Tax credits for various provisions of law have outlined by the Federal Board of Revenue (FBR) as explained under Section 65 of the Income Tax Ordinance, 2001.
In a recent development in the realm of taxation, the Federal Board of Revenue (FBR) has issued an updated version of the Income Tax Ordinance, 2001, incorporating amendments introduced through the Finance Act, 2021. The updated ordinance, effective up to June 30, 2021, encompasses various provisions aimed at providing tax credits under Section 65.
Section 65 of the Income Tax Ordinance, 2001, delves into miscellaneous provisions relating to tax credits. The section outlines specific scenarios and conditions under which individuals or members of an association of persons may be entitled to tax credits. Notably, it addresses cases where sub-section (1) of section 92 applies to the association.
According to the text of Section 65, if the person entitled to a tax credit is a member of an association of persons falling under sub-section (1) of section 92, the following provisions apply:
Component A of the formula in sub-section (2) of sections 61, 62, 63, and 64 shall be the amount of tax that would be assessed to the individual if any amount derived in the year, exempt from tax under sub-section (1) of section 92, were chargeable to tax.
Component B of the formula in sub-section (2) of sections 61, 62, 63, and 64 shall be the taxable income of the individual for the year if any amount derived in the year, exempt from tax under sub-section (1) of section 92, were chargeable to tax.
Additionally, any tax credit allowed under this Part is subject to the application of sub-section (3) of section 4. This implies that the utilization of tax credits is governed by specific rules and guidelines outlined in the ordinance.
However, there are limitations on the carryforward, refund, or carryback of tax credits. Section 65(3) stipulates that any tax credit or part of a tax credit that cannot be credited under sub-section (3) of section 4 for a tax year shall not be refunded, carried forward to a subsequent tax year, or carried back to a preceding tax year.
An interesting provision is outlined in Section 65(4), which allows for the claiming of excess credit by an association of persons if the member to whom sub-section (3) applies is part of an association falling under sub-section (1) of section 92. This provision, however, requires a written agreement between the member and the association, which must be furnished with the association’s return of income for the relevant year.
It’s important to note the disclaimer provided at the end of the text, emphasizing that the information is for reference purposes and that the team PkRevenue.com is not responsible for any errors or omissions in the provided text of Section 65.
In conclusion, the updated provisions in Section 65 of the Income Tax Ordinance, 2001, bring clarity to the conditions and procedures surrounding tax credits for individuals and members of associations of persons, particularly in cases where sub-section (1) of section 92 is applicable.