KARACHI: Federal Board of Revenue (FBR) has been suggested to double threshold for collection of withholding tax on consumption of electricity by domestic users.
Karachi Tax Bar Association (KTBA) in its proposals for budget 2022/2022, said that Section 235 of Income Tax Ordinance, 2001 provides tax on domestic electricity bills at Rs25,000 or more per month if the payer is not on the Active Taxpayers List (ATL).
READ MORE: Genuine NPOs unable to get benefit of 100% tax credit
“This provision is non cognizant of the civic structure of our country as a majority of the people are either living in rented places or in family house,” the tax bar said.
Hence the nexus between the consumer and the owner of electricity unit is not linear all time. The process of changing title of utility connection is quite cumbersome and is linked with the property documents, it added.
READ MORE: Changes sought in withholding on non-resident payment
The KTBA suggested that that this provision of law should be permitted. “As minimum threshold should be raised from Rs25,000 to Rs50,000,” it added.
Giving rationale to the suggestion, the tax bar said that it will address the undue hardships for domestic consumers where consumer of electricity is different from owner of unit.
Earlier, KTBA has highlighted that genuine Non-Profit Organizations (NPOs) are unable to gent benefit of 100 per cent ax credit.
READ MORE: FBR urged to allow all tax adjustment in salary income
The tax bar informed the FBR that through Finance Act 2017 an additional condition was inserted to avail the benefit of 100 per cent tax credit.
Also, provision for taxation of surplus funds has also been introduced. The condition debarred the NPO could be from having admin and management expenses of more than 15 per cent of its total receipts. The legitimately collected funds properly invested in specified securities are subjected to tax.
“These harsh provisions was introduced in the wake of the trust gap between the FBR and the NPO’s whereby certain cases found susceptible of the genuineness or negligent toward compliances,” the tax bar said, adding that the condition was imposed across the board on all NPOs regardless of the fact that nature of some of the NPOs activities is such that it is impossible for them to restrict these expenses under the threshold of 15 per cent.
READ MORE: PYMA seeks duty, taxes cut on yarn in budget 2022/2023
This has resulted in many genuine NPOs being unable to claim the benefit of 100 per cent tax credit.
It is recommended that NPO’s should be categorized according to their nature objectives and purposes and not one single standardized rule should be made applicable. The said condition be deleted or a clarification should be issued whereby certain nature of NPO’s are excluded from this condition.
Alternatively, the provision for taxation of surplus funds should not be applicable in case those funds are invested in Federal Government securities.
This will ensure that genuine NPOs are not punished for the compliances under which they have no control.
