Tag: Income Tax Ordinance 2001

FBR seeks power companies help for mandatory registration of businesses

ISLAMABAD: Federal Board of Revenue (FBR) has sought help of ministry of power for invoking Section 181AA of Income Tax Ordinance, 2001 whereby it is mandatory for a businessman to get registered and file income tax return while requesting industrial or commercial connection.

Chairman Federal Board of Revenue Syed Muhammad Shabbar Zaidi in his letter to Ministry of Power has sought its help for the implementation of Section 181AA of Income Tax Ordinance, 2001 which specifically stipulates that any application for commercial or industrial connection of electricity or gas shall not be processed and such connection shall not be provided unless the person applying for electricity or gas connection is registered under the said Section which pertains to filing of income tax returns.

Chairman FBR has further added that FBR has extended the date of filing the return of income for the year 2018 to August 2, 2019 to facilitate filing of return by all persons who were required to file the return of income but have not filed so far. Chairman FBR has requested Ministry of Power to issue instructions to Power Distribution Companies to apprise them that it is mandatory to be on ‘Active Taxpayers List (ATL)’ for every commercial and industrial electricity or gas consumer.

Chairman FBR appreciated the cooperation of Ministry of Power for providing the data of industrial and commercial users of electricity and hoped that Ministry of Power would also help in the implementation of Section 181AA of Income Tax Ordinance through the involvement of respective ‘Distribution Companies’.

Related Posts

FBR grants general relaxation to file tax year 2018 income returns up to August 02

July 16, 2019
FBR probes concealment in land, immovable property purchases

ISLAMABAD: Federal Board of Revenue (FBR) has obtained data of land and immovable property transactions from provincial registrar offices and started proceedings against those who concealed the actual amount to purchase the assets.

FBR sources said that the data had been obtained on the basis of withholding tax deduction by the property registrars. The sources said that the FBR was probing the lower values declared by the purchasers against the fair market values.

The FBR is also probing those people who have such immovable properties where filing of income tax returns is mandatory.

As per Section 114 of Income Tax Ordinance, 2001 following persons are required to annual income tax returns:

— owns immovable property with a land area of two hundred and fifty square yards or more or owns any flat located in areas falling within the municipal limits existing immediately before the commencement of Local Government laws in the provinces; or areas in a Cantonment; or the Islamabad Capital Territory;

— owns immovable property with a land area of five hundred square yards or more located in a rating area;

— owns a flat having covered area of two thousand square feet or more located in a rating area.

The sources said the FBR has been allowed to investigate transactions of past six years.

The sources said that the FBR through Finance Act, 2018 notified Directorate General of Immovable Property for determination of fair market values and authorized this directorate with immense powers.

The Directorate-General may, subject to the provisions and conditions as may be prescribed, initiate proceedings for the acquisition of property for the reasons to believe that any immovable property of a fair market value has been transferred by a person, hereinafter referred to as the transferor, to another person, hereinafter referred to as the transferee, for a consideration which is less than the fair market value of the immovable property and that the consideration for such transfer as agreed to between the transferor and transferee has been understated in the instrument of transfer for the purposes of ─

(a) the avoidance or reduction of withholding tax obligations under this Ordinance;

(b) concealment of unexplained amount referred to in sub- section (1) of section 111 representing investment in immovable property; or

(c) avoidance or reduction of capital gains tax under section 37.

The sources said that the FBR had extended the filing of income tax returns for tax year 2018 up to August 2, 2019 to facilitate persons to file their returns, especially in those cases where immovable properties had been purchased but not declared.

July 11, 2019
Income Tax Ordinance 2001: Income from pension funds tax exempted

KARACHI: The government has allowed tax exemption to the income derived by pensioners invested in various schemes, including pension funds.

The Second Schedule of Income Tax Ordinance, 2001 allowed tax exemption to the income derived by pensioners.

The following exemptions are available to the pensioners:

Any payment from a provident fund to which the Provident Funds Act, 1925 applies.

The accumulated balance due and becoming payable to an employee participating in a recognized provident fund.

The accumulated balance up to 50 percent received from the voluntary pension system offered by a pension fund manager under the Voluntary Pension System Rules, 2005 at the time of eligible person’s-

(a) retirement; or

(b) disability rendering him unable to work.

The amounts received as monthly installment from an income payment plan invested out of the accumulated balance of an individual pension accounts with a pension fund manager or an approved annuity plan or another individual pension account of eligible person or the survivors pension account maintained with any other pension fund manager as specified in the Voluntary Pension System Rules 2005 shall be exempt from tax provided accumulated balance is invested for a period of ten years:

Provided that where any amount is exempted under this clause and subsequently it is discovered, on the basis of documents or otherwise, by the Commissioner that any of the conditions specified in this clause were not fulfilled, the exemption originally allowed shall be deemed to have been wrongly allowed and the Commissioner may, notwithstanding anything contained in this Ordinance, re-compute the tax payable by the taxpayer for the relevant years and the provisions of this Ordinance shall, so far as may be, apply accordingly.

Any withdrawal of accumulated balance from approved pension fund that represent the transfer of balance of approved provident fund to the said approved pension fund under the Voluntary Pension System Rules , 2005.

Any benevolent grant paid from the Benevolent Fund to the employees or members of their families in accordance with the provisions of the Central Employee Benevolent Fund and Group Insurance Act, 1969.

Any payment from an approved superannuation fund made on the death of a beneficiary or in lieu of or in commutation of any annuity, or by way of refund of contribution on the death of a beneficiary.

Any income of a person representing the sums received by him as a worker from out of the Workers Participation Fund established under the Companies Profits (Workers Participation) Act, 1968.

March 29, 2019
Income Tax Ordinance 2001: total exemption on payment of pension, retirement

KARACHI: Any income representing any payment received by way of gratuity or commutation of pension by an employee on his retirement is exempted from income tax.

The Second Schedule of Income Tax Ordinance, 2001 explained the exemption from total income.

Any income representing any payment received by way of gratuity or commutation of pension by an employee on his retirement or, in the event of his death, by his heirs as does not exceed –

(i) in the case of an employee of the Government, a Local Government, a statutory body or corporation established by any law for the time being in force, the amount receivable in accordance with the rules and conditions of the employee’s services;

(ii) any amount receivable from any gratuity fund approved by the Commissioner in accordance with the rules in Part III of the Sixth Schedule;

(iii) in the case of any other employee, the amount not exceeding three hundred thousand rupees receivable under any scheme applicable to all employees of the employer and approved by the Board for the purposes of this sub-clause; and

(iv) in the case of any employee to whom sub-clause (i), (ii) and (iii) do not apply, fifty per cent of the amount receivable or seventy-five thousand rupees, whichever is the less:

Provided that nothing in this sub-clause shall apply –

(a) to any payment which is not received in Pakistan;

(b) to any payment received from a company by a director of such company who is not a regular employee of such company;

(c) to any payment received by an employee who is not a resident individual; and to any gratuity received by an employee who has already received any gratuity from the same or any other employer.

March 27, 2019
Income Tax Ordinance 2001: Corporate tax rate to be reduced to 25pc

The government of Pakistan has undertaken a strategic initiative to gradually reduce corporate income tax rates, aiming to bring them down to 25% by the tax year 2023 and onwards.
(more…)

March 26, 2019

Tax rates for salary, business individuals

KARACHI: Following are the tax rates for individuals under First Schedule of Income Tax Ordinance, 2001.

The tax rate as updated through Finance Supplementary (Amendment) Act, 2018 to Income Tax Ordinance, 2001, issued by Federal Board of Revenue (FBR).

Rates of tax for individuals

(1) The rates of tax imposed on the taxable income of every individual, not being an individual to which paragraph (1A) of this Division applies, shall be as set out in the following table, namely:—

Table

S. No.	Taxable Income	Rate of Tax
01	Where the taxable income does not exceed Rs. 400,000	0 percent
02	Where the taxable income exceeds Rs. 400,000 but does not exceed Rs. 800,000	Rs1,000
03	Where the taxable income exceeds Rs. 800,000 but does not exceed Rs. 1,200,000	Rs2,000
04	Where the taxable income exceeds Rs.1,200,000 but does not exceed Rs. 2,400,000	5 percent of the amount exceeding Rs. 1,200,000
05	Where the taxable income exceeds Rs. 2,400,000 but does not exceed Rs. 3,000,000	60,000 + 15 percent of the amount exceeding Rs. 2,400,000
06	Where the taxable income exceeds Rs. 3,000,000 but does not exceed Rs. 4,000,000	150,000 + 20 percent of the amount exceeding Rs. 3,000,000
07	Where the taxable income exceeds Rs. 4,000,000 but does not exceed Rs. 5,000,000	350,000 + 25 percent of the amount exceeding Rs. 4,000,000
08	Where the taxable income exceeds Rs. 5,000,000	600,000 + 29 percent of the amount exceeding Rs. 5,000,000

Provided that where the taxable income exceeds eight hundred thousand rupees the minimum tax payable shall be two thousand rupees.

Salary persons

(1A) Where the income of an individual chargeable under the head “salary” exceeds fifty per cent of his taxable income, the rates of tax to be applied shall be as set out in the following table, namely:—

Table

S.No.	Taxable Income	Rate of Tax
01	Where the taxable income does not exceed Rs. 400,000	0 percent
02	Where the taxable income exceeds Rs. 400,000 but does not exceed Rs. 800,000	Rs1,000
03	Where the taxable income exceeds Rs. 800,000 but does not exceed Rs. 1,200,000	Rs2,000
04	Where the taxable income exceeds Rs. 1,200,000 but does not exceed Rs. 2,500,000	5 percent of the amount exceeding Rs. 1,200,000
05	Where the taxable income exceeds Rs.2,500,000 but does not exceed Rs. 4,000,000	65,000 + 15 percent of the amount exceeding Rs. 2,500,000
06	Where the taxable income exceeds Rs. 4,000,000 but does not exceed Rs. 8,000,000	290,000 + 20 percent of the amount exceeding Rs. 4,000,000
07	Where the taxable income exceeds Rs. 8,000,000	1,090,000 + 25 percent of the amount exceeding Rs. 8,000,000

Provided that where the taxable income exceeds eight hundred thousand rupees the minimum tax payable shall be two thousand rupees.

March 25, 2019

Income Tax Ordinance 2001: advance tax on paying education fee abroad

KARACHI: Foreign exchange companies are responsible for collecting advance tax on remitting abroad the education related expenses.

The Federal Board of Revenue (FBR) recently updated Income Tax Ordinance, 2001 under which Section 236R explained the advance tax on remitting amount abroad for education expenses.

Section 236R: Collection of advance tax on education related expenses remitted abroad

Sub-Section (1): There shall be collected advance tax at the rate specified in Division XXIIV of Part-IV of the First Schedule on the amount of education related expenses remitted abroad.

Rate of collection of tax under section 236R shall be 5percent of the amount of total education related expenses.

Sub-Section (2): Banks, financial institutions, foreign exchange companies or any other person responsible for remitting foreign currency abroad shall collect advance tax from the payer of education related expenses.

Sub-Section (3): Tax collected under this section shall be adjustable against the income of the person remitting payment of education related expenses.

Sub-Section (4): For the purpose of this section, “education related expenses” includes tuition fee, boarding and lodging expenses, any payment for distant learning to any institution or university in a foreign country and any other expense related or attributable to foreign education.

March 24, 2019
Advance tax on dealers, commission agents

KARACHI: Every market committee has been required to collect advance tax from dealers, commission agents under income tax laws.

The Federal Board of Revenue (FBR) recently updated Income Tax Ordinance, 2001 under which advance tax is collectable from dealers, commission agents and arhatis under Section 236J.

Section 236J: Advance tax on dealers, commission agents and arhatis etc

Sub-Section (1): Every market committee shall collect advance tax from dealers, commission agents or arhatis, etc. at the rates specified in Division XVII of Part-IV of the First Schedule at the time of issuance or renewal of licences.

The rate of collection of tax under section 236J shall be as follows:

Group Amount of tax
(per annum)
Group or Class A: Rs. 10,000
Group or Class B: Rs. 7,500
Group or Class C: Rs. 5,000
Any other category: Rs. 5,000

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

Sub-Section (4): In this section “market committee” includes any committee or body formed under any provincial or local law made for the purposes of establishing, regulating or organizing agricultural, livestock and other commodity markets.

Related Stories
Income Tax Ordinance 2001: return filers can claim tax adjustment paid on educational fee
Income Tax Ordinance 2001: Advance tax on sales to distributors, dealers and wholesalers
Income Tax Ordinance 2001: advance tax on electronic media, cable operators
Income Tax Ordinance 2001: amended advance tax rates on marriages, functions
Income Tax Ordinance 2001: advance tax on sale, purchase of immovable properties

March 23, 2019
Income Tax Ordinance 2001: return filers can claim tax adjustment paid on educational fee

KARACHI: Income tax return filers can claim adjustment of advance tax paid on educational fee.

According to updated Income Tax Ordinance, 2001 issued by Federal Board of Revenue (FBR) the advance tax collected on education fee under Section 236I is adjustable against total income tax liability of a taxpayer.

Section 236I: Collection of advance tax by educational institutions

Sub-Section (1): There shall be collected advance tax at the rate specified in Division XVI of Part-IV of the First Schedule on the amount of fee paid to an educational institution.

The rate of collection of tax under section 236I shall be 5 percent of the amount of fee.

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

Sub-Section (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.

Sub-Section (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.

Sub-Section (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.

Sub-Section (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.

March 21, 2019
Advance tax on sales to distributors, dealers and wholesalers

KARACHI: Federal Board of Revenue (FBR) has made manufacturers responsible for collecting advance tax on sales to distributors, dealers and wholesalers.

The tax has been imposed under Section 236G of Income Tax Ordinance, 2001.

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

Sub-Section (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.

The rate of collection of tax under section 236G shall be as follows:-

Category of Sale Rate of Tax
Filer Non-Filer
Fertilizers 0.7 percent 1.4 percent
Other than Fertilizers 0.1 percent 0.2 percent

Sub-Section (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.

Section 236H: Advance tax on sales to retailers

Sub-Section (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.

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

Category of sale Rate of tax
Filer Non-Filer
(1) (2) (3)
Electronics 1 percent 1 percent
Others 0.5 percent

Sub-Section (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.

Section 236HA: Tax on sale of certain petroleum products

Sub-Section (1): Every person selling petroleum products to a petrol pump operator or distributor, where such operator or distributor is not allowed a commission or discount, shall collect advance tax on ex-depot sale price of such products at the rate specified in Division XVA of Part IV of the First schedule.

The rate of collection of tax under section 236HA shall be 0.5 percent of ex-depot sale price for filers and 1 percent for non-filers.

Sub-Section (2): The tax deductible under sub-section (1) shall be a final tax on the income arising from the sale of petroleum products to which sub-section (1) applies.

Related Stories
Income Tax Ordinance 2001: advance tax on electronic media, cable operators
Income Tax Ordinance 2001: amended advance tax rates on marriages, functions
Income Tax Ordinance 2001: advance tax on sale, purchase of immovable properties
Income Tax Ordinance 2001: advance tax on domestic, international air tickets
Income Tax Ordinance 2001: advance tax on electricity consumption

March 20, 2019

Group	Amount of tax (per annum)
Group or Class A:	Rs. 10,000
Group or Class B:	Rs. 7,500
Group or Class C:	Rs. 5,000
Any other category:	Rs. 5,000

Category of Sale	Rate of Tax
	Filer	Non-Filer
Fertilizers	0.7 percent	1.4 percent
Other than Fertilizers	0.1 percent	0.2 percent