Tag: Income Tax Ordinance 2001

TAX YEAR 2021: FBR updates tax rates for motor vehicles registration, transfers

ISLAMABAD: Federal Board of Revenue (FBR) has updated advance tax rates for registration and transfer of motor vehicles during tax year 2021.

The FBR issued the tax rates as updated up to June 30, 2020 and will remain applicable during July 01, 2020 to June 30, 2021, if not amended.

The advance tax on motor vehicles at the time of registration and transfer of registration is governed under Section 231B of Income Tax Ordinance, 2001, which states:

Section 231B. Advance tax on private motor vehicles.—

(1) Every motor vehicle registering authority of Excise and Taxation Department shall collect advance tax at the time of registration of a motor vehicle, at the rates specified in Division VII of Part IV of the First Schedule:

“Provided that no collection of advance tax under this sub-section shall be made after five years from the date of first registration as specified in clauses (a), (b) and (c) of sub-section (6).”

(1A) Every leasing company or a scheduled bank or a non-banking financial institution or an investment bank or a modaraba or a development finance institution, whether shariah compliant or under conventional mode, at the time of leasing of a motor vehicle to a “person whose name is not appearing in the active taxpayers’ list”, either through ijara or otherwise, shall collect advance tax at the rate of four per cent of the value of the motor vehicle.

(2) Every motor vehicle registering authority of Excise and Taxation Department shall collect advance tax at the time of transfer of registration or ownership of a private motor vehicle, at the rates specified in Division VII of Part IV of the First Schedule:

Provided that no collection of advance tax under this sub-section shall be made on transfer of vehicle after five year from the date of first registration in Pakistan.

(3) Every manufacturer of a motor “vehicle” shall collect, at the time of sale of a motor car or jeep, advance tax at the rate specified in Division VII of Part IV of the First Schedule from the person to whom such sale is made.

(4) Sub-section (1) shall not apply if a person produces evidence that tax under sub-section (3) in case of a locally manufactured vehicle or tax under section 148 in the case of imported vehicle was collected from the same person in respect of the same vehicle.

(5) The advance tax collected under this section shall be adjustable:

Provided that the provisions of this section shall not be applicable in the case of –

(a) the Federal Government;

(b) a Provincial Government;

(d) a foreign diplomat; or

(e) a diplomatic mission in Pakistan.

“(6) For the purposes of this section the expression “date of first registration” means—

(a) the date of issuance of broad arrow number in case a vehicle is acquired from the Armed Forces of Pakistan;

(b) the date of registration by the Ministry of Foreign Affairs in case the vehicle is acquired from a foreign diplomat or a diplomatic mission in Pakistan;

(c) the last day of the year of manufacture in case of acquisition of an unregistered vehicle from the Federal or a Provincial Government; and

(d) in all other cases the date of first registration by the Excise and Taxation Department.

(7) For the purpose of this section “motor vehicle” includes car, jeep, van, sports utility vehicle, pick-up trucks for private use, caravan automobile, limousine, wagon and any other automobile used for private purpose.”

Explanation.— For the removal of doubt, it is clarified that a motor vehicle does not include a rickshaw, motorcycle-rickshaw and any other motor vehicle having engine capacity upto 200cc.

(1) The rate of tax under sub-sections (1) and (3) of section 231B shall be as set out in the following Table:–

S. No.	Engine capacity	Tax
(1)	(2)	(3)
1.	upto 850cc	Rs. 7,500
2.	851cc to 1000cc	Rs. 15,000
3.	1001cc to 1300cc	Rs. 25,000
4.	1301cc to 1600cc	Rs. 50,000
5.	1601cc to 1800cc	Rs. 75,000
6.	1801cc to 2000cc	Rs. 100,000
7.	2001cc to 2500cc	Rs. 150,000
8.	2501cc to 3000cc	Rs. 200,000
9.	Above 3000cc	Rs. 250,000

(2) The rate of tax under sub-sections (2) of section 231B shall be as follows:–

S. No.	Engine capacity	Tax
(1)	(2)	(3)
1.	upto 850cc	–
2.	851cc to 1000cc	5,000
3.	1001cc to 1300cc	7,500
4.	1301cc to 1600cc	12,500
5.	1601cc to 1800cc	18,750
6.	1801cc to 2000cc	25,000
7.	2001cc to 2500cc	37,500
8.	2501cc to 3000cc	50,000
9.	Above 3000cc	62,500

Provided that the rate of tax to be collected shall be reduced by 10 percent each year from the date of first registration in Pakistan.

October 11, 2020

Tax on taxable income explained

ISLAMABAD: Federal Board of Revenue (FBR) has explained taxable income for collection of tax from persons or corporate entities. The FBR issued Income Tax Ordinance, 2001 updated June 30, 2020 incorporating amendments brought through Finance Act, 2020.
(more…)

October 10, 2020
FBR issues draft rules for settlement of tax cases

ISLAMABAD: Federal Board of Revenue (FBR) has issued draft rules for settlement of tax cases through oversight committee.

The FBR issued SRO 945(I)/2020 to notify draft rules for implementation of law of agreed assessment under Section 122D of Income Tax Ordinance, 2001.

The Section 122D has been inserted to the Ordinance through Finance Act, 2020.

The section allowed an opportunity where a taxpayer, in response to a notice under sub-section (9) of section 122, intends to settle his case, he may file offer of settlement in the prescribed form before the assessment oversight committee.

According to the draft rules, a settlement application shall be made electronically by the applicant in person or by his authorized representative, under Section 122D for agreed assessment to the committee.

A settlement application shall be preferred to the committee after the date of service of the notice under sub-section 9 of Section 122 of the Ordinance and before finalization of assessment.

The commissioner shall not conclude assessment proceedings under Section 122 if an application, made against the notice issued under sub-section (9) of Section 122, lies pending before the committee.

The committee after examination of the contents of an application submitted by an applicant and facts stated therein and on scrutiny of requisitioned record, if any, shall afford opportunity of being heard to the applicant in writing.

The committee shall finalize the application filed under Section 122D of the Ordinance within thirty days of receipt of application or within an extended period of sixty days, for reasons to be recorded in writing by the committee.

October 3, 2020
KE starts updating information of industrial, commercial consumers for tax purpose

KARACHI: K-Electric has launched updating details of industrial and commercial consumers, which is mandatory under income tax law.

The company, which is providing electricity to 2.5 million consumers including residential, commercial, industrial and agriculture, has asked the consumers to update their details through an electronic form along with providing details of CNIC and NTN.

The K-Electric said that pursuant to Section 181AA of Income Tax Ordinance, 2001 all entities with industrial and commercial electricity connections are required to maintain a National Tax Number (NTN) issued by the Federal Board of Revenue (FBR).

In order to comply with the above-mentioned law, KE is updating its customer information database and in this regard we request you to share your NTN and CNIC numbers at earliest for our record.

The power utility asked the consumers to provide details, included: name, CNIC, consumer number, mobile number, NTN, email address and occupancy.

July 23, 2020
Commissioner IR empowered to amend assessment without definite information

KARACHI: Commissioners of Inland Revenue have been empowered to amend assessment on the basis of best judgment and make dis-allowances without specific supporting evidence.
(more…)

June 27, 2020
Tax deduction allowed on salary up to Rs25,000 paid in cash

KARACHI: The Finance Bill 2020 has proposed major changes related to tax deduction in order to provide relief to business community. Under the proposed amendments the threshold amount has been increased up to Rs25,000 for tax deduction in case salary is paid.

According to interpretation of the Finance Bill 2020 by BDO Pakistan, the Finance Bill proposed amendments to Section 21 of the Income Tax Ordinance, 2001.

(l) The Bill seeks to enhance threshold of deduction for cash payment against business income under single account head from Rupees fifty thousand to Rupees two hundred and fifty thousand per annum.

This proposal seeks to relieve businesses from making transactions through banking channel, as it is difficult for business to make every transaction through banking channel.

Further The Bill seeks to increase the threshold of expenditure liable to be disallowed as a business expense if the same is not made through a crossed banking instrument/ online transfer of payment from Rs.10,000/- to Rs.25,000/ per transaction.

Furthermore, The Bill seeks to enhance threshold from Rs.15,000/- to Rs.25,000/- as allowable deduction against business income if the salary is paid in cash.

(p) & (q) The Bill seeks to add two new clauses to regulate limit of expenditure on account of utility bill and sales made to persons required to be registered but not registered under the Sales Tax Act, 1990 as an admissible deduction against business income where sales equal to or exceed Rs. 100 million per person. However, the disallowance of expenditure shall not exceed 20 percent of total deduction claimed.

June 24, 2020
Amendments to taxability on payments for goods, services and contracts

KARACHI: The Finance Bill 2020 has proposed changes to taxability on payments made for goods, services and contracts.

According to explanation to amendments made to Section 153 of Income Tax Ordinance, 2001 through Finance Bill 2020 by BDO Pakistan Audit Consultancy and Tax Advisory Firm:

(1a): The bill seeks to include toll manufacturing to be treated as sale of good for the purpose of withholding under this subsection. This inclusion clarifies the taxability of this segment and it will be minimum tax.

(3): The bill seeks to treat taxes withheld at source as minimum tax on payment of goods, services and execution of contracts.

(4): The tax deducted at source is adjustable for the Company being manufacturer and the Public Listed Company registered on stock exchange. This inclusion will result in expansion of tax collection by the board.

The Bill seeks that the Commissioner shall respond to application for the issuance of exemption certificate related to withholding of taxes against goods, services and execution of contracts to facilitate the public listed companies registered in stock exchange, within fifteen days.

Where not responded, the IRIS may issue exemption certificate provided that the advance tax under section 147 was paid by the taxpayer.

The Commissioner retains the power to revoke the automatically issued certificate by IRIS on the basis of reasons to be recorded in writing after providing an opportunity of being heard.

(7) The Bill has sought following amendments in the requirement of the prescribed person defined as withholding agent.

Existing Description:

Individuals and association of person having turnover of fifty million rupees

Proposed Description:

Individuals and association of person having turnover of one hundred million rupees. Persons registered under Sales Tax Act, 1990 only are now required to meet turnover of one hundred million rupees or more in any preceding tax years to qualify as withholding agent.

June 22, 2020
Finance Bill proposes significance amendments to income tax at import stage

KARACHI: The Finance Bill 2020 has proposed significant amendments related to income tax at import stage in Section 148 of Income Tax Ordinance, 2001 as it was described by BDO Pakistan Audit Consultancy and Tax Advisory Firm.

Following are the changes proposed by the Finance Bill, 2020 in Section 148:

148(1): The bill seeks to add expression “in respect of goods classified in Parts I to III of the Twelfth Schedule” in sub-section (1) of the Section 148. The tax advisory firm interprets that earlier rates of advance tax at import stage were classified in the First Schedule now a separate Twelfth Schedule is constituted which specifies goods wise rates.

148(1): The bill seeks to add a new proviso to initiate that the Board [Federal Board of Revenue] may, through a notification in the official Gazette, add a good in any Part or reclassify a good from one Part to another of the Twelfth Schedule. The firm commented that Board [FBR] reserves powers to enter any good in the Twelfth Schedule.

148(7): The Finance Bill seeks to insert the expression “goods on which tax is required to be collected under this section at the rate of 1 percent or 2 percent by an industrial undertaking for its own use” to make tax adjustable. The firm commented that tax at the rate of 1 percent or 2 percent paid by an industrial undertaking for import of goods for its own use shall become adjustable tax.

148(7): The bill seeks to omit the hyphen and clauses “(a), (c), (d). The tax advisory firm commented that the omission results in withdrawal of exemption from advance tax at import stage provided to motor vehicles in CBU condition by manufacturer of motor vehicles and large import houses.

148(8) & 148(8A): The bill seeks to omit sub-section (8) and (8A) of section 148. The firm commented that this will result in end of minimum tax regime for edible oil, packing material and plastic raw material and ships breakers and now tax paid at import stage can be claimed as adjustable tax if industrial undertaking criteria are fulfilled.

148(9): The bill seeks to amend the term “value of goods” by linking it with retail price under the Third Schedule of the Sales Tax Act, 1990, and other than Third Schedule items. The firm commented that for the purpose of collection of advance income tax at import stage, value of goods has been aligned with the enabling provision of the Sales Tax Act 1990, which specifies the value for the purpose of sale tax at import stage.

148A: Tax on local purchase of cooking oil or vegetable ghee by certain persons. The firm commented that earlier this section resulted in manufacture of vegetable ghee or cooking oil to pay 2 percent final tax on local purchase of locally produced edible oil. The Bill seeks to omit this section, which would result such manufacturer and taxing real net income of the taxpayers.

June 22, 2020
Details of transactions exempted from withholding tax

ISLAMABAD: The Finance Bill, 2020 has proposed to withdraw withholding tax collection on nine different types of transactions under Income Tax Ordinance, 2001.

According to budget commentary issued by PwC A F Ferguson, as part of reforms for ease of doing business, the government has proposed to withdraw following withholding tax provisions, which in government’s view were not generating enough revenues:

01. Section 148A – Tax on local purchase of cooking oil or vegetable ghee by certain persons

Two percent tax was chargeable on the purchase of locally produced edible oil by the manufacturers of cooking oil or vegetable ghee.

02. Section 156B – Withdrawal of balance under Pension Fund

A pension fund manager making payment from individual pension accounts, maintained under any approved Pension Fund, was required to deduct tax at the average rate of tax as calculated in section 12, from the amount so withdrawn by the pensioner before or after his retirement.

03. Section 235B – Tax on steel melters and composite units

Tax under this section was required to be collected from every steel melter, and composite steel units, registered for the purpose of Chapter XI of Sales Tax Special Procedure Rules, 2007 at the rate of one rupee per unit of electricity consumed for the production of steel billets, ingots and mild steel (MS products) excluding stainless steel.

04. Section 235D – Advance tax on functions and gatherings

Advance tax under this section was required to be collected by the prescribed person on the total amount of the bill from a person arranging or holding a function in a marriage hall, marquee, hotel, restaurant, commercial lawn, club, a community place or any other place used for such purpose including the food, service or any other facility is provided by any other person, from the person arranging or holding the function.

05. Section 235F – Advance tax on cable operators and other electronic media

Under this section, Pakistan Electronic Media Regulatory Authority was required to collect advance tax, at the time of issuance of licence for distribution services or renewal of the licence to a licencee.

06. Section 236J – Advance tax on dealers, commission agents and arhatis etc

Advance tax under this section was required to be collected by every market committee from dealers, commission agents or arhatis, etc. at the time of issuance or renewal of licences

07. Section 236R – Collection of advance tax on education related expenses remitted abroad

Advance tax was required to be collected by Banks, financial institutions, foreign exchange companies or any other person responsible for remitting foreign currency abroad for the purpose of education related expenses remitted abroad from the payer of education related expenses.

08. Section 236U – Advance tax on insurance premium

Advance tax was required to be collected under this section, by the insurance company at the time of collection of insurance premium from the person in respect of general insurance premium and life insurance premium.

09. Section 236X- Advance tax on tobacco

Pakistan Tobacco Board or its contractors, at the time of collecting cess on tobacco, directly or indirectly, shall collect advance tax at the rate of five percent of the purchase value of tobacco from every person purchasing tobacco including manufacturers of cigarettes.

June 15, 2020
Withholding statements to be filed on quarterly basis

ISLAMABAD: Withholding agents shall require to file statement on quarterly basis from fiscal year starting July 01, 2020.

The Finance Bill, 2020 proposed amendments to Section 165 of Income Tax Ordinance, 2001, under which the filing of withholding statement will be on quarterly basis against existing biannual basis.

The requirement of filing withholding statement on biannual basis was introduced through Finance Supplementary (Second Amendment) Act, 2019 as it was required to file on monthly basis.

The bill proposed that filing requirement shall be:

(a) in respect of quarter ending on the 31st day of March, on or before the 20th day of April; 92

(b) in respect of quarter year ending on the 30th day of June, on or before the 20th day of July;

(c) in respect of quarter ending on the 30th day of September, on or before the 20th day of October; and

(d) in respect of quarter ending on or before the 31st day of December, on or before the 20th January.”;

Another amendment has been proposed which stated that every person involved or engaged in economic transactions as prescribed by the Board shall furnish to the Commissioner a quarterly statement in the prescribed form and manner.

June 15, 2020