instruments.

    (2) Every banking company, non-banking financial institution, exchange company or any authorized dealer of foreign exchange shall collect advance tax at the time of transfer of any sum against cash through online transfer, telegraphic transfer, mail transfer or any other mode of electronic transfer.

    (3) The advance tax under this section shall be collected at the rate specified in Division VIA of Part IV of the First Schedule, where the sum total of payments for transactions mentioned in sub-section (1) or sub-section (2) as the case may be, exceed twenty-five thousand rupees in a day.

  • Income tax rates on telephone, internet usage

    Income tax rates on telephone, internet usage

    ISLAMABAD: Federal Board of Revenue (FBR) has updated rates of income tax on usage of telephone and internet services by phone subscribers during tax year 2021 (July 30, 202 to June 30, 2021).

    The FBR issued Income Tax Ordinance, 2001 (updated June 30, 2020) after incorporating amendments brought through Finance Act, 2020.

    The FBR also updated following rates of collection of tax under section 236 of the Income Tax Ordinance, —

    (a)In the case of a telephone subscriber (other than mobile phone subscriber) where the amount of monthly bills exceeds Rs100010 percent of the exceeding amount of bill
    (b)In the case of subscriber of internet, mobile telephone and pre-paid internet or telephone card12.5 percent of the amount of bill or sales price of internet pre-paid card or prepaid telephone card or sale of units through any electronic medium or whatever form.

    Following is the text of Section 236 of Income Tax Ordinance, 2001:

    236. Telephone and internet users.- (1) Advance tax at the rates specified in Part IV of the First Schedule shall be collected on the amount of –

    (a) telephone bill of a subscriber;

    (b) prepaid cards for telephones;

    (c) sale of units through any electronic medium or whatever form; and

    (d) internet bill of a subscriber; and

    (e) prepaid cards for internet.

    (2) The person preparing the telephone or internet bill shall charge advance tax under sub-section (1) in the manner telephone or internet charges are charged.

    (3) The person issuing or selling prepaid cards for telephones or internet shall collect advance tax under sub-section (1) from the purchasers at the time of issuance or sale of cards.

    (3A) The person issuing or selling units through any electronic medium or whatever form shall collect advance tax under sub-section (1) from the purchaser at the time of issuance of sale of units.

    (4) Advance tax under this section shall not be collected from Government, a foreign diplomat, a diplomatic mission in Pakistan, or a person who produces a certificate from the Commissioner that his income during the tax year is exempt from tax.