INCOME TAX INCOME TAX

ORDINANCE 2001ORDINANCE 2001

CHANGES THROUGH FINANCE ACT, 2009CHANGES THROUGH FINANCE ACT, 2009

BY BY

SYED MUHAMMAD IJAZ, FCA, LL.B.SYED MUHAMMAD IJAZ, FCA, LL.B.

Director Taxation, Director Taxation,

M M YousafYousaf AdilAdil SaleemSaleem & Co a member firm of Deloitte Touch& Co a member firm of Deloitte TouchééTohmatsuTohmatsu

CHANGES IN CHAPTER CHANGES IN CHAPTER

11

& 2 OF THE INCOME& 2 OF THE INCOME

TAX ORDINANCE 2001TAX ORDINANCE 2001

TAXATION OF BRANCH PROFIT AS TAXATION OF BRANCH PROFIT AS

DIVIDEND.DIVIDEND.

[Section 2(19)(F)][Section 2(19)(F)]

•• The intention of the legislature was to deem the The intention of the legislature was to deem the remittanceremittance of of after tax profit, by a branch to its head office, outside Pakistafter tax profit, by a branch to its head office, outside Pakistan, an, as dividend income and not the profit itself.as dividend income and not the profit itself.

•• To remove this ambiguity amendment has been made in section To remove this ambiguity amendment has been made in section 2(19)(f) 2(19)(f)

•• Petroleum exploration and production (E&P) companies by Petroleum exploration and production (E&P) companies by virtue of new subvirtue of new sub--clause (iv) in Clause (f) of subclause (iv) in Clause (f) of sub--section (19) of section (19) of section 2 have been excluded from the ambit of the dividendsection 2 have been excluded from the ambit of the dividend

•• Consequential amendment has also been made in subsection (1) Consequential amendment has also been made in subsection (1) of section 5, which imposes a tax on dividend income.of section 5, which imposes a tax on dividend income.

•• See section 150 as wellSee section 150 as well--Tax deduction by non residents from Tax deduction by non residents from dividendsdividends

CHAPTER III, CHAPTER III,

TAX ON TAXABLE TAX ON TAXABLE

INCOMEINCOME

(AMENDMENTS)(AMENDMENTS)

PART IIPART II--HEAD OF HEAD OF

INCOME: SALARYINCOME: SALARY

TAXATION OF BONUSTAXATION OF BONUS

[Section 12 [Section 12 –– & PART 1, DIV 1, PARA 2, First Schedule]& PART 1, DIV 1, PARA 2, First Schedule]

•• A proviso has been inserted in Clause (a) of subA proviso has been inserted in Clause (a) of sub--section (2) of section (2) of

section 20 whereby any bonus paid or payable to a corporate section 20 whereby any bonus paid or payable to a corporate

employee receiving salary income of Rs. One million or more employee receiving salary income of Rs. One million or more

(excluding bonus) shall be chargeable to tax at the rate of 30%.(excluding bonus) shall be chargeable to tax at the rate of 30%.

•• This is a one time levy and payable for the tax year 2010 only, This is a one time levy and payable for the tax year 2010 only, so so

as to support the internally Displaced People (as to support the internally Displaced People (IDPsIDPs) for their ) for their

rehabilitation.rehabilitation.

Example-1—where salary excluding bonus is above 1 million

Rs.180,000Rs.180,000Total Tax (A+B)Total Tax (A+B)

Rs.90,000Rs.90,000((B)B)TaxTax thereon @ 30%thereon @ 30%

Rs.300,000Rs.300,000Bonus income for the year Bonus income for the year

Rs.90,000Rs.90,000((A)A)TaxTax thereon @ 9% thereon @ 9%

Rs.1,000,000Rs.1,000,000Salary income other than bonus Salary income other than bonus

Working of TaxWorking of Tax

Rs.1,300,000 (including bonus of Rs.1,300,000 (including bonus of Rs.300,000)Rs.300,000)Salary income of a corporate employee in Salary income of a corporate employee in

tax year 2010tax year 2010

Example-2—where salary excluding bonus is below 1 million

Rs.90,000Rs.90,000Total TaxTotal Tax thereon @ 9%thereon @ 9%

Rs.1,000,000Rs.1,000,000Salary Income Including Bonus Salary Income Including Bonus

Rs.100,000Rs.100,000Bonus income for the year Bonus income for the year

Rs.900,000Rs.900,000Salary income other than bonus Salary income other than bonus

Working of TaxWorking of Tax

Rs.1,000,000 (including bonus of Rs.1,000,000 (including bonus of Rs.100,000)Rs.100,000)Salary income of a corporate employee in Salary income of a corporate employee in

tax year 2010tax year 2010

SENIOR CITIZENS [Clause (1A) of Part SENIOR CITIZENS [Clause (1A) of Part

III of the Second Schedule]III of the Second Schedule]

•• The cost of living has increased. In view of this The cost of living has increased. In view of this

fact, the taxable limit, in a tax year, of a senior fact, the taxable limit, in a tax year, of a senior

citizen having age of 60 years or more, has been citizen having age of 60 years or more, has been

enhanced from Rs. 500,000 to Rs. 750,000.enhanced from Rs. 500,000 to Rs. 750,000.

PART IV HEAD OF PART IV HEAD OF

INCOME: INCOME FROM INCOME: INCOME FROM

BUSINESS AND BUSINESS AND

PROFESSIONPROFESSION

DIVISION II DEDUCTIONS: DIVISION II DEDUCTIONS:

GENERAL PRINCIPALSGENERAL PRINCIPALS

DEDUCTIONS IN COMPUTING BUSINESS DEDUCTIONS IN COMPUTING BUSINESS INCOME. [Section 20(1A)]INCOME. [Section 20(1A)]

•• A new subA new sub--section (1A)has been inserted in section 20 section (1A)has been inserted in section 20 to allow deduction to a person using animals for the to allow deduction to a person using animals for the purpose of the business or profession otherwise than as purpose of the business or profession otherwise than as stockstock--inin--trade where such animals have died or become trade where such animals have died or become permanently useless for such purposes. permanently useless for such purposes.

•• The amount of deduction to be allowed is not to The amount of deduction to be allowed is not to exceed the difference between the actual cost of the exceed the difference between the actual cost of the animals and the amount, if any, realized in respect of animals and the amount, if any, realized in respect of the carcasses of animals. the carcasses of animals.

•• The amendment has been made to encourage dairy The amendment has been made to encourage dairy farming businesses. farming businesses.

PART IV HEAD OF INCOME: INCOME FROM BUSINESS AND PROFESSION& PART VIII LOSSES

P IV -DIVISION III DEDUCTIONS: SPECIAL PROVISIONS

ADMISSIBILITY OF DEPRECIATION ON ADMISSIBILITY OF DEPRECIATION ON

PASSENGER TRANSPORT VEHICLES [Section PASSENGER TRANSPORT VEHICLES [Section

22(13)(a)]22(13)(a)]

•• Through Finance, Act, 2005, restriction on value of Through Finance, Act, 2005, restriction on value of

vehicles was removed for the vehicles acquired on or vehicles was removed for the vehicles acquired on or

after the first day of July, 2005. after the first day of July, 2005.

•• The taxpayers were claiming huge depreciation in The taxpayers were claiming huge depreciation in

respect of luxurious vehicles mostly used for personal respect of luxurious vehicles mostly used for personal

purposes at the cost of revenue. In view of this, the said purposes at the cost of revenue. In view of this, the said

proviso has been omitted; however, the limit has been proviso has been omitted; however, the limit has been

enhanced to Rs. 1.5 million keeping in view the increase enhanced to Rs. 1.5 million keeping in view the increase

in the prices of vehicles.in the prices of vehicles.

ACCELERATED DEPRECIATION TO ALTERNATE ACCELERATED DEPRECIATION TO ALTERNATE ENERGY PROJECTSENERGY PROJECTS. . [Section 23B, section 57 and Third [Section 23B, section 57 and Third Schedule]Schedule]--PROVISION RELEVANT TO POWER PROVISION RELEVANT TO POWER PRODUCERSPRODUCERS

•• A new section 23A has been inserted whereby First Year A new section 23A has been inserted whereby First Year Allowance (FYA) at the rate of 90% of the cost of plant, Allowance (FYA) at the rate of 90% of the cost of plant, machinery and equipment has been allowed.machinery and equipment has been allowed.

•• The plant, machinery and equipment has to be installed in The plant, machinery and equipment has to be installed in Pakistan by a company set up for the purpose of Pakistan by a company set up for the purpose of alternate alternate energy power generationenergy power generation. .

•• The FYA will be allowed in lieu of initial allowance allowed The FYA will be allowed in lieu of initial allowance allowed u/su/s23 in respect of 23 in respect of ““eligible depreciation assetseligible depreciation assets”” put to use after July put to use after July 01, 2009. 01, 2009.

•• This has been done to encourage investment in this sector both This has been done to encourage investment in this sector both by residents and nonby residents and non--residents. The amendment has also been residents. The amendment has also been made in section 57 to allow carry forward of losses for indefinimade in section 57 to allow carry forward of losses for indefinite te period.period.

PROVISION REGARDING CONSUMER PROVISION REGARDING CONSUMER LOANSLOANS. . [Section 29A][Section 29A]--BANK RELATED BANK RELATED PROVISIONSPROVISIONS

•• Prior to Finance Act 2009, a banking company or nonPrior to Finance Act 2009, a banking company or non--banking banking finance company or house building finance corporation were finance company or house building finance corporation were allowed deductions allowed deductions not exceeding 3%not exceeding 3% of the income for the tax of the income for the tax year arising out of consumer loans for creation of a reserve to year arising out of consumer loans for creation of a reserve to setoff bad debts arising out of such loans.setoff bad debts arising out of such loans.

•• Since special provisions for computation of income of a banking Since special provisions for computation of income of a banking company will be operative through Seventh Schedule to the company will be operative through Seventh Schedule to the Income Tax Ordinance, 2001, from tax year 2009, therefore, the Income Tax Ordinance, 2001, from tax year 2009, therefore, the banking companies have been excluded from section 29A.banking companies have been excluded from section 29A.

•• Such companies would not be entitled to any provision regarding Such companies would not be entitled to any provision regarding consumer loans with effect from July 1, 2009. However, they consumer loans with effect from July 1, 2009. However, they would be entitled to make provisions in accordance with Rule would be entitled to make provisions in accordance with Rule 1(c) of the Seventh Schedule for total advances and off balance 1(c) of the Seventh Schedule for total advances and off balance sheet items as provided therein.sheet items as provided therein.

TAX CREDIT ON ADMISSIBLE TAX CREDIT ON ADMISSIBLE

DONATIONS. [Section 61(2)(b)(ii)]DONATIONS. [Section 61(2)(b)(ii)]

•• In order to encourage the charitable activities, In order to encourage the charitable activities,

the limit of 15% has been enhanced to 20% for the limit of 15% has been enhanced to 20% for

companies.companies.

PART IXPART IX--

DEDUCTIBLE DEDUCTIBLE

ALLOWANCESALLOWANCES

TAX CREDIT ON PROFIT ON DEBT FOR TAX CREDIT ON PROFIT ON DEBT FOR

CONSTRUCTION OF NEW HOUSE OR CONSTRUCTION OF NEW HOUSE OR

ACQUISITION OF HOUSE. [Section 64]ACQUISITION OF HOUSE. [Section 64]

•• amendment through Finance Act, 2009 was to be amendment through Finance Act, 2009 was to be

computed at the average rate of tax on lesser of:computed at the average rate of tax on lesser of:

–– total profit on debttotal profit on debt

–– 40 percent of taxable income of taxpayer40 percent of taxable income of taxpayer

–– Rs. 500,000/Rs. 500,000/--

•• After amendment, the above limits have been increased After amendment, the above limits have been increased

as under. as under.

–– The limit of 40% taxable income has been increased to 50%.The limit of 40% taxable income has been increased to 50%.

–– The ceiling of Rs. 500,000/The ceiling of Rs. 500,000/-- has been raised to Rs. 750,000/has been raised to Rs. 750,000/--..

TAX CREDIT FOR MANUFACTURER TAX CREDIT FOR MANUFACTURER MAKING SALES TO SALES TAX REGISTERED MAKING SALES TO SALES TAX REGISTERED PERSONS. [Section 65A]PERSONS. [Section 65A]

•• For broadening of tax base a new section 65A has been For broadening of tax base a new section 65A has been inserted.inserted.

•• Every manufacturer registered under the Sale Tax Act, Every manufacturer registered under the Sale Tax Act, 1990 is entitled to a tax credit of 1990 is entitled to a tax credit of 2.5% 2.5% of of tax payabletax payablefor tax year if 90% of sales are made to persons who for tax year if 90% of sales are made to persons who are registered under the Sales Tax Act, 1990. are registered under the Sales Tax Act, 1990.

•• For claiming the tax credit, the taxpayer, will however For claiming the tax credit, the taxpayer, will however be required to;be required to;–– Provide complete details of the persons to whom the sales Provide complete details of the persons to whom the sales were made during the tax year. were made during the tax year.

–– The facility, is not allowed to a person whose income is The facility, is not allowed to a person whose income is covered under the final or minimum tax regime. covered under the final or minimum tax regime.

–– No carry forward of such credit is allowed.No carry forward of such credit is allowed.

CHAPTER IV: CHAPTER IV:

COMMON RULESCOMMON RULES

PART III ASSETSPART III ASSETS

ADJUSTMENT IN COST OF ASSETS ADJUSTMENT IN COST OF ASSETS

ACQUIRED THROUGH FOREIGN ACQUIRED THROUGH FOREIGN

CURRENCY LOAN. [Section 76(5)]CURRENCY LOAN. [Section 76(5)]--WILL WILL

EFFECT THE FOREIGN INVESTORS AND EFFECT THE FOREIGN INVESTORS AND

ASSETS TAKEN ON FOREIGN LOANSASSETS TAKEN ON FOREIGN LOANS

•• An Explanation has been added to the said sub section An Explanation has been added to the said sub section

providing that for the purposes of depreciation, the providing that for the purposes of depreciation, the

difference if any on account of Foreign Currency difference if any on account of Foreign Currency

fluctuation is now to be taken into account only in year fluctuation is now to be taken into account only in year

of occurrence of such fluctuation and WDV adopted in of occurrence of such fluctuation and WDV adopted in

previous year will not be altered. previous year will not be altered.

CHAPTER IX CHAPTER IX ––

MINIMUM TAXMINIMUM TAX

RERE--INTRODUCTION OF MINIMUM TAX ON TURNOVER DECLARED BY INTRODUCTION OF MINIMUM TAX ON TURNOVER DECLARED BY RESIDENT COMPANIES. [Section 113 & 137(1) & 147 & Clause 2A of PRESIDENT COMPANIES. [Section 113 & 137(1) & 147 & Clause 2A of Partart--V of the V of the Second Schedule] DEFINITION OF TURNOVER [Section 2(70A)]Second Schedule] DEFINITION OF TURNOVER [Section 2(70A)]

•• Minimum tax abolished through Finance Act 2008 has been revived.Minimum tax abolished through Finance Act 2008 has been revived.

•• This section is applicable in cases where due to any reason inclThis section is applicable in cases where due to any reason including any other law for uding any other law for the time being the time being inforceinforce–– Loss for the YearLoss for the Year

–– The setting of a loss of an earlier yearThe setting of a loss of an earlier year

–– Exemption from taxExemption from tax

–– The application of credits or rebates; orThe application of credits or rebates; or

–– Claiming of allowances including depreciation and amortization Claiming of allowances including depreciation and amortization

•• However, such tax will not be payable by a resident company declHowever, such tax will not be payable by a resident company declaring gross loss before set off of aring gross loss before set off of depreciation and other inadmissible expenses under the Ordinancedepreciation and other inadmissible expenses under the Ordinance and also such gross loss has and also such gross loss has not been arrived at by changing the accounting pattern. In such not been arrived at by changing the accounting pattern. In such cases the Commissioner of cases the Commissioner of Income Tax has been empowered to compute the tax as per historicIncome Tax has been empowered to compute the tax as per historical accounting pattern and al accounting pattern and other provisions of the Ordinance shall apply.other provisions of the Ordinance shall apply.

The turnover has been defined to meanThe turnover has been defined to mean

–– a)a) The gross receipts from sale of goods excluding sales tax and FThe gross receipts from sale of goods excluding sales tax and Federal Excise Duty or ederal Excise Duty or trade discount shown on invoices/bills. Any amount taken as deemtrade discount shown on invoices/bills. Any amount taken as deemed income and assessed ed income and assessed as final tax shall also be excluded.as final tax shall also be excluded.

–– b)b) The gross fees for rendering of services or benefits including The gross fees for rendering of services or benefits including commission except those commission except those covered by Presumptive Tax Regime (PTR).covered by Presumptive Tax Regime (PTR).

–– c) c) The gross receipts from the execution of contracts other than thThe gross receipts from the execution of contracts other than those liable to final tax.ose liable to final tax.

–– d)d) The companyThe company’’s share of the aforesaid amounts of any Association of Person ofs share of the aforesaid amounts of any Association of Person of which the which the company is a member. Various exemptions which were earlier availcompany is a member. Various exemptions which were earlier available to certain institutions able to certain institutions from the application of section 113 have also been revived. Howefrom the application of section 113 have also been revived. However the exemption earlier ver the exemption earlier available to a small company has not been made available.available to a small company has not been made available.

TAXATION OF INCOME OF CERTAIN TAXATION OF INCOME OF CERTAIN RETAILERS [Section 113B)RETAILERS [Section 113B)

•• A retailer being an individual or AOP, where turnover A retailer being an individual or AOP, where turnover is Rs.5 million or more, and is Rs.5 million or more, and

•• who is subject to special procedure for a payment of who is subject to special procedure for a payment of sales tax under the Sales Tax Act is liable to pay final sales tax under the Sales Tax Act is liable to pay final tax at the rates specified under section 113B on his total tax at the rates specified under section 113B on his total turnover. turnover.

•• Such retailer is however not entitled to claim any Such retailer is however not entitled to claim any adjustment of withholding tax collected or deducted adjustment of withholding tax collected or deducted under any other heads.under any other heads.

•• After amendment made through Finance Act 2009 the After amendment made through Finance Act 2009 the turnover chargeable to tax under this section will now turnover chargeable to tax under this section will now exclude the sales of goods on which tax is deducted or exclude the sales of goods on which tax is deducted or deductible under section 153(1)(a).deductible under section 153(1)(a).

CHAPTER XCHAPTER X--

PROCEDURESPROCEDURES

PART IPART I--RETURNSRETURNS

MANDATORY FILING OF RETURNS BY MANDATORY FILING OF RETURNS BY

CERTAIN PERSON [Section 114]CERTAIN PERSON [Section 114]

•• In order to expand the tax base, following persons have In order to expand the tax base, following persons have

been added to the already existing categories of been added to the already existing categories of

taxpayer who are required to file the returns of income.taxpayer who are required to file the returns of income.

–– a) Who owns immoveable property with land area of 500 a) Who owns immoveable property with land area of 500

Square yards or more located in a rating area.Square yards or more located in a rating area.

–– b) Who owns a flat having covered area of 2,000 square feet b) Who owns a flat having covered area of 2,000 square feet

or more located in a rating area.or more located in a rating area.

–– c) Who owns a motor vehicle having engine capacity above c) Who owns a motor vehicle having engine capacity above

1000CC.1000CC.

–– d) Who has obtained a National Tax Number.d) Who has obtained a National Tax Number.

CONDITIONAL REVISIONING OF RETURN. CONDITIONAL REVISIONING OF RETURN. [Section 114(6)][Section 114(6)]

•• Now the revised return is allowed to be filed within five Now the revised return is allowed to be filed within five years from the end of the financial year in which years from the end of the financial year in which original return was filed without prejudice to any other original return was filed without prejudice to any other liability which the taxpayer may incur under the liability which the taxpayer may incur under the Ordinance and subject to the following conditions:Ordinance and subject to the following conditions:–– a) The revised return has to be accompanied by revised a) The revised return has to be accompanied by revised accounts or revised audited accounts as the case may be.accounts or revised audited accounts as the case may be.

–– b) The reason for revision of return, in writing, duly signed, b) The reason for revision of return, in writing, duly signed, has to be filed therewith.has to be filed therewith.

–– c) The revised return has to be filed before the issuance of c) The revised return has to be filed before the issuance of the notice for amendment of assessment in respect of the the notice for amendment of assessment in respect of the relevant tax year.relevant tax year.

Example-I---As per old provisions

30.09.201430.09.201431.12.201431.12.2014Period of limitation of Period of limitation of revision of returnrevision of return

30.09.200930.09.200931.12.200931.12.2009Date(sDate(s) of filing of Return) of filing of Return

Example-2— As per new provisions

5 years and 9 months5 years and 9 months5 years and 6 months5 years and 6 months

30.06.201530.06.201530.06.201530.06.2015Five years from the Five years from the aforesaid dateaforesaid date

30.06.201030.06.201030.06.201030.06.2010Financial year ending in Financial year ending in which return was filedwhich return was filed

30.09.200930.09.200931.12.200931.12.2009Date(sDate(s) of filing of Return) of filing of Return

EE--FILING OF RETURN AND WEALTH FILING OF RETURN AND WEALTH STATEMNT BY SALARIED PERSONSSTATEMNT BY SALARIED PERSONS. . [Section 115][Section 115]

The proviso to sub section (1) of section 115 has The proviso to sub section (1) of section 115 has been substituted to provide thatbeen substituted to provide that

•• where salary income for the tax year is Rs. where salary income for the tax year is Rs. 500,000/500,000/-- or more, the taxpayer shall file return or more, the taxpayer shall file return of income electronically in the prescribed form, of income electronically in the prescribed form, and and

–– it shall be accompanied by the proof of deduction or it shall be accompanied by the proof of deduction or payment of tax andpayment of tax and

–– wealth statement as required wealth statement as required u/su/s 116.116.

STATEMENT OF FINAL TAXATION. STATEMENT OF FINAL TAXATION.

[Section 115(4)][Section 115(4)]

•• By virtue of amendment made in subBy virtue of amendment made in sub--section (4) section (4)

of section 115, persons deriving income from of section 115, persons deriving income from

rendering or providing of services are rendering or providing of services are

–– subject to minimum tax subject to minimum tax u/su/s 153, and153, and

–– Are required to file a return of income instead of Are required to file a return of income instead of

simplified statement of final taxation.simplified statement of final taxation.

REVISION OF STATEMENT IN CASE OF REVISION OF STATEMENT IN CASE OF

FINAL TAXATION. [Section 115(4A)]FINAL TAXATION. [Section 115(4A)]

•• To allow a person who, having furnished To allow a person who, having furnished

statement, discovers any omission or wrong statement, discovers any omission or wrong

statement therein, statement therein,

–– Can furnish revised statement at any time within five Can furnish revised statement at any time within five

years from the end of the financial year in which years from the end of the financial year in which

such statement was furnished.such statement was furnished.

FILING OF WEALTH STATEMENT IN FILING OF WEALTH STATEMENT IN FINAL TAXATION REGIME (FTR) FINAL TAXATION REGIME (FTR) CASES. [Section 115(4B)]CASES. [Section 115(4B)]

•• By virtue of this newly added subsection every By virtue of this newly added subsection every person (person (other than companyother than company) filing statement ) filing statement under subunder sub--section (4) of section 115 of the section (4) of section 115 of the Ordinance, covered by Final Taxation Regime Ordinance, covered by Final Taxation Regime (FTR), (FTR), who has paid tax amounting to Rs. who has paid tax amounting to Rs. 20,000/20,000/-- or more for the tax year, is required to or more for the tax year, is required to file file

–– wealth statementwealth statement alongwithalongwith a a wealth wealth reconciliation statementreconciliation statement..

MANDATORY FILING OF WEALTH MANDATORY FILING OF WEALTH

RECONCILIATION STATEMENT. RECONCILIATION STATEMENT.

[Section 116(1)][Section 116(1)]

•• every individual taxpayer required to file every individual taxpayer required to file wealth wealth

statement statement u/su/s 116 shall also furnish 116 shall also furnish Wealth Wealth

Reconciliation StatementReconciliation Statement

PART II PART II --

ASSESSMENTSASSESSMENTS

BEST JUDGMENT ASSESSMENT IN BEST JUDGMENT ASSESSMENT IN

FTR CASES. [Section 121(1)(aa)]FTR CASES. [Section 121(1)(aa)]

•• The powers of the Commissioner of Income The powers of the Commissioner of Income

Tax to make best judgment assessment on the Tax to make best judgment assessment on the

basis of available information and material have basis of available information and material have

been extended tobeen extended to

–– such cases where a person fails to furnish statement such cases where a person fails to furnish statement

of final taxation under subof final taxation under sub--section (5) of section 115 section (5) of section 115

of the Ordinance.of the Ordinance.

LIMITATION FOR AMENDMENT OF LIMITATION FOR AMENDMENT OF

ASSESSMENT [section 122(2) and (4)]ASSESSMENT [section 122(2) and (4)]

•• Amendment to provide aAmendment to provide a

•• uniform timeline of five years reckoned from uniform timeline of five years reckoned from

the the end of the financial yearend of the financial year in which the in which the

Commissioner has issued or treated to have Commissioner has issued or treated to have

issued the assessment order to the taxpayer for issued the assessment order to the taxpayer for

amendment of assessment. amendment of assessment.

PART IIIPART III-- APPEALSAPPEALS

FILING OF APPEAL BEFORE THE FILING OF APPEAL BEFORE THE COMMISSIONER OF INCOME TAX COMMISSIONER OF INCOME TAX (APPEALS). [Section 127(1) and (4)](APPEALS). [Section 127(1) and (4)]

•• Sub section (1) of section 127 has been amended to Sub section (1) of section 127 has been amended to allow filing of appeals by taxpayer if;allow filing of appeals by taxpayer if;

–– Dissatisfied with the order passed under Part III of Chapter Dissatisfied with the order passed under Part III of Chapter X for giving any effects of instructionsX for giving any effects of instructions

–– This amendment will help the taxpayer to contest the legal This amendment will help the taxpayer to contest the legal issues before the appellate issues before the appellate forafora, even if no tax liability is , even if no tax liability is involved in the order passed by the Taxation Officer.involved in the order passed by the Taxation Officer.

•• Additional tax charged Additional tax charged u/su/s 205 is appeal205 is appeal--able nowable now

•• Appeal fee is fixed at Rs. 1000Appeal fee is fixed at Rs. 1000

FIXING OF MAXIMUM TIME LIMIT TO PASS FIXING OF MAXIMUM TIME LIMIT TO PASS AN ORDER BY THE COMMISSIONER AN ORDER BY THE COMMISSIONER (APPEALS). [Section 129(4)](APPEALS). [Section 129(4)]

•• 120 days time limit defined from the date of filing of 120 days time limit defined from the date of filing of appeal or within an extended period of 60 days for appeal or within an extended period of 60 days for reasons to be recorded in writing by CIT (Appeals).reasons to be recorded in writing by CIT (Appeals).

•• The period during which the hearing of an appeal is The period during which the hearing of an appeal is adjourned adjourned –– at the request of the appellant, orat the request of the appellant, or

–– Is postponed due to any appeal or proceedings, orIs postponed due to any appeal or proceedings, or

–– stay order, remand, orstay order, remand, or

–– alternative dispute resolution proceedings, oralternative dispute resolution proceedings, or

–– for any other reason, shall be excluded in the computation of for any other reason, shall be excluded in the computation of the aforementioned period.the aforementioned period.

CONSTITUTION OF BENCHES BY THE CHAIRMAN CONSTITUTION OF BENCHES BY THE CHAIRMAN APPELLATE TRIBUNAL. [Section 130(8A) & (8AA)]APPELLATE TRIBUNAL. [Section 130(8A) & (8AA)]

•• Chairman empowered to constitute as many single benches as he maChairman empowered to constitute as many single benches as he may deem y deem necessary to hear such case or cases as the Federal Govt. may bynecessary to hear such case or cases as the Federal Govt. may by order in order in writing specify writing specify

•• Such single member bench can dispose of any case in due process Such single member bench can dispose of any case in due process of law of law uptouptoRs. 5 m.Rs. 5 m.

FEE FOR FILING OF APPEAL BEFORE APPELLATE TRIBUNAL FEE FOR FILING OF APPEAL BEFORE APPELLATE TRIBUNAL [section 131(3)][section 131(3)]

•• Appeal fee is fixed at Rs. 2000 instead of in relation to tax asAppeal fee is fixed at Rs. 2000 instead of in relation to tax assessed.sessed.

STAY OF DEMAND BY THE APPELLATE TRIBUNAL. [section STAY OF DEMAND BY THE APPELLATE TRIBUNAL. [section 131(5)]131(5)]

–– A new provisoA new proviso-- Appellate Tribunal may via 30 days interim order can stay the Appellate Tribunal may via 30 days interim order can stay the demand. Then issue notice to respondent and then demand. Then issue notice to respondent and then

–– confirm or alter the stay as the Tribunal deems fit.confirm or alter the stay as the Tribunal deems fit.

–– Stay order shall in no case remain operative for more than 180 dStay order shall in no case remain operative for more than 180 days. ays.

ALTERNATIVE DISPUTE RESOLUTION. [Section 134A]ALTERNATIVE DISPUTE RESOLUTION. [Section 134A]

•• Section 134A(i) this section is inapplicable in cases where Section 134A(i) this section is inapplicable in cases where –– a) Where prosecution proceedings have been initiated.a) Where prosecution proceedings have been initiated.

–– b) Applications which require interpretation of various questionb) Applications which require interpretation of various question of law having of law having effect on identical other cases.effect on identical other cases.

•• recommendations within 90 days of constitution. recommendations within 90 days of constitution.

•• May be dissolved by the FBR in case it fails to submit its recomMay be dissolved by the FBR in case it fails to submit its recommendations mendations within the stipulated period. FBR shall then constitute anotherwithin the stipulated period. FBR shall then constitute another committee committee and the reconstituted committee will be required to submit its and the reconstituted committee will be required to submit its recommendations in 90 days. recommendations in 90 days.

•• If there is no decision the taxpayer may revert back to the appeIf there is no decision the taxpayer may revert back to the appellate forum llate forum where the case is pending.where the case is pending.

•• Previously no time limit was specified for FBR to pass order on Previously no time limit was specified for FBR to pass order on the the recommendations made by the ADRC. Now FBR is required to pass anrecommendations made by the ADRC. Now FBR is required to pass an order order as it deem appropriate within 45 days of the receipt of recommenas it deem appropriate within 45 days of the receipt of recommendations of dations of ADRC.ADRC.

Part IVPart IV-- Collection andCollection and

Recovery of TaxRecovery of Tax

PAYMENT OF TAX U/S 113 PAYMENT OF TAX U/S 113

ALONGWITH THE RETURN. [Section ALONGWITH THE RETURN. [Section

137]137]

•• With the reWith the re--introduction of minimum tax introduction of minimum tax u/su/s

113, taxpayers are required to pay the liability 113, taxpayers are required to pay the liability

u/su/s 113 along with the return.113 along with the return.

Part VPart V-- Advance Tax and Advance Tax and

Deduction of Tax at Deduction of Tax at

SourceSourceDivision IDivision I---- Advance Tax Paid by the Tax PayerAdvance Tax Paid by the Tax Payer

Division IIDivision II---- ImportsImports

Division IIIDivision III---- Deduction at SourceDeduction at Source

Division IVDivision IV---- General Provisions Relating to theGeneral Provisions Relating to the

Advance Payment of Tax or Deduction of Tax atAdvance Payment of Tax or Deduction of Tax at

SourceSource

PAYMENT OF ADVANCE TAX. [Section 147)PAYMENT OF ADVANCE TAX. [Section 147)

•• Old method revived where In case of a company, the mode of deterOld method revived where In case of a company, the mode of determining advance mining advance tax liability tax liability u/su/s 147 has been Based on turnover basis as per following formula.147 has been Based on turnover basis as per following formula.

•• (A x B/C) (A x B/C) –– DD

•• whereas:whereas:–– A is the taxpayerA is the taxpayer’’s turnover for the quarter;s turnover for the quarter;

–– B is the tax assessed to the taxpayer for the latest tax year;B is the tax assessed to the taxpayer for the latest tax year;

–– C is the taxpayerC is the taxpayer’’s turnover for the latest tax year; ands turnover for the latest tax year; and

–– D is the tax paid during the quarter for which a tax credit is aD is the tax paid during the quarter for which a tax credit is allowed under section 168, other llowed under section 168, other than tax deducted under section 155.than tax deducted under section 155.

•• Schedule for advance tax payment has been given.Schedule for advance tax payment has been given.–– a) in respect of the September quarter, on or before the 15th daa) in respect of the September quarter, on or before the 15th day of October.y of October.

–– b) in respect of the December quarter, on or before the 15th dayb) in respect of the December quarter, on or before the 15th day of January.of January.

–– c) in respect of the March quarter, on or before the 15th day ofc) in respect of the March quarter, on or before the 15th day of April; andApril; and

–– d) in respect of the June quarter, on or before the 15th day of d) in respect of the June quarter, on or before the 15th day of June.June.

•• The taxpayer shall also be required to take into consideration tThe taxpayer shall also be required to take into consideration tax ax u/su/s 113 while 113 while computing tax liability computing tax liability u/su/s 147.147.

•• Further, advance tax is also payable, in the absence of last assFurther, advance tax is also payable, in the absence of last assessed income or declared essed income or declared turnover on the basis of tax liability under section 113. turnover on the basis of tax liability under section 113.

•• Question relating to tax calculations Question relating to tax calculations u/su/s 147 147

•• When the amounts are treated to be the When the amounts are treated to be the

minimum tax and not a final discharge will they minimum tax and not a final discharge will they

be adjustable against advance tax liabilitybe adjustable against advance tax liability

WITHHOLDING TAX ON IMPORTS. [Section 148(7), (8) WITHHOLDING TAX ON IMPORTS. [Section 148(7), (8) –– PartPart--II of II of First Schedule First Schedule –– Clause (9A) of Second Schedule]Clause (9A) of Second Schedule]

•• As per Finance Act, 2009, the limit of paidAs per Finance Act, 2009, the limit of paid--up capital and total assets have up capital and total assets have been enhanced to Rs. 250m and 350m respectively previously it wabeen enhanced to Rs. 250m and 350m respectively previously it was 100m for s 100m for both.both.

•• Through Finance Act, 2009, the tax collected shall be treated asThrough Finance Act, 2009, the tax collected shall be treated as minimum tax minimum tax u/su/s 148(8) previously it was a final discharge 148(8) previously it was a final discharge

•• Tax collected on import of packing material by the manufacturer Tax collected on import of packing material by the manufacturer of edible oil shall also be of edible oil shall also be treated as minimum tax. From tax year 2010 and onwards manufactutreated as minimum tax. From tax year 2010 and onwards manufacturer of ghee and rer of ghee and edible oil shall file return edible oil shall file return u/su/s 114 instead of filing statement 114 instead of filing statement u/su/s 115.115.

•• Rate of tax on imports has been raised to 4% on the value of gooRate of tax on imports has been raised to 4% on the value of goods ds previously it was 2%. previously it was 2%.

•• Further a new subFurther a new sub--clause (9A) has been added to Partclause (9A) has been added to Part--III of the Second III of the Second Schedule wherein tax under section 148 shall be collected @ 3% oSchedule wherein tax under section 148 shall be collected @ 3% on import n import value of raw material imported by an industrial undertaking for value of raw material imported by an industrial undertaking for its own use.its own use.

PAYMENTS FOR GOODS AND SERVICES. [Section PAYMENTS FOR GOODS AND SERVICES. [Section 153]153]

•• As a result of amendment made in subAs a result of amendment made in sub--section (6), tax deducted section (6), tax deducted on payments made for rendering or providing of services will be on payments made for rendering or providing of services will be considered as minimum tax and henceforth all the taxpayers considered as minimum tax and henceforth all the taxpayers falling in the ambit of section 153(1) (b) shall file return undfalling in the ambit of section 153(1) (b) shall file return under er the normal tax regime.the normal tax regime.

•• SubSub--section (9) has been amended to include a nonsection (9) has been amended to include a non--profit profit organization in the list of prescribed persons who are required organization in the list of prescribed persons who are required to to withhold tax at the time of making payments for sale of goods, withhold tax at the time of making payments for sale of goods, rendering of services or contract.rendering of services or contract.

•• Persons engaged in packing and rePersons engaged in packing and re--packing have been excluded packing have been excluded from the definition of from the definition of ““manufacturermanufacturer”” for the purposes of for the purposes of section 153. As such in view of appellate decision, persons section 153. As such in view of appellate decision, persons engaged in packing and reengaged in packing and re--packing will be subject to final packing will be subject to final taxation.taxation.

COLLECTION OF TAX FROM EXPORTERS COLLECTION OF TAX FROM EXPORTERS RECEIVING EXPORT PROCEEDS IN CASH. [Section RECEIVING EXPORT PROCEEDS IN CASH. [Section 154 154 –– DivisionDivision--IV, PartIV, Part--III of First Schedule]III of First Schedule]

•• There is a special arrangement for export of goods to There is a special arrangement for export of goods to Afghanistan whereby goods are exported without Form Afghanistan whereby goods are exported without Form ““EE”” and and export proceeds are directly received by the exporters in local export proceeds are directly received by the exporters in local currency. Such exports are allowed in terms of currency. Such exports are allowed in terms of parapara (7) of SRO (7) of SRO 759(1)/2008 dated 18.07.2008. Since the export proceeds are not 759(1)/2008 dated 18.07.2008. Since the export proceeds are not realized in foreign exchange through authorized dealers, realized in foreign exchange through authorized dealers, therefore, no tax is collected thereon.therefore, no tax is collected thereon.

•• In order to cover the above situation, a new subIn order to cover the above situation, a new sub--section (3C) has section (3C) has been inserted which provides that in respect of goods exported been inserted which provides that in respect of goods exported without Form without Form ““EE”” the Collector of Customs shall collect tax @ the Collector of Customs shall collect tax @ 1% at the time of clearing such goods for export. 1% at the time of clearing such goods for export.

FILING OF COPIES OF PAID CHALLANS ALONGWITH FILING OF COPIES OF PAID CHALLANS ALONGWITH CERTIFICATE OF DEDUCTION. [Section 164]CERTIFICATE OF DEDUCTION. [Section 164]

•• Previously a taxpayer was entitled to claim credit of tax collecPreviously a taxpayer was entitled to claim credit of tax collected/deducted on ted/deducted on the basis of prescribed tax deduction certificate. Now taxpayersthe basis of prescribed tax deduction certificate. Now taxpayers are required are required to furnish copies of paid to furnish copies of paid challanschallans or other equivalent documents or other equivalent documents alongwithalongwithcertificate of deductions for claming credit of the same.certificate of deductions for claming credit of the same.

CLAIM OF SERVICE CHARGES ON CLAIM OF SERVICE CHARGES ON COLLECTION/DEDUCTION OF TAX BY THE WITHHOLDING COLLECTION/DEDUCTION OF TAX BY THE WITHHOLDING AGENTS. [Section 168]AGENTS. [Section 168]

•• Under the Income Tax Ordinance, 2001 the Withholding Agents are Under the Income Tax Ordinance, 2001 the Withholding Agents are not not entitled to receiveentitled to receive

•• any services charges for collection or deduction of tax as a Witany services charges for collection or deduction of tax as a Withholding hholding Agent. Incase such a deduction is made it can be recovered by thAgent. Incase such a deduction is made it can be recovered by the FBR like a e FBR like a recovery of tax under the law.recovery of tax under the law.

Part VIPart VI-- RefundsRefunds

TIME LIMITATION TO ISSUE REFUND ORDER. TIME LIMITATION TO ISSUE REFUND ORDER. [Section 170(4)][Section 170(4)]

•• Time limit for order Time limit for order u/su/s 170 regarding refund is increased from 170 regarding refund is increased from 45 to 60 days45 to 60 days

ADDITIONAL PAYMENT FOR DELAYED REFUND. ADDITIONAL PAYMENT FOR DELAYED REFUND. [Section 171][Section 171]

•• Compensation for delayed refund is linked with KIBOR Compensation for delayed refund is linked with KIBOR previously it was 6%previously it was 6%

•• Further a proviso is added which provides that where there is a Further a proviso is added which provides that where there is a reason to believe that a person has claimed refund which is not reason to believe that a person has claimed refund which is not due to him, the provisions regarding payment of such additional due to him, the provisions regarding payment of such additional amount shall not apply till the investigation of the claim is amount shall not apply till the investigation of the claim is completed and the claim is either accepted or rejected.completed and the claim is either accepted or rejected.

Part VIIIPart VIII-- Records,Records,

Information, Collection andInformation, Collection and

AuditAudit

EMPOWERMENT OF CHARTERED ACCOUNT FIRMS FOR EMPOWERMENT OF CHARTERED ACCOUNT FIRMS FOR OBTAINING INFORMATION FOR THE PURPOSE OF INCOME TAX OBTAINING INFORMATION FOR THE PURPOSE OF INCOME TAX AUDIT. AUDIT. [[Section 176 and 210(1)(b)]Section 176 and 210(1)(b)]

•• A new clause (c) has been added to section 176 of the Income TaxA new clause (c) has been added to section 176 of the Income Tax Ordinance, 2001Ordinance, 2001

•• A firm of Chartered Accountants appointed by the Board, has beenA firm of Chartered Accountants appointed by the Board, has been empowered with empowered with the prior approval of Commissioners concerned to enter the businthe prior approval of Commissioners concerned to enter the business premises of the ess premises of the taxpayer, who has been selected for audit in order to obtain anytaxpayer, who has been selected for audit in order to obtain any information and information and examine the record kept in such premises. These powers have beenexamine the record kept in such premises. These powers have been granted in view of granted in view of the fact that the Federal Government intends to get audit conducthe fact that the Federal Government intends to get audit conducted in a transparent ted in a transparent manner and as such an manner and as such an MoUMoU has been signed with ICAP which will be effective from has been signed with ICAP which will be effective from 1st July, 2009.1st July, 2009.

•• APPOINTMENT OF CHARTERED ACCOUNTANTS FOR INCOME APPOINTMENT OF CHARTERED ACCOUNTANTS FOR INCOME AUDIT. [Section 210(1B). AUDIT. [Section 210(1B). Commissioners are empowered to delegate power to Commissioners are empowered to delegate power to CAzCAzto carryout audit.to carryout audit.

SELECTION OF CASES FOR AUDIT [Section 177]SELECTION OF CASES FOR AUDIT [Section 177]

•• Previously the Board was empowered to lay down criteria for selePreviously the Board was empowered to lay down criteria for selection of person for ction of person for audit. Now section 177 has been amended to empower the Board to audit. Now section 177 has been amended to empower the Board to lay down criteria lay down criteria also for selection of also for selection of ““classes of personsclasses of persons”” for the purposes of the income tax audit.for the purposes of the income tax audit.

Part XIPart XI-- Offences andOffences and

ProsecutionsProsecutions

Part XIIPart XII-- Additional TaxAdditional Tax

PROSECUTION FOR NONPROSECUTION FOR NON--COMPLIANCE WITH CERTAIN COMPLIANCE WITH CERTAIN STATUTORYOBLIGATIONS. [Section191 & 192]STATUTORYOBLIGATIONS. [Section191 & 192]

•• Though imprisonment was defined however, quantum of penalties waThough imprisonment was defined however, quantum of penalties was not s not defined which is now defined as under;defined which is now defined as under;

–– For non compliance not exceeding Rs. 50,000 For non compliance not exceeding Rs. 50,000 u/su/s 191191

–– For False statement not exceeding Rs. 100,000 For False statement not exceeding Rs. 100,000 u/su/s 192192

PROSECUTION FOR CONCEALMENT OF INCOME. [Section PROSECUTION FOR CONCEALMENT OF INCOME. [Section 192A]192A]

–– where a person in any proceedings or in any earlier proceedings where a person in any proceedings or in any earlier proceedings concealed concealed income or furnished inaccurate particulars of such income and thincome or furnished inaccurate particulars of such income and the e revenue impact of such concealment or furnishing of inaccurate revenue impact of such concealment or furnishing of inaccurate particulars of such income is particulars of such income is five hundred thousand rupees or morefive hundred thousand rupees or more shall shall be treated as committing an offence punishable on conviction witbe treated as committing an offence punishable on conviction with h •• imprisonment imprisonment uptoupto two years or with fine or both.two years or with fine or both.

–– For the purpose of this section concealment of income or the furFor the purpose of this section concealment of income or the furnishing nishing of inaccurate particulars has been defined to include:of inaccurate particulars has been defined to include:•• a) the suppression of any income or amount chargeable to tax.a) the suppression of any income or amount chargeable to tax.

•• b) the claiming of any deduction for any expenditure not actuallb) the claiming of any deduction for any expenditure not actually incurred; ory incurred; or

•• c) any act referred to in subc) any act referred to in sub--section (1) of section 111. section (1) of section 111.

FIXATION OF PENALTY LIMIT FOR PROSECUTION FOR NONFIXATION OF PENALTY LIMIT FOR PROSECUTION FOR NON--MAINTENANCE OF RECORD AND IMPROPER USE OF NTN. [Section MAINTENANCE OF RECORD AND IMPROPER USE OF NTN. [Section 193 and 194]193 and 194]--

•• Amendment has been made in sections 193 and 194 to fix the limitAmendment has been made in sections 193 and 194 to fix the limit of fine of fine uptouptoRs. 50,000/Rs. 50,000/-- in case of prosecution for failure to maintain records and imprin case of prosecution for failure to maintain records and improper oper use of N.T.N.use of N.T.N.

IMPOSITION OF PENALTY FOR CONVICTION IN PROSECUTION IMPOSITION OF PENALTY FOR CONVICTION IN PROSECUTION PROCEEDINGS RELATING TO DISPOSAL OF PROPERTY TO PROCEEDINGS RELATING TO DISPOSAL OF PROPERTY TO PREVENT ATTACHMENT. [Section 197]PREVENT ATTACHMENT. [Section 197]

•• As a result of amendment the court is now empowered to impose a As a result of amendment the court is now empowered to impose a fine fine uptouptoRs. 100,000/Rs. 100,000/-- as previously no limit of fine was specified.as previously no limit of fine was specified.

POWER TO COMPOUND OFFENCES. [Section 202]POWER TO COMPOUND OFFENCES. [Section 202]

•• Section 202 has been substituted to empower the Director GeneralSection 202 has been substituted to empower the Director General of Income of Income Tax with the prior approval of Board, instead of Commissioner, tTax with the prior approval of Board, instead of Commissioner, to compound o compound offence subject to payment of tax along with additional tax andoffence subject to payment of tax along with additional tax and penalty to be penalty to be determined under the provisions of the Ordinance.determined under the provisions of the Ordinance.

ADDITIONAL TAX FOR DELAYED PAYMENTS. [Section 205]ADDITIONAL TAX FOR DELAYED PAYMENTS. [Section 205]

•• KIBOR plus 3%. Previously @ 12% per annum of the tax not paid. KIBOR plus 3%. Previously @ 12% per annum of the tax not paid.

•• DEFINITION OF KIBOR [Section 30AA]DEFINITION OF KIBOR [Section 30AA]

CHAPTER XICHAPTER XI

PART IPART I---- GENERALGENERAL

CONDONATION OF TIME LIMIT. [Section 214A]CONDONATION OF TIME LIMIT. [Section 214A]

•• A new section 214A has been inserted which provides that Board cA new section 214A has been inserted which provides that Board can an condone the delay in any case or class of casescondone the delay in any case or class of cases

•• Board can also delegate its powers to Commissioner or the DirectBoard can also delegate its powers to Commissioner or the Director General or General through notification subject to such conditions as specified thethrough notification subject to such conditions as specified thereinrein

POWER OF THE BOARD TO CALL FOR RECORDS. [Section POWER OF THE BOARD TO CALL FOR RECORDS. [Section 214B]214B]

•• A new section 214B has been introduced which empowers the Board A new section 214B has been introduced which empowers the Board to call to call for and examine record of any departmental proceedings under thifor and examine record of any departmental proceedings under this s Ordinance or the rules made there under for the purpose of satisOrdinance or the rules made there under for the purpose of satisfying itself as fying itself as to the legality or propriety of any decision or order passed theto the legality or propriety of any decision or order passed therein and may rein and may pass such order as it may think fit.pass such order as it may think fit.

•• The Board shall, however, not pass any order imposing or enhanciThe Board shall, however, not pass any order imposing or enhancing any tax ng any tax or penalty, unless the concerned person has been given an opportor penalty, unless the concerned person has been given an opportunity of unity of being heard.being heard.

•• A limitation period of 3 years starting from the date of originaA limitation period of 3 years starting from the date of original decision or order has been l decision or order has been provided to pass such order by the Board.provided to pass such order by the Board.

CHAPTER XII CHAPTER XII

TRANSITIONALTRANSITIONAL

ADVANCE TAXADVANCE TAX

PROVISIONSPROVISIONS

COLLECTION OF ADVANCE TAX ON COLLECTION OF ADVANCE TAX ON PRIVATE MOTOR VEHICLES. [Section 231B]PRIVATE MOTOR VEHICLES. [Section 231B]

•• Section 231B has been substituted to provided that Section 231B has been substituted to provided that every motor registering authority shall collect advance every motor registering authority shall collect advance tax at the time of registration of a new locally tax at the time of registration of a new locally manufactured motor vehicle, at the rate specified in manufactured motor vehicle, at the rate specified in DivisionDivision--VII of PartVII of Part--IV of the First Schedule.IV of the First Schedule.

•• Previously the authority for collection of this tax was Previously the authority for collection of this tax was not specified which had created problems for field not specified which had created problems for field formations in enforcement of this provision.formations in enforcement of this provision.

•• The Local Government has also been included in the The Local Government has also been included in the list of person to whom the provision of this section list of person to whom the provision of this section shall not apply.shall not apply.

TREATMENT OF ADVANCE TAX COLLECTED ON MONTHLY TREATMENT OF ADVANCE TAX COLLECTED ON MONTHLY ELECTRICITY BILLS IN THE CASES OF NONCORPORATE ELECTRICITY BILLS IN THE CASES OF NONCORPORATE TAXPAYERS. Section 235.TAXPAYERS. Section 235.

•• Courts have given decision that provisions for collection of 10%Courts have given decision that provisions for collection of 10% tax with its tax with its adjustment not allowed to non corporate tax payers is against thadjustment not allowed to non corporate tax payers is against the natural e natural justicejustice

•• In order to give effect to the courtsIn order to give effect to the courts’’ orders, suborders, sub--section (4) of section 235 has section (4) of section 235 has been amended to provide as under.been amended to provide as under.–– a) in the case of a taxpayer other than a company, tax collecteda) in the case of a taxpayer other than a company, tax collected uptoupto bill amount bill amount

of thirty thousand rupees of thirty thousand rupees per month shall be treated as minimum tax on the per month shall be treated as minimum tax on the income of such persons and no refund shall be allowed;income of such persons and no refund shall be allowed;

–– b) in the case of a taxpayer other than a company, tax collecteb) in the case of a taxpayer other than a company, tax collected on d on monthly bill monthly bill over and above thirty thousand rupees over and above thirty thousand rupees per month shall be adjustable.per month shall be adjustable.

–– c)) In the case of a company, tax collected shall be adjustable c)) In the case of a company, tax collected shall be adjustable against tax liabilityagainst tax liability

•• E.gE.g 30,000*10%*12=36,000 tax un30,000*10%*12=36,000 tax un--adjustable being the minimum taxadjustable being the minimum tax

•• 35000*10%*12=42,000 adjustable say total income 35000*10%*12=42,000 adjustable say total income =400000tax@7.5%=30,000 un=400000tax@7.5%=30,000 un--adjustable threshold =36,000 balance adjustable threshold =36,000 balance refundable=42000refundable=42000--36000=600036000=6000

•• 35000*10%*12=42,000 adjustable. Say total income =500000 35000*10%*12=42,000 adjustable. Say total income =500000 tax@10%=50,000 untax@10%=50,000 un--adjustable threshold =36,000 balance payable =50000adjustable threshold =36,000 balance payable =50000--42000=800042000=8000

ADVANCE TAX AT THE TIME OF SALE THROUGH AUCTION.. [Section 236A]ADVANCE TAX AT THE TIME OF SALE THROUGH AUCTION.. [Section 236A]

•• Previously under Income Tax Ordinance, 1979 auctions were subjecPreviously under Income Tax Ordinance, 1979 auctions were subject to withholding tax @ 3% t to withholding tax @ 3% u/su/s 50(7a) no such parallel provision was available under Income Ta50(7a) no such parallel provision was available under Income Tax Ordinance, 2001.x Ordinance, 2001.

•• Now through insertion of section 236A any person making sale thrNow through insertion of section 236A any person making sale through public auction, of any ough public auction, of any property or goods confiscated or attached either belonging to orproperty or goods confiscated or attached either belonging to or not belonging to the:not belonging to the:–– a) Governmenta) Government

–– b) Local Governmentb) Local Government

–– c) any authorityc) any authority

–– d) a companyd) a company

–– e) a foreign association declared to be company under sube) a foreign association declared to be company under sub----clause (vii) of clause (b) of subclause (vii) of clause (b) of sub----section 2 of section 2 of section 80,section 80,

–– f) a foreign contractorf) a foreign contractor

–– g) a consultantg) a consultant

–– h) a consortiumh) a consortium

–– i) Collector of Customsi) Collector of Customs

–– j) Commissioner of income tax orj) Commissioner of income tax or

–– k) any other authority shall Collect advance tax,, computed on tk) any other authority shall Collect advance tax,, computed on the basis of sale price of such property and he basis of sale price of such property and at the rate specified in Division VIII of Part IV of the First Sat the rate specified in Division VIII of Part IV of the First Schedule chedule (5%) (5%) from the person to whom from the person to whom such property or goods are being sold.such property or goods are being sold.

•• The tax so Collected is adjustable and taxpayer will be entitledThe tax so Collected is adjustable and taxpayer will be entitled to claim credit in the relevant tax to claim credit in the relevant tax year.year.

•• The term The term ““sale of propertysale of property”” has been explained to include the award of any lease to any perhas been explained to include the award of any lease to any person, son, including a lease of the right to Collect toll's, fees or other including a lease of the right to Collect toll's, fees or other levies by whatever name called.levies by whatever name called.

AMENDMENTS IN 2NDAMENDMENTS IN 2ND

SCHEDULESCHEDULE

WITHDRAWALS OF ACCUMULATED BALANCE WITHDRAWALS OF ACCUMULATED BALANCE FROM VOLUNTARY PENSION SCHEMES [Clause FROM VOLUNTARY PENSION SCHEMES [Clause (23A) of Part I of the Second Schedule](23A) of Part I of the Second Schedule]

•• Previously,, out of accumulated balance,, up to 25% received Previously,, out of accumulated balance,, up to 25% received from the Voluntary Pension Scheme (VPS) was exempt from from the Voluntary Pension Scheme (VPS) was exempt from tax.. The limit has been enhanced to 50%..tax.. The limit has been enhanced to 50%..

EXEMPTIONS FROM PROVISIONS OF SECTION EXEMPTIONS FROM PROVISIONS OF SECTION 153(1)(b) [Clause (16A) of Part IV of the Second Schedule]153(1)(b) [Clause (16A) of Part IV of the Second Schedule]

•• Through the insertion of new clause 16A in Part IV of Second Through the insertion of new clause 16A in Part IV of Second Schedule, section 153(1)(b) will not be applicable to news printSchedule, section 153(1)(b) will not be applicable to news printmedia.. However, for media other than print media, provisions media.. However, for media other than print media, provisions of section 153(1)(b) shall continue to apply.of section 153(1)(b) shall continue to apply.

IPPsIPPs RELATED AMENDMENTSRELATED AMENDMENTS

•• KotKot AdduAddu shall continue to enjoy exemption shall continue to enjoy exemption

under clause 138under clause 138

•• Companies qualifying for exemption Companies qualifying for exemption u/cu/c 132 of 132 of

this schedule in respect of receipts from the sale this schedule in respect of receipts from the sale

of electricity (still available)of electricity (still available)

•• The The corporatizedcorporatized entities of entities of WapdaWapda so far as so far as

they relate to their receipts on account of Sales they relate to their receipts on account of Sales

of electricityof electricity

AMENDMENTS IN 7THAMENDMENTS IN 7TH

SCHEDULESCHEDULE

BANKS RELATED CHANGESBANKS RELATED CHANGES

SEVENTH SCHEDULESEVENTH SCHEDULE

•• This schedule has been amended..This schedule has been amended..

•• In the light of amendments in Rule (1), the banking companies In the light of amendments in Rule (1), the banking companies would be entitled to make provisions for advances and off would be entitled to make provisions for advances and off balance sheet items up to a maximum of 1% of total advances.balance sheet items up to a maximum of 1% of total advances.

•• These companies would be under obligation to provide a These companies would be under obligation to provide a certificate from the external auditor to the effect that such certificate from the external auditor to the effect that such provisions are based upon and are in line with the Prudential provisions are based upon and are in line with the Prudential Regulations of the State Bank of Pakistan.. The banking Regulations of the State Bank of Pakistan.. The banking companies would be all lowed to carry forward provisions in companies would be all lowed to carry forward provisions in excess of 1% to the succeeding years..excess of 1% to the succeeding years..

•• If the provisioning is less than 1% of the total advances, then If the provisioning is less than 1% of the total advances, then the the taxpayer would be entitled to the actual provisioning for the yetaxpayer would be entitled to the actual provisioning for the year.ar.

•• The banking companies like other resident companies would be The banking companies like other resident companies would be required to pay minimum tax under section 113 of the required to pay minimum tax under section 113 of the Ordinance as per provision of the aforesaid section..Ordinance as per provision of the aforesaid section..