Others important Amendments:

Rationalization of Minimum Tax Regime applicable to certain Retailers – Section 113 B Clause (c)

At present a retailer being individual or associations of person having turnover exceeding Rs 50,00,000 for any tax year and who is subject to special procedure for payment of Sales Tax under Chapter III of the Sales Tax Special Procedure Rule 2006

And will not be entitled to claim any adjustment of any withholding tax collected or deducted under any head during the tax year

Now, a new proviso is added in section 113(B) as under:-

"Provided that turnover chargeable to tax under this section shall not include the sale of goods on which tax is deducted or deductible under clause (a) of sub-section (1) of section 153"

Tax credit on Profit on Debt for Construction

Of New House or Acquisition of House:

At present a taxpayer is entitled to tax credit on interest/Rent payment on housing loan up to 45 percent of the taxable income or Rs. 500,000/- which ever is less:

t is now decided to enhance the limit to 50 percent of the taxable income for the year or Rs. 750,000/- whichever is less

Reduction in Tax liability of Senior Citizen

A senior citizen of Pakistan, being a tax payer, aged 60 years or more on the first day of the relevant tax year, is allowed a rebate of 50% of the tax payable if his / her taxable income in that year is less then Rs 500,000. The said rebate continues with the increased threshold of Rs 750,000 in place of the exciting Rs 500,000

Collection of Tax from electricity Bills Sec-235

Now substituted as under:

"(4) Under this section:-

(a)in the case of a taxpayer other than a company, tax collected upto bill amount of thirty thousand rupees per month shall be treated as minimum tax on the income of such persons and no refund shall be allowed:

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

(c)in the case of a company, tax collected shall be adjustable against tax liability".

Export indenting commission

Clause (5)

Export indenting commission received by an export indenting agent or export buying house is subject to tax at the rate of 1% i.e. the same rate which the exporter is liable to tax. The said clause is proposed to be deleted with the result that such person would now be subject to tax at the rate of 5%

Withholding tax on Distributors of Ciggrates.

Clause (9A) of Part II (Second Schedule)

Tax under section 148 shall be collected at the rate of 3% on the import value of raw material imported by and industrial undertaking for its own use.

Clause (24A) of Part II (Second Schedule)

A new clause is proposed to be inserted which prescribes a reduced rate of withholding tax of 1% of the gross amount of payment as against 3.5% presently applicable on sale of cigarettes and pharmaceutical products by distributors of such goods.

Admissible business expenses to include loss of animals use for purpose of business

Section 20, sub-section (1A)

A new sub section inserted to introduce a new item as deductible expense for determining income chargeable to tax under the head "income from business". The provision proposed to be inserted provides that in the event of death or permanent incapacitation of an animal used for the purposes of business or profession, difference between the actual cost of such animals and the amount if any realized in respect of carcasses or animal shall be allowed as a deductable expense. However, this provision shall not be applicable if animals comprise the taxpayers stock –in-trade.

Depreciation for Vehicle not playing for Hire

Section.22 (13) (a)

By an amendment, the depreciable asset being a passenger transport vehicle not playing for hire has been restricted to one and half million rupees for the purpose of calculation of depreciation.

For purpose of depreciation, exchange differences on foreign currency loan for assets acquired allowable in the year of "occurrence"

Section 76

An explanation has been added to sub-section (5) of section 76 wherein it is stated that for the purpose of calculation of depreciation acquired from loan denominated in a foreign currency, any difference due to the fluctuation in such foreign currency rate shall be taken in the year of occurrence.

Accelerated depreciation to alternative energy projects

Part –II PARA (2)

With the insertion of section 23 B in the Ordinance, Part II of the Third Schedule to allow a first year allowance at the rate of 90% of the cost of the eligible depreciable asset, being installed for generation of alternate energy.

Evidence of collection or deduction of Tax

Section 164

A person collecting or deducting tax is presently required to furnish a certificate of the tax collected or deducted in prescribed format. Similarly the person claiming the tax deducted is required to furnish certificate together with the Return

It is now mandatory to provide copies the tax payment challan or any other similar document will as evidence for such collection or deduction of tax. Withholding agent is now required to provide the evidence / challans of tax deposit and the same is to be deducted by the tax payer together with the Return.

Advance Tax on Private Motor Vehicles

Section 231 B

A new locally manufactured motor vehicle now attracts payment of tax at the time of registration at the rate specified in Division III Part IV of the First Schedule. Previously, for all new motor cars or jeeps (including imported) tax was required to be paid at the time of registration.

Advance Tax at the time of Sale by auction

Section 236 A

Any person making sale of any property or goods by public auction shall collect advance tax computed on the basis of sale price of such property or goods at the rate of 5%, to whom such property or goods are auctioned.

The credit for such tax collected will be given to the person purchasing such property or goods.

Tax Credit to a Person registered under the Sales Tax Act 1990

Section 65 A

A new scheme of Tax credit is introduced whereby a manufacturer registered under the sales tax act shall be entitled to claim a tax credit of 2.5% of tax payable for a tax year provided his sales equal to 90% of his total sales should be to registered person under this act and he is also required to file complete details of the person to whom the sales were made.

No credit will be allowed to a person whose income is covered under final tax or minimum tax.

Carry forward of any amount where full credit may not be allowed against the tax liability for the tax year, shall not be allowed.

Short Payment of Advance Tax

A tax payer fails to pay tax as per the "own estimate " or the tax so paid is less than 90 percent of the tax chargeable for that tax year the tax payer is liable to pay additional tax on the amount of tax on the chargeable or the tax paid by him falls short of 90% of Tax.

The additional tax at present is calculated from April 1 in that year to the date on which the assessment is made or June 30 of the financial year next following, whichever is earlier.

It is now amended that such additional tax will be calculated from the first day of last Quarter of the relevant tax year. For example, in the case of tax payer having accounting year ending on December 31, the additional tax will be calculated from October 1st.

Delegation

Section 210

The commissioner may delegate the powers to conduct audit of persons selected for audit to a firm of Chartered Accountants appointed by FBR.

Additional Tax

The rate of additional tax is changed to KIBOR plus 3% instead of 12% per annum.

Maintenance of Records

Section 174

At present record are to be maintained by the tax payer for 5 years after the end of the tax year to which they relate. The requirement to maintain record as above and until the final decision in any proceedings including revision, appeals e.t.c.

Additional Payment of Refund

Section 171

The rate of additional payment for delayed refund link to the KIBOR instead of 6% the expression KIBOR has been defined to mean the KIBOR applicable on the first day of each quarter of the financial year.

Refund Order

Section 170

The time limit for issuing refunds by the commissioner has been increased from 45 days to 60 days.

Best Judgment Assessment

Section 121

At present commissioner is empowered to make an assessment of the taxable income based on any available information and material to the best of his judgment of certain person:

A)Fails to furnish return of income u/s 114

B)Fail to furnish wealth statement.

It is now amended to extend the power of C.I.T. to carry out best judgment assessment if a Person fails to furnish statement of final taxation required to be filed under a notice in writing from the commissioner.

Amendment of Assessment

Section 122

Presently the Commissioner of Income Tax is empowered to amend an assessment within five years after the commissioner has issued an assessment order or the return of income has been filed which is treated as an assessment order under section 120 of the Ordinance, 2001 further the commissioner is authorized to amend as many times as necessary, the original assessment within five years of issuance of the original assessment order or one year of the originalassessment order or one year of the issuance of the amended assessment order whichever is later.

It is now amended that the aforesaid time limit shall be counted from the end of the respective financial year in which the order is issued or amended by the commissioner of the income tax and not from the date of the assessment order or amended order as the case may be.

Prosecution for Non compliance

Section 191

Presently a person fails tocomply the notice of filing of return of income is liable to fine or imprisonment for 1 year or both. It is now proposed to panelized the noncompliance of:

ØVoluntary filing of return of income or statement of final taxation.

ØWealth statement

ØNotice for recovery

Are liable to prosecution and a fine up not exceeding to Rs 50,000.

Prosecution of False Statement

Section 192

Presently no ceiling is available for a fine for the purpose of false statement. It is now added that fine is restricted up to Rs 100,000.

Power of FBR TO CALL for Records

See 214 A

The FBR may examine the records of any departmental proceedings, however no order for imposing or enhancing any tax or penalty than that originally levied can be passed unless the affected person has been given an opportunity of being heard .However no order can be passed by the FBR after the expiry three years from the date of its original decision or order

Restriction of Fines under Various Prosecution Proceeding

Section 193, 194 & 197

Fines in section 193 194 are restricted not exceeding up Rs 50,000. In section 197 it is up to Rs 100,000.

Prosecution for Concealment of Income

Section 192 (A)

Concealment of income or furnishing of inaccurate particulars of income or claiming of any deduction for any expenditure not actually incurred or any act referred as unexplained income or assets in term of section III of the ordinance it is now added that impact of above concealment of Rs 500,000 such person is punishable with fine or in presentment up to two years or both