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FBR issues circular explaining amendments to Income Tax Ord 2001.

ISLAMABAD, July 18 -- Federal Board of Revenue on Friday issued a Circular No. 10 of 2010 for explanation of the amendments made through Finance Act 2010 in the Income Tax Ordinance 2001.

Amendment In Capital Value Tax Law (Section 7 of Finance Act, 1989): Consequent upon amendment in the Federal Legislative List of the Constitution of Islamic Republic of Pakistan, through 18th Amendment that the federal government is no more empowered to levy/collect Capital Value Tax on immoveable properties located in provinces. Therefore, through an amendment in CVT Law, brought about through Finance Act 2010, capital value tax rates applicable on immoveable properties have been omitted. Consequently, capital value tax is no more chargeable under section 7 of the Finance Act, 1989 on immoveable properties with effect from 1st July 2010.

Taxability of interest free/concessional loans [Section 13(7)]: Sub-section (7) of section 13 provides for taxation of benefit arising on free or concessional loan in the hands of an employee. A proviso has now been added under this section whereby such benefit shall not be taxable in the hands of an employee in cases where such benefit is extended by the employer due to the waiver of interest by such employee on his accounts (e.g. provident fund etc) maintained with the employer.

Tax credit for investment in industrial undertaking [Section 65B]: In order to encourage companies for investment in balancing, modernisation and replacement of the already installed plant and machinery in an industrial undertaking set up in Pakistan and owned by such company under the provisions of newly inserted section 65B, 10 percent rebate in income tax payable for the tax year in which such plant and machinery is installed, shall be admissible if such investment is made in the purchase and installation of plant and machinery at any time between the 1st day of July, 2010 and the 30th day of June, 2015. In case where investment in purchase of machinery and completion of installation thereof does not occur in the same tax year, such tax rebate shall be admissible in the tax year of installation of such plant and machinery.

In cases where no tax is payable by the taxpayer in the year of installation of plant and machinery or where the tax payable is less than the amount of tax credit, the amount of such credit or the amount of unadjusted tax credit, as the case may be, shall be carried forward and deducted from the tax payable by the taxpayer in respect of the following tax year, and so on, but no such amount shall be carried forward for more than two tax years and shall not exceed in aggregate the 10 percent limit as specified.

Incentive For Enlistment By A Company [Section 65C]: To encourage companies for enlistment in any registered stock exchange in Pakistan, a new section 65C has been introduced through Finance Act, 2010 in the Income Tax Ordinance, 2001, whereby companies opting for enlistment shall be entitled to the benefit of 5 percent tax credit on tax payable in the tax year of its enlistment.

First charge on estate of the deceased individual [Section 87(2A)]: Through Finance Act, 2010, a new sub-section (2A) in section 87 of the Income Tax Ordinance, 2001, has been inserted whereby any liability under the Income Tax Ordinance, 2001, outstanding against a deceased person shall be the first charge on the estate of such deceased person, in preference to any other outstanding liability of the deceased.

Unexplained Income Or Assets [Section 111]: Under the existing provision of sub-section (2) of section 111 of the Income Tax Ordinance, 2001, any un-explained amount/investment, on discovery, was required to be added to the income of the taxpayer in the financial year preceding immediately to the year of such discovery. This treatment in taxation of unexplained amount suffered a disconnect viz-a-viz the facts of the case pertaining to the year to which the un-explained income/investment pertained. Such treatment, apart from resulting in technical lacunae, also has the potential to affect adversely the quality of assessment/revenue. Therefore, an amendment in sub-section (2) of section 111 has been made through Finance Act, 2010 to add such unexplained amount/investment be taxed in the year to which it pertains.

Applicability of minimum tax on income of certain Persons [Section 113]: The following changes have been made in the minimum tax regime: (i) Rate of minimum tax has been enhanced from 0.5 to 1 percent, and minimum tax shall be applicable where a loss is suffered under the conditions as described under sub-section (1) of section 113, also in the case of -(a) an association of persons having turnover of Rs 50 million or above in the tax year 2007 or in any subsequent tax year shall also be liable to pay minimum tax on turnover at the rate of 1 percent of their turnover; and (b) an individual having turnover of Rs 50 million or above in the tax year 2009 or in any subsequent tax year shall also be liable to 1 percent tax on the turnover. Provisions of section 113 shall be applicable accordingly.

Change in deadline for filing of annual statement by the employer [Section 118(3)]: Sub-section (3) of section 118 has been substituted to provide for change in deadline for furnishing of annual statement of deduction of income tax from salary to be filed by an employer of an individual, return of income trough e-portal in the case of a salaried person or a statement required under sub-section (4) of section 115 of the Income Tax Ordinance, 2001 from 30th day of September after the end of tax year to 31st day of August after the end of tax year.

Last date for filing of income tax return in the case of individual and AOPs (30th September) remains unchanged. Also the deadline for filing of income tax return in the cases of the companies remains unchanged.

Published by HT Syndication with permission from Daily Times. For more information on news feed please contact Sarabjit Jagirdar at htsyndication@hindustantimes.com

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Publication:Daily Times (Lahore, Pakistan)
Date:Jul 18, 2010
Words:1031
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