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Tag: Income Tax Ordinance 2001

  • Bank account details made mandatory for registered taxpayers

    Bank account details made mandatory for registered taxpayers

    ISLAMABAD: All registered taxpayers are required to update their profile by providing details of bank accounts otherwise they will be excluded from Active Taxpayers List (ATL).

    The Finance Bill, 2020 has proposed amendment to insert Section 114A to the Income Tax Ordinance, 2001 to make the mandatory for all taxpayers to update their profile.

    According to budget commentary issued by PwC A. F. Ferguson Chartered Accountants, all existing registered taxpayers as well as those who will obtain registration by September 30, 2020 will be required to file and update their tax profile by December 31, 2020 whereas other taxpayers will be required to file and update their profiles within 90 days of registration.

    Furthermore, with regard to any changes in such profile, the updating is required to be made within 90 days of such change.

    Failure to file and update tax profiles in the above manner and within the prescribed dates could result in a taxpayer’s exclusion from active taxpayers list. However, such persons can be included back in active taxpayers list by filing the requisite information and paying the prescribed amount of surcharges.

    Following is the proposed new Section 114A to Income Tax Ordinance, 2001:

    “114A. Taxpayer’s profile.— (1) Subject to this Ordinance, the following persons shall furnish a profile, namely:—

    (a) every person applying for registration under section 181;

    (b) every person deriving income chargeable to tax under the head, “income from business”;

    (c) every person whose income is subject to final taxation;

    (d) any non-profit organization as defined in clause (36) of section 2;

    (e) any trust or welfare institution; or

    (f) any other person prescribed by the Board.

    (2) A taxpayer’s profile—

    (a) shall be in the prescribed form and shall be accompanied by such annexures, statements or documents as may be prescribed;

    (b) shall fully state, in the specified form and manner, the relevant particulars of—

    (i) bank accounts;

    (ii) utility connections;

    (iii) business premises including all manufacturing, storage or retail outlets operated or leased by the taxpayer;

    (iv) types of businesses; and

    (v) such other information as may be prescribed;

    (c) shall be signed by the person being an individual, or the person’s representative where section 172 applies; and

    (d) shall be filed electronically on the web as prescribed by the Board.

    (3) A taxpayer’s profile shall be furnished,—

    (a) on or before the 31st day of December, 2020 in case of a person registered under section 181 before the 30th day of September, 2020; and

    (b) within ninety days registration in case of a person not registered under section 181 before the 30th day of September, 2020.

    (4) A taxpayer’s profile shall be updated within ninety days of change in any of the relevant particulars of information as mentioned in clause (b) of sub-section (2).”

  • Resident ship owners to pay tonnage tax at US 75 cents

    Resident ship owners to pay tonnage tax at US 75 cents

    ISLAMABAD: A Pakistan resident ship owning company shall pay tonnage tax of an amount equivalent to US 75 cents per ton, as proposed through Finance Bill, 2020.

    A new clause (c) has been inserted in Section 7A of Income Tax Ordinance, 2001 through Finance Bill, 2001 to levy the tax on resident ship owning company.

    “(c) A Pakistan resident ship owning company registered with the Securities and Exchange Commission of Pakistan after the 15th day of November, 2019 and having its own sea worthy vessel registered under Pakistan Flag shall pay tonnage tax of an amount equivalent to seventy five US Cents per ton of gross registered tonnage per annum.”

    The application of tax has been extended up to June 30, 2023 by amending sub-section 2.

    Before amendment the section is read as:

    7A. Tax on shipping of a resident person.—(1) In the case of any resident person engaged in the business of shipping, a presumptive income tax shall be charged in the following manner, namely:—

    (a) ships and all floating crafts including tugs, dredgers, survey vessels and other specialized craft purchased or bare-boat chartered and flying Pakistan flag shall pay tonnage tax of an amount equivalent to one US $ per gross registered tonnage per annum; and

    (b) ships, vessels and all floating crafts including tugs, dredgers, survey vessels and other specialized craft not registered in Pakistan and hired under any charter other than bare-boat charter shall pay tonnage tax of an amount equivalent to fifteen US cents per ton of gross registered tonnage per chartered voyage provided that such tax shall not exceed one US $ per ton of gross registered tonnage per annum:

    Explanation.—For the purpose of this section, the expression “equivalent amount” means the rupee equivalent of a US dollar according to the exchange rate prevalent on the first day of December in the case of a company and the first day of September in other cases in the relevant assessment year.

    (2) The provisions of this section shall not be applicable after the 30th June, 2020.

  • Definition of IRIS inserted to Income Tax Ordinance, 2001

    Definition of IRIS inserted to Income Tax Ordinance, 2001

    ISLAMABAD: The Finance Bill 2020 has proposed to insert definition of IRIS to income Tax Ordinance, 2001.

    The Finance Bill 2020 proposed many changes to Section 02 of the Ordinance.

    A new clause (30AC) to Section 2 of the Ordinance has been proposed to define IRIS

    “IRIS” means a web based computer programme for operation and management of Inland Revenue taxes administered by the Board;

    in section 2,—

    A new sub-clause (aa) to clause 29C of Section 2 has been inserted:

    “(aa) from the 1st day of May, 2020, a person directly involved in the construction of buildings, roads, bridges and other such structures or the development of land, to the extent and for the purpose of import of plant and machinery to be utilized in such activity, subject to such conditions as may be notified by the Board; and “;

    After clause (30), the following new clause shall be inserted, namely:—

    “(30A) “integrated enterprise” means a person integrated with the Board through approved fiscal electronic device and software, and who fulfills obligations and requirements for integration as may be prescribed;”;

    After clause (30AB), re-numbered as aforesaid, the following new clause shall be inserted, namely:-

    “(30AC) “IRIS” means a web based computer programme for operation and management of Inland Revenue taxes administered by the Board;”;

    For clause (31A), the following shall be substituted, namely:–

    “(31A) “Local Government” shall have the same meaning for respective provisions and Islamabad Capital Territory as contained in the Balochistan Local Government Act, 2010 (V of 2010), the Khyber Pakhtunkhwa Local Government Act, 2013 (XXVIII of 2013), the Sindh Local Government Act, 2013 (XLII of 2013), the Islamabad Capital Territory Local Government Act, 2015 (X of 2015) and the Punjab Local Government Act, 2019 (XIII of 2019) ;”; and

    In clause (36),—

    In sub-clause (a), for the expression “or development purposes” the expression “purposes for general public” shall be substituted; and

    In sub-clause (b), after the word “registered” the words “by or” shall be inserted.

  • Major changes to income tax law made through Finance Bill 2020

    Major changes to income tax law made through Finance Bill 2020

    ISLAMABAD: The government has brought massive changes to Income Tax Ordinance, 2001 through Finance Bill 2020.

    EY Ford Rhodes Chartered Accountants highlighted the major changes introduced to Income Tax Ordinance, 2001 through Finance Bill 2020:

    The definition of the term ‘industrial undertaking’ has been proposed to be expanded to include builders and developers for the purpose of import of plant and machinery.

    A Pakistani company registered with the SECP after 15 November 2019 and having its own Pakistan Flag sea worthy vessel will be subject to fixed tax based on Tonnage.

    Administration and collection charges in relation to deriving income chargeable to tax under the head ‘income from property’ proposed to be restricted to 2 percent of the rent chargeable to tax, as against the existing 6 percent.

    Individuals and AOPs can now opt for net income taxation in respect of ‘income from property’. Previously, this option was only available where such income exceeded Rs4 million.

    Expenditure on account of utility bills is proposed to be disallowed if in excess of the limits on violation of conditions, as may be prescribed.

    Expenditure attributable to sales made to persons required to be registered but not registered under the ST Act may now be disallowed under specified conditions.

    Normal depreciation in the first year of use is proposed to be allowed to the extent of 50 percent. Similarly, in the year of disposal, normal depreciation is proposed to be allowed to the extent of 50 percent. Currently, full year depreciation is allowable in the year of acquisition and no depreciation is available in the year of disposal.

    Lease payment deductions in respect of passenger transport vehicle not plying for hire is proposed to be restricted to the extent of principal cost of PKR 2.5 million.

    Taxability of capital gains arising on disposal of immovable property revamped, depending upon the holding period. Further, rate of tax on such gains also proposed to be reduced by 50 percent.

    Tax credit on donation given to an associate is proposed to be reduced.

    Tax credit on enlistment is proposed to be restricted for companies opting for enlistment on or before 30 June 2022.

    Deductibility of interest / profit on debt paid to foreign affiliates is proposed to be restricted to 15 percent of taxable income before depreciation, amortization and foreign profit on debt.

    Permanent establishment of non-residents will also now be subject to minimum tax under section 113 of the Ordinance. Currently, minimum tax is only applicable on resident companies and AoPs.

    Certain specified persons are required to prepare and furnish a Tax Profile to the FBR within the prescribed time. Non-furnishing of the Tax Profile may lead to non-inclusion of the name of the taxpayer in the ATL.

    Wealth statement can now only be revised after seeking prior approval from the CIR.

    The concept of self-assessment based on the complete return of income filed by a taxpayer is proposed to be subjected to processing through automated system to arrive at correct amounts of total income, taxable income and tax payable.

    Concept of Assessment Oversight Committee is proposed to be introduced whereby a taxpayer may, pursuant to a notice issued under section 122(9), approach the Committee to settle its case by filing an offer of settlement.

    For the purpose of filing an appeal before the ATIR, the condition of payment of 10 percent of the amount of tax upheld by the CIR(Appeals) is proposed to be inserted.

    Rates of collection of tax at import stage from capital goods, raw material and finished goods proposed to be revamped by inserting a new Twelfth Schedule to the Ordinance. Rate of tax proposed to be reduced to 1 percent and 2 percent on capital goods and raw material imported by an industrial undertaking, respectively.

    It is proposed that for all categories of taxpayers, tax paid at import stage will be a minimum tax except for industrial undertaking paying tax at the rate of 1 percent or 2 percent in respect of goods for its own use.

    The rate of deduction of tax and the scheme of taxation under section 152 on payment to a permanent establishment of a non-resident person on account of sale of goods, rendering of services (including applicability of reduced 3 percent rate for specified sectors ) and execution of contracts is proposed to be synchronized with that of a resident person.

    The rate of deduction of tax on account of supply of goods made from outside Pakistan under a cohesive business transaction is proposed to be reduced to 1.4 percent as against the current rate of 2.1 percent.

    Toll manufacturing proposed to be treated as sale of goods for the purposes of deduction of tax under section 153.

    Receipts on account of engineering services are proposed to be subject to withholding tax at 8 percent as against the current rate of 3 percent.

    The withholding tax statements under section 165 of the Ordinance are proposed to be filed on a quarterly basis as against the current requirement of bi-annual filing.

    Agencies including NADRA, FIA, provincial excise and taxation departments, utility companies etc. are now required to provide information to the FBR on real-time basis.

    Tax audit under section 177 of the Ordinance may be conducted electronically.

    Where a taxpayer fails to furnish records, documents, books of accounts or is unable to provide sufficient explanation regarding any defects in the records, the CIR can determined the taxable income on the basis of sectoral benchmark ratio prescribed by the FBR.

    Collection of tax under sale by auction would inter-alia include renewal of a license previously sold through auction. Further, where payment is received in installments, it is proposed that advance tax be collected on each installment.

    Following provisions relating to collection / deduction of tax at source are proposed to be omitted –

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

    • 235B – Tax on steel melters and composite units

    • 236D – Advance tax on functions and gatherings

    • 236F – Advance tax on cable operators and other electronic media

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

    • 236R – Collection of advance tax on education related expenses remitted abroad

    • 236U – Advance tax on insurance premium

    • 236X – Advance tax on tobacco

    Withholding tax rate on dividend is proposed to be synchronized with the charging rate.

    The bill proposes to impose tax at the rate of 4 percent on import of finished pharmaceutical products not manufactured in Pakistan as certified by Drug Regulatory Authority of Pakistan.

    Where the sukuk holder is a company, the rate of tax to be deducted under Section 150A on account of return on investment in Sukuk is proposed to be increased from 15 percent to 25 percent.

    Withholding tax rate on dividend is proposed to be synchronized with the charging rate.

    Profit on debt derived by an individual from a debt instrument issued by the Federal Government and purchased exclusively through a bank account maintained abroad, a non-resident Rupee account repatriable (NRAR) or a foreign currency account maintained with a banking company in Pakistan is proposed to be subject to withholding tax at the rate of ten percent as a final discharge. Further, such taxpayers would fall outside the purview of the Tenth Schedule even if their name does not appear on the ATL.

    Payment of dividend to a non-resident person would not attract the provisions of Tenth Schedule to the Ordinance.

    Payments to non-resident persons on account of royalty, fee for technical services, insurance and re-insurance premium and other general payments (not specifically covered) are proposed to be excluded from the ambit of the Tenth Schedule.

  • Advance tax on purchase of immovable property to be paid on fair market value

    Advance tax on purchase of immovable property to be paid on fair market value

    KARACHI: Federal Board of Revenue (FBR) will collect advance income tax on sale of immovable properties on the basis of fair market value.

    Sources in FBR said that the purchaser of immovable property shall make payment of advance tax income tax on the amount determined at fair market value not on the DC value or valuation tables notified by the FBR.

    Under Section 236K of Income Tax Ordinance, 2001, 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.”

    The rate of tax to be collected under section 236K shall be 1 percent of the fair market value from a person appeared on Active Taxpayers List (ATL). The rate shall be at two percent of the fair market value from persons not appearing on the ATL.

  • No advance tax on domestic electricity consumers on billed amount below Rs75,000

    No advance tax on domestic electricity consumers on billed amount below Rs75,000

    KARACHI: The domestic consumers of electricity whose monthly billed amount is below Rs75,000 are not liable to pay advance income tax.

    According to Section 235A of Income Tax Ordinance, 2001, the domestic electricity consumers are subject to payment of advance income tax, officials of Federal Board of Revenue (FBR) said.

    As per tax rate, a domestic consumer is liable to pay 7.5 percent advance income tax in case of above monthly bill is Rs75,000 or above.

    However, there is zero percent advance income tax in case the monthly billed amount is below Rs75,000.

    Section 235A. Domestic electricity consumption.-

    (1) There shall be collected advance tax at the rates specified in Division XIX of Part IV of the First Schedule on the amount of electricity bill of a domestic consumer.

    Explanation.— For removal of doubt, it is clarified that for the purposes of this section, electricity consumption bill referred to in sub-section (2) means electricity bill inclusive of sales tax and all incidental charges.

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

    (3) Tax collected under this section shall be adjustable against tax liability.

  • Provincial registered taxpayers require to pay advance income tax

    Provincial registered taxpayers require to pay advance income tax

    KARACHI: Persons registered for sales tax with the provincial revenue authorities are required to pay advance income tax to Federal Board of Revenue (FBR) on the basis turnover declared before the provincial revenue authorities.

    According to Section 147A of Income Tax Ordinance, 2001, every provincial sales tax registered person shall be liable to pay adjustable advance tax at the rate of three per cent of the turnover declared before the provincial revenue authority.

    The Section 147A is read as:

    Advance tax from provincial sales tax registered person.-

    Sub-Section (1): Every provincial sales tax registered person shall be liable to pay adjustable advance tax at the rate of three per cent of the turnover declared before the provincial revenue authority.

    Sub-Section (2): The advance tax under sub-section (1) shall be paid monthly at the time when sales tax return is to be filed with the provincial revenue authority.

    Sub-Section (3): Advance tax paid under this section may be taken into account while working out advance tax payable under section 147.

    Sub-Section (4): The provisions of this Ordinance shall apply to any advance tax due under this section as if the amount due were tax due under an assessment order.

    Sub-Section (5): A taxpayer who has paid advance tax under this section for a tax year shall be allowed a tax credit for that tax in computing the tax due by the taxpayer on the taxable income of the taxpayer for that year.

    Sub-Section (6): A tax credit allowed for advance tax paid under this section shall be applied in accordance with sub-section (3) of section 4.

    Sub-Section (7): A tax credit or part of a tax credit allowed under this section for a tax year that is not able to be credited under sub-section (3) of section 4 for the year shall be refunded to the taxpayer in accordance with section 170.

    Sub-Section (8): This section shall not apply to a person whose name was appearing in the active taxpayers’ list on the thirtieth day of June of the previous tax year.

  • Tax Amendment Ordinance: Salient features of changes introduced to income tax law

    Tax Amendment Ordinance: Salient features of changes introduced to income tax law

    ISLAMABAD: Federal Board of Revenue (FBR) on Wednesday issued salient features of amendment to Income Tax Ordinance, 2001 made through Tax Law (Second Amendment) Ordinance, 2019.

    Following are the salient features of income tax:

    1. The Financial Monitoring Unit is the central agency in Pakistan responsible for receiving and analyzing Suspicious Transaction Reports and disseminating the same to the relevant authorities for further investigation or regulatory action in respect of cases relating to money laundering and terrorist financing.

    Section 216 of the Income Tax Ordinance, 2001 accords confidentiality to tax records and proceedings and has overriding effect over all other laws for the time being in force. Requisite amendment has been made in order to enable sharing of information between FBR and FMU in order to facilitate FMU to perform its functions as laid down in the Anti-Money Laundering Act, 2010 and to enable compliance with FATF regulations.

    2. The standard rate of minimum tax under section 113 of the Income Tax Ordinance, 2001 is being reduced from 1.5 percent to 0.5 percent in the case of traders having turnover upto Rs.100 M for the Tax Year 2020.However, traders having turnover upto Rs.100 Million who have filed their returns for the Tax Year 2018 will be obliged to pay tax equal to or more than the tax paid for the Tax Year 2018 for the Tax Years 2019 and 2020.

    Moreover, a trader has been defined as an individual engaged in the buying and selling of goods in the same state including a retailer and a wholesaler, however, distributors have been ousted from the scope of this definition.

    3. Under section 153 of the Ordinance, individuals having turnover of Rs.50 Million or above in any of the preceding Tax Years are obliged to act as withholding tax agents whilst making payments for supply of goods, rendering of services or for execution of contracts. Henceforth traders, being individuals and having turnover upto Rs.100 Million shall not be required to act as a withholding agent under section 153 of the Ordinance.

    4. The existing foreign exchange framework of the country allows non-residents to invest in debt securities and Government securities through Special Convertible Rupee Accounts (SCRA’s) maintained with banks in Pakistan.

    There is no restriction on repatriation of funds from SCRA’s which incentivizes investment in the local debt market by non-resident investors. Several amendments for encouraging investment in the local debt market and simplifying the tax regime for non-resident companies have been introduced which are summarized hereunder:-

    (i) Capital gains emanating from the disposal of debt instruments and government securities (including treasury bills and Pakistan Investment Bonds) to non-resident companies (not having a permanent establishment in Pakistan) who have made investments in such debt instruments/securities exclusively through a Special Convertible Rupee Account (SCRA) maintained with a bank in Pakistan shall be subject to withholding tax @ 10 percent by banks/financial institutions which shall constitute final discharge of tax liability.

    (ii) Enhanced rate of withholding tax for persons not appearing on the active taxpayers list under the Tenth Schedule to the Ordinance shall not apply to capital gains and profit on debt earned by non-resident companies, not having a permanent establishment in Pakistan, which invest in local debt instruments/securities through SCRA maintained with a bank in Pakistan.

    (iii) Special Convertible Rupee Accounts (SCRA) being maintained by non-resident companies having no permanent establishment in Pakistan shall be exempt from collection of advance tax on banking transactions otherwise than through cash under section 236P of the Ordinance.

    (iv) A non-resident company having no permanent establishment in Pakistan investing debt instruments and government securities through SCRA shall not be required to pay advance tax under section 147 of the Income Tax Ordinance, 2001 in respect of capital gains arising to it.

    (v) Requirement for filing a statement of final taxation under section 115(4) of the Income Tax Ordinance, 2001 and registration under section 181 of the Ordinance shall not apply to a non-resident company having no permanent establishment in Pakistan solely by reason of Capital Gain or Profit on Debt earned from investments in debt securities and Government securities through Special Convertible Rupee Account maintained with a banking company or financial institution in Pakistan.

    5. Section 130 of the Income Tax Ordinance, 2001 provides for the establishment of an Appellate Tribunal Inland Revenue. In order to streamline the affairs of the Tribunal and to impart greater efficiency and transparency in the working of the Tribunal for ensuring maximum disposal of cases the constitution, functioning of benches and procedure of the Appellate Tribunal shall henceforth be regulated by rules which the Prime Minister may prescribe. The scope of qualifications for eligibility as a judicial member has also been enlarged.

    6. In terms of clause (66) of Part-IV of the Income Tax Ordinance, 2001 exemption from collection of advance tax under section 235 of the Ordinance on the electricity bills of commercial and industrial consumers was available to the five export oriented sectors who fulfill the twin conditions of falling under the zero rated regime of sales tax and being registered in sales tax as exporters or manufacturers. The zero rating regime for the five export–oriented sectors has now been abolished, therefore, consequent amendment in clause (66) of Part-IV of the Second Schedule has been made to remove the legal anomaly.

    7. In order to facilitate manufacturers, a Commissioner, under the auspices of clause (72B) of Part-IV of the Second Schedule to the Ordinance has the mandate to issue exemption certificate in respect of collection of tax under section 148 of the Ordinance at the import stage in respect of raw materials being imported by industrial undertakings subject to various conditions.

    However, no time limit has been prescribed under the law or rules for disposal of such exemption certificate by the Commissioner. In order to complement efforts being made towards ease of doing business if a Commissioner fails to issue such certificate within the time period prescribed under the Income Tax Rules, 2002 the certificate shall be automatically processed and issued by IRIS and shall be deemed to have been issued by the Commissioner. However, the Commissioner shall have the mandate to modify or cancel the certificate issued automatically by IRIS on the basis of reasons to be recorded in writing after providing an opportunity of being heard to the taxpayer.

    8. Prior to the promulgation of the Tax Laws (Second Amendment) Ordinance,2019 the rate of withholding income tax on the import of mobile phones was Rs.730 in case of a mobile phones having value exceeding 30 UD dollars and upto 100 US Dollars. In order to complement the efforts of the government towards promotion of financial inclusion, e-commerce etc, income tax at the import stage in respect of mobile phones having value exceeding 30 US dollars and up to 100 US dollars has been reduced from Rs.730 to Rs.100 per mobile phone.

    9. Under the Second Schedule to the Income Tax Ordinance, 2001 exemption is available to the profits and gains of a company from a Green Field Industrial Undertaking for a period of five years. Likewise, exemption from minimum tax is also available to Greenfield Industrial Undertakings.

    However, the term “Greenfield Industrial Undertaking” was not defined in the Income Tax Ordinance, 2001. In order to avoid multifarious interpretations of the said term as well as preclude leakage of revenue through incorrect claim of tax exemptions the term “Greenfield Industrial Undertaking” has now been defined under the Income Tax Ordinance, 2001.This definition shall be applicable from 1st July, 2019 onwards.

    10. In order to document business activity section 181D of the Ordinance was inserted through the Finance Act, 2019 whereby it was made mandatory for every person engaged in any business, profession or vocation to obtain and display a business license as prescribed by the board.

    In order to complement efforts towards implementation of this scheme the Commissioner is being empowered to impose a fine of Rs.20, 000/- in the case of a taxpayer deriving income chargeable to tax under the Ordinance and Rs.5, 000/- in all other cases.

    Moreover, the Commissioner shall also be empowered to cancel a business license after providing an opportunity of being heard if a person fails to notify any change in particulars within 30 days of such change or if a person is convicted of any offence under any Federal Tax Law.

    11. The Director General of International Tax Operations has been empowered to select and conduct transfer pricing audit of cases under section 230E of the Ordinance. Previously, there was no provision which specified the procedure to be adopted for conducting transfer pricing audit of taxpayers.

    It has now been specified that transfer pricing audit of cases selected by the Director General of International Tax Operations shall be conducted as per procedure laid down in 177 of the Ordinance.

    Moreover, the right to conduct transfer pricing audit under section 230E of the Ordinance shall not prejudice the right of the Commissioner to determine transfer price at arms length in transactions between associates while conducting audit under section 177 or 214C of the Ordinance or whilst making amendment under section 122 of the Ordinance.

    12. The rate of minimum tax under section 113 of the Ordinance for the Tax Year 2020 shall be 0.5 percent in the case of a trader of yarn, being an individual, irrespective of the date of registration in sales tax. Moreover , rate of deduction of withholding tax in respect of yarn traders making sales/supplies or rendering services to the five export oriented sectors shall henceforth be 0.5 percent.

    13. In order to facilitate expeditious disposal of cases automatically selected for audit under section 214D of the Ordinance the Board has been empowered to prescribe procedure for conclusion of audit of income tax affairs of a person automatically selected for audit under section 214D of the Ordinance .Such procedure may include acceptance of declared income of a taxpayer subject to the condition specified therein.

  • Procedure to get extension for filing return, statement

    Procedure to get extension for filing return, statement

    KARACHI: In case a person unable to file annual return and wealth statement by due date the he/she has right to get extension in date on various grounds by furnishing an application to Commissioner Inland Revenue.

    Section 119 of the Income Tax Ordinance, 2001 provided the procedure to get date extension in filing annual return and wealth statement.

    Section 119: Extension of time for furnishing returns and other documents.

    (1) A person required to furnish —

    (a) a return of income under section 114 or 117;

    (c) a statement required under sub-section (4) of section 115; or

    (d) a wealth statement under section 116,

    may apply, in writing, to the Commissioner for an extension of time to furnish the return, or statement, as the case may be.

    (2) An application under sub-section (1) shall be made by the due date for furnishing the return of income, or statement to which the application relates.

    (3) Where an application has been made under sub-section (1) and the Commissioner is satisfied that the applicant is unable to furnish the return of income, 3[ ] or 4[ ] statement to which the application relates by the due date because of —

    (a) absence from Pakistan;

    (b) sickness or other misadventure; or

    (c) any other reasonable cause,

    the Commissioner may, by order, in writing, grant the applicant an extension of time for furnishing the return, or statement, as the case may be.

    (4) An extension of time under sub-section (3) should not exceed fifteen days from the due date for furnishing the return of income, employer’s certificate, or statement, as the case may be, unless there are exceptional circumstances justifying a longer extension of time:

    Provided that where the Commissioner has not granted extension for furnishing return under sub-section (3) or sub-section (4), the Chief Commissioner may on an application made by the taxpayer for extension or further extension, as the case may be, grant extension or further extension for a period not exceeding fifteen days unless there are exceptional circumstances justifying a longer extension of time.

    (6) An extension of time granted under sub-section (3) shall not, for the purpose of charge of default surcharge under sub-section (1) of section 205, change the due date for payment of income tax under section 137.