Tax exemption available on ‘profit on debt’ if security issued outside Pakistan

KARACHI: Tax exemption is available to profit on debt where security issued outside Pakistan for raising loan.

Officials in Federal Board of Revenue (FBR) on Wednesday said that tax exemption is available on profit on debt in certain conditions.

According to Income Tax Ordinance, 2001, any profit received by a non-resident person on a security issued by a resident person shall be exempt from tax under this Ordinance where—

(a) the persons are not associates;

(b) the security was widely issued by the resident person outside Pakistan for the purposes of raising a loan outside Pakistan for use in a business carried on by the person in Pakistan;

(c) the profit was paid outside Pakistan; and

(d) the security is approved by the FBR for the purposes of this section.

The income tax exemption is also available to any scholarship granted to a person to meet the cost of the person’s education shall be exempt from tax under this Ordinance, other than where the scholarship is paid directly or indirectly by an associate.

Any income received by a spouse as support payment under an agreement to live apart] shall be exempt from tax under the Ordinance.

The officials said income tax exemption is also available to the income derived by the federal government, provincial government, and local government.

The income of the Federal Government shall be exempt from tax under the Ordinance.

The income of a Provincial Government or a Local Government in Pakistan shall be exempt from tax under this Ordinance, other than income chargeable under the head “Income from Business” derived by a Provincial Government or Local Government from a business carried on outside its jurisdictional area.

Any payment received by the Federal Government, a Provincial Government or a Local Government shall not be liable to any collection or deduction of advance tax.

Exemption under this section shall not be available in the case of corporation, company, a regulatory authority, a development authority, other body or institution established by or under a Federal law or a Provincial law or an existing law or a corporation, company, a regulatory authority, a development authority or other body or institution set up, owned and controlled, either directly or indirectly, by the Federal Government or a Provincial Government, regardless of the ultimate destination of such income as laid down in Article 165A of the Constitution of the Islamic Republic of Pakistan:

Provided that the income from sale of spectrum licenses and renewal thereof by Pakistan Telecommunication Authority on behalf of the Federal Government after the first day of March 2014 shall be treated as income of the Federal Government and not of the Pakistan Telecommunication Authority.

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