finance bill 2012-13.pdf

7/27/2019 Finance Bill 2012-13.pdf

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TAX MEMORANDUM

FINANCE BILL 2012-13,

Kabani & Company (Chartered Accountants) is pleased to present this tax memorandum, which isprimarily aimed to help in understanding the impact of the Budget changes that are brought by theFinance Bill 2012-13 relating to Income Tax, Sales Tax Laws and Federal Excise Duty.

It is suggested that in order to understand the precise effect of a particular amendment, referenceshould preferably be made to the relevant wordings of the Act when passed. The bill was presented inthe Parliament of Pakistan on June 01, 2012. Amendments and reshufflings are possible before itsapproval from National Assembly. It is suggested that changes should not generally be acted uponwithout first obtaining appropriate professional advice.

This has always been a pleasure to be of service to our clients.

Kabani & Company(Chartered Accountants)


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DISCLAIMER & ACKNOWLEDGMENT

This Finance Bill 2012-2013 has been prepared according to the guide lines of the Finance Bill as announced by

the Finance Minister Dr. Abdul Hafeez Sheikh as on June 01, 2012. Although the highest standard of

Professional Competence and Care has been followed regarding the showing of facts & figures in this Budget

Commentary.

However Kabani & Company (Chartered Accountants) does not assume any responsibility as to the correctness,

alteration or change of these fact & figures in future which may be expected when the bill is presented in

National Assembly of Pakistan for its approval.


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Table of Contents

1.BUDGET AT A GLANCE

2.BUDGET HIGHLIGHTS

3.SALIENT FEATURES FOR THE BUDGET 2012-2013

a. Income Tax

b.Sales Tax & Federal Excise Duty

4.INCOME TAX

5.SALES TAX

6.FEDERAL EXCISE DUTY


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BUDGET AT A GLANCEFOR THE FINANCIAL YEAR 2012-13

Federal Budget 2012-13

(Rupees InBillion)

Revenue Resources

I. Net Revenue Receipts (A) 1,775

II. Net Capital Receipts 487

III. External Receipts 135

IV. Provincial Cash Balance-Surplus 80

V. Bank Borrowing 484

Total Resources 2,960

Current Expenditures

I. Interest Payments 926

II. Defense Affairs & Service 545

III. Grant & transfers 312

IV. Subsidies 209

V. Pension 129

VI. Running of Civil Government 240

VII. Provision for Pay & Pension 35

2,396

Development Expenditures

Federal Government 360

Provincial Government 50

Other Development Expenditure 154

564

Total Expenditure 2,960

(A) Net Revenue Receipts

a) Tax Revenue 2,504

b) Non Tax Revenue 730

Gross Revenue Receipts 3,234

Less: Provincial Receipts (1,459)

1,775


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BUDGET HIGHLIGHTS

Following are salient features of the national budget for Fiscal Year 2012-13:

Total Budget volume is Rs. 2,960 billion

Gross Revenue Receipts (estimated) for Year 2012-13 Rs. 3,234 billion

FBR sets Rs. 2,381 billion tax collection target

Rs. 1,459 billion to be transferred to provinces under NFC Award

Budget deficit is likely to remain at Rs. 1,185 billion

Provincial Surplus estimated at Rs. 80 billion

Rs. 70 billion to be allocated for BISP

Rs. 10 billion to be allocated for Export Development Fund

10% additional discount at Utility Stores on different commodities for BISP card holders

Government to set up 2,000 new Utility Stores, 35,000 families to get relief

100,000 youth to get internships, technical training

Bachelor, Master Degree Holders to get 40,000 internships each in public and private sector

20,000 Graduates to be imparted skilled training to fulfill domestic and foreign demand

Government to pay tuition fee of PhD and Master students belonging to Balochistan, FATA,Gilgit-Baltistan

20% adhoc relief in pay and pension of Federal Government Employees

Income Tax Exemption Limit enhanced upto Rs. 400,000

Tax on Business Turnover reduced from 1% to 0.5%

Withholding tax ceiling for cash withdrawal from banks enhanced from Rs. 25,000 to Rs.50,000

Federal Excise Duty on 10 items abolished

Federal Excise Duty on cement reduced from Rs. 750 to 500 per metric tonn

18 raw materials, 9 components being used for text books, stationary exempted fromCustoms Duty.

Customs duty reduced from 10% to 5% on 88 raw materials of Pharmaceutical Industry

Growth rate remains at 3.7 % as compared to 3.4 % during last two years

Pakistan repay $ 1.2 billion of loans to IMF

Sales Tax rate reduced from 17% to 16%


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Current expenditure registers 10% decrease

Total volume of grants reaches 70% of Divisible Pool

Parliament passes 24 laws to empower women during last four years

Inflation reduced to 11%, next year it will be cut down to single digit

Tax Revenues registers 46% increase, tax collection increases from Rs. 1327 billion to Rs.1950 billion

Subsidy of Rs. 50 billion given on fertilizer

Industrial growth rate projected to 3.4% this year against 3.1% last year

Subsidies of Rs. 1,250 billion given on electricity sector during last five years

Government injected 3500 MW of electricity to National Grid

Pakistan to get 2 billion cubic feet of gas from Pak-Iran Gas pipeline, Turkmenistan-Afghanistan-Pakistan India gas pipeline.

500 million cubic feet of LNG will be made available for consumers

Government gave relief of Rs. 70 billion on petroleum products

National Economic Council approved Annual Development Plan of Rs. 873 billion

Federal Government share in Annual Development Plan is Rs. 300 billion

200 projects completed under Public Sector Development Programme (PSDP) at a cost of Rs.300 billion.

Government allocates Rs. 360 billion under PSDP for 96 ongoing projects

Rs. 69 billion earmarked for Electricity section, WAPDA, Electric Companies will be given Rs.115 billion

Rs. 48 allocated for Water sector, Rs. 44 billion for Social Sector

FATA, Gilgit-Baltistan, AJK to get Rs. 37 billion

Rs. 16 billion allocated for Higher Education

Rs. 84 billion allocated for Transport and Communication (Rs. 51 billion for NHA, Rs. 23 billion

for Railways)

Balochistan share increase upto 9.09% in Divisible Pool

Government accepted Rs. 120 billion as royalty on gas sale from 1954 to 1991 for Balochistan

Federal Government to finance 11500 jobs for Baloch youth

Block Development Allocation enhanced up to Rs. 16 billion for Gilgit-Baltistan

Rs. 10 billion allocated for mega project in Gilgit-Baltistan

Rs. 17 billion allocated in PSDP for FATA


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Rs. 12 billion for development projects, Rs. 16.5 billion allocated for current expenditure forAzad Kashmir besides a loan of Rs. 8.5 billion

Remittances by overseas Pakistan touch $ 13 billion mark during last two years

Exports register 28% increase volume touches $ 25 billion mark


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SALIENT FEATURES

INCOME TAX

1. To provide relief to low income earners, basic exemption limit is now being raised for salariedand business individuals to Rs. 400,000. The existing rate slabs are proposed to be reducedfrom 17 to 5. These concessionary measures will exempt 64,420 taxpayers besides reducingthe effective tax rates and providing relief to the entire salaried and business communities.

2. The normal progressive slab rates are being introduced for the Association of Persons (AOPs).The existing slabs are proposed to be reduced to 5 from 6. Basic exemption upto the incomeof Rs. 400,000 is also to be provided. This will reduce effective tax rates thereby providingrelief to all AOPs in their tax burden.

3. Minimum tax was levied @ 1% on gross turnover through Finance Act 2010. Various sectorsof economy agitated the enhanced rate of minimum tax. Therefore, in the case of businesscommunity the rate of minimum tax is proposed to be reduced to 0.5% from 1% on grossturnover.

4. Advance tax @ 0.2 % is withheld on cash withdrawal from banks where such withdrawalexceeds Rs. 25,000 in a day. To facilitate the taxpayers it is proposed that the said limit ofcash withdrawal is to be enhanced to Rs. 50,000 per day.

5. To recognize and incentivize compliant taxpayers, it is proposed to introduce a TaxpayerHonour Card scheme for all taxpayers who have filed tax returns and paid due taxes for thelast 5 fiscal years. The holders of the card will be entitled to various privileges and benefits.

6. Capital Gain Tax (CGT) is being levied on the sale of property if it is disposed off within twoyears of its acquisition. This will act as a curb for investors who are either speculating orholding real estate for trading purpose.

7. To promote the stagnating capital market in the country, the changes made through theFinance (Amendment) Ordinance, 2012 are being incorporated into the statute through theFinance Bill 2012. This will provide guarantee to the capital market that the Government iscommitted to its sustainability and growth.

8. To promote investment in securities and insurance sectors, the limit of investment eligible fortax credit is being enhanced from 15% to 20% of the taxable income. The existing limit ofinvestment of Rs. 500,000 in securities or insurance premium is also being increased to Rs.1,000,000/- . The retention period of securities is also being reduced from three to one year.

9. To provide relief to the employees availing small amounts of loans from their employer, theloan upto Rs. 500,000/- is proposed to be exempt from income tax whereas the benchmarkinterest rate for loans above this limit shall be fixed at 10% instead of the progressively

increasing rate which has reached 13%.

10. To encourage a competitive market for retirement schemes, it is proposed that accumulatedbalance of provident fund transferred to approved pension fund should be separately markedby the Pension Fund Manager and any withdrawal representing this marked balance shouldbe exempt from tax and be treated as if that is withdrawn from provident fund and hence taxfree.

11. Income of retirement/pension funds is exempt from tax if 90% of the profit is distributed asdividend. Any payment from a provident fund is exempt from tax in the hands of recipient.Existing practice of obtaining yearly exemption certificate is cumbersome and time consumingfor the entities and refunds for any tax suffered against the exempt income is proposed to bechanged and the said funds be granted exemption from deduction of withholding tax.


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12. The business community is demanding since long for exemption of withholding tax on profitspaid on intra group debt. It is proposed that profit on intra-group debt be exempted fromwithholding tax. However, the income from profit on debt will remain taxable.

13. To provide relief to the pensioners, amounts received as monthly installment from an incomepayment plan invested for a period of ten years out of the accumulated balances into apension fund, annuity or individual pension accounts as specified in the Voluntary PensionSystem Rules, 2005 is proposed to be exempt from tax.

14. The income of the Workers Profit Participation Fund (WPPF) is exempt under the CompaniesProfit (Workers Participation) Act 1968. However Income Tax Ordinance does not recognizethis exemption. In order to streamline and to remove the lacuna, it is proposed that theexemption to WPPF be granted in the Income Tax Ordinance 2001.

15. Person making a payment of insurance premium or re-insurance premium to a non-residentperson is required to deduct tax from the gross amount paid. It is proposed to exemptwithholding tax from payment to P.E. of a Non-resident.

16. It has been observed that the banks invest in capital market and in return dividend received

by the banks is taxed @ 10%. In order to eliminate the tax arbitrage it is proposed thatdividend received by banks from money market funds and income funds are to be taxedprogressively over a period of two years. For tax year 2013 @ 25% and for tax year 2014 andonwards @ 35%.

17. The Government is consistently pursuing the policy of phasing out the Presumptive TaxRegime (PTR) in three years. In order to incentivize the taxpayers opting out of PTR a lowerrate of tax is being offered to commercial importers, exporters and suppliers if they opt out ofthe PTR.

18. To ensure documentation of the economy and to bring traders/distributors on tax roll, it isproposed that the manufacturers shall be made withholding agents to collect 1% tax againstthe sales made to traders & distributors. However, the tax so collected shall be adjustable

against their income.

19. The tax rates for passengers as well as goods transport vehicles are proposed to be enhancedas under:-

20 persons or more from Rs. 100 to Rs. 500 per seat per annumIn case of goods transport and vehicle: from Rs. 1 to Rs. 5 per Kg laden weight

20. CVT on immovable properties is not being levied in Islamabad Capital Territory. It is proposedto levy and collect CVT on transactions of immovable properties in Islamabad with identicalstructure adopted by the provinces.

21. It is proposed to bring clarity in the law by revamping the sections and extending the facilityof tax credit to investments for extension of the existing manufacturing facility and tocorporate dairy farms.

22. The value of vehicles is proposed to be enhanced from Rs 1.5 (m) to Rs 2.5 (m) for thepurpose of depreciation allowance.

23. Presently the Directorate General Intelligence and Investigation is performing its functionsthrough an office order. It is proposed to provide legal cover as already done in Sales Tax andFederal Excise Laws through an amendment in the Income Tax Ordinance

24. Previously, stock exchanges were deducting taxes in respect of margin financing (Badla).Currently the same function is being performed by NCCPL. It is proposed to makecorresponding change in the Income Tax Ordinance, 2001 whereby NCCPL shall collect and


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deposit the tax on behalf of the taxpayers.

25. The rate of initial depreciation on new buildings is 50% which results in converting theaccounting income to tax loss. The rate initial depreciation is being reduced to 25%.

26. The exemption granted to profit and gains to the Venture Capital Company and VentureCapital Fund till 2014 is proposed to be extended for 10 years i.e. upto 2024.


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SALES TAX & FEDERAL EXCISE

Objectives

Reduction in the higher rates of Sales Tax from 22% and 19.5% to 16%.

Reduction in Federal Excise Duty on cement from Rs. 500/ PMT to Rs. 400/ PMT

Elimination of excise duty on 10 items with the objective to further phasing out of FederalExcise regime.

Streamlining the sales tax regime by substituting zero-rating on certain items with a view tostop illegal refunds.

Enhancing tax incidence on cigarettes by revising upward price tiers.

RELIEF MEASURES

(a) Removing aberrations in rates of sales tax @ 22% and 19.5% to standard rate of 16%through rescinding of SRO 644(I)/2007 dated 27-06-2007 vide SRO 594(I)/2012, dated01.06.2012, effective from the 02.06.2012.

(b) Reducing federal excise duty on cement from Rs. 500/ PMT to 400/ PMT enforced throughamendment in Table-I of First Schedule to the Federal Excise Act, 2005, effective from the01.07.2012.

(c) Phasing out of federal excise duty regime by reducing the number of goods liable to federalexcise duty enforced through amendment in Table-I of First Schedule to the Federal ExciseAct, 2005, effective from the 02.06.2012.

(d) Exemption of federal excise duty on live stock insurance enforced through amendment inTable-II of Third Schedule to the Federal Excise Act, 2005, effective from the 01.07.2012.

(e) Retrospective exemption of federal excise duty on services rendered by Asset ManagementCompanies enforced through amendment in Table-II of Third Schedule to the Federal ExciseAct, 2005, effective from the 01.07.2012.

(f) Grant of exemption to waste paper to enhance collection as well as restrict inadmissible inputtax adjustment in this sector.

REVENUE MEASURES

(a) Revision in the upward limit of price tiers of cigarettes to enhance the Federal Excise Duty onlocally produced Cigarettes enforced through amendment in Table-I of First Schedule to theFederal Excise Act, 2005, effective from the 02.06.2012.

(b) Increase in the rate of sales tax on steel sector from Rs. 6/ Kwh to Rs. Rs. 8/ Kwh enforcedthrough amendment Sales Tax Special Procedures Rules, 2007.

(c) Substitution of zero-rating with exemption on supplies against international tender enforcedthrough Finance Act, 2012 vide deletion of Supplies against International Tender from FifthSchedule and addition in Sixth Schedule of the Sales Tax Act, 1990, effective from the02.06.2012.

(d) Substitution of zero-rating with exemption on certain items such as remittable scrap andsprinkler.


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SIMPLIFICATION/MEASURES

(a) Shifting of cotton seed oil from exemption to zero-rating regime enforced throughamendment in Schedules to the Sales Tax Act, 1990.

(b) Revise Federal Excise Duty on foreign travel enforced through amendment in Table-I of FirstSchedule to the Federal Excise Act, 2005, effective from the 01.07.2012.

(c) Harmonize section 11 and 36 of the Sales Tax Act, 1990 enforced through amendment inSales Tax Act, 1990, effective from the 01.07.2012.

(d) Alignment of PCT Headings in various schedules to the Sales Tax Act, 1990, with the HS-2012version of Pakistan Customs Tariff.

(e) Updation of the restriction related to prices of cigarettes in the First Schedule to the FederalExcise Act, 2005.

(f) Simplification of collection procedure of FED on air travel from Pakistan by excluding thecharge of FED on air travel to Pakistan.


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INCOME TAX

DefinitionsSection 2(35AA)

A new clause 35AA is proposed to be inserted which seeks to define NCCPL as National ClearingCompany of Pakistan Limited, which is a company incorporated under the Companies Ordinance, 1984(XLVII of 1984) and licensed as Clearing House by the Securities and Exchange Commission ofPakistan.

Taxable IncomeSection 9

A new expression under clause (a) of section 10 has been proposed to form part of section 9 whichseeks to make consequential amendment in the definition of Taxable Income as a result of proposedchange in the definition of Total Income, after the word income, occurring for the second time.

Total IncomeSection 10

A hyphen has been proposed to be substituted in section 10, for the words persons income undereach of the heads of income for the year and thereafter the following clauses are proposed to beadded, namely:-

(a) Persons income under all heads of income for the year; and(b) persons income exempt from tax under any of the provisions of this Ordinance;

The aforesaid proposed amendment in the definition of total income will also consider theexempt income in computing total income of a person additionally with persons income underall heads of income for the year.

Value of perquisitesSection 13(7) & (14)

The amendment in this sub-section seeks to exempt concessional loans given by an employer to hisemployee up to Rs. 500,000. The following additional proviso has been proposed to be added to sub-section (7), namely:-

Provided further that the above sub-section shall not apply to loans not exceeding five hundredthousand rupees.;

The words ten per cent per annum have been proposed to be substituted for the words and commassuch rate, if any, as the Federal Government may, by notification, specify in sub-clause (ii) of clause

(a) of sub-section (14) of section 13. This proposal limits the benchmark rate on a loan to anemployee extended to him by his employer to a maximum of ten percent per annum.

Capital gainsSection 37(1A) & (5)

A new sub-section (1A) has been proposed to be inserted in section 37 after sub-section (1), whichreads as follows:-

(1A) Notwithstanding anything contained in sub-sections (1) and (3), gain arising on the disposal ofimmovable property, held for a period up to two years, by a person in a tax year, shall be chargeableto tax in that year under the head Capital Gains at the rates specified in Division VIII of Part I of theFirst Schedule.; and.


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With the introduction of this sub-section immoveable property held for at least two years is proposedto be charged to tax at its relevant rate.

In sub-section (5) the word or is proposed to be inserted after semicolon in clause (b) and theclause (c) is proposed to be omitted. Hence, the immoveable property comes under the definition of

capital asset.

Capital gain on disposal of securitiesSection 37A(1) & 37A(1A)

The comma and words ,other than a gain that is exempt from tax under this Ordinance areproposed to be inserted after the word year, occurring for the first time, in sub-section (1) ofsection 37A. This proposal refines the taxability of capital gain on disposal of securities and seeks toexclude exempt capital gains from the heads of income.

A new sub-section is proposed to be added after sub-section (1) seeking to provide method ofcomputation for calculating gain on disposal of securities. This sub-section reads as follows:-(1A) The gain arising on the disposal of a security by a person shall be computed in accordance with

the following formula, namely:-

A - BWhere

A is the consideration received by the person on disposal of the security; andB is the cost of acquisition of the security.

Income from other sourcesSection 39

A new clause (cc) has been proposed to be inserted after clause (c) in sub-section (1) of section 39,which reads as follows additional payment on delayed refund under any tax law;. This clause seeks

to include aforementioned payments in income from other sources.

Exemptions and tax concessionsIn the Second Schedule

Section 53(1A)

Sub-section (1A) of section 53 is proposed to be omitted. That sub-section previously required theinclusion of income exempt under second schedule for computation of total income. The effect of thisproposal has been taken for granted in section 10 of the ordinance.

Limitations on set off andCarry forward of losses

Section 59A(1), (2),(3),(4)

Sub-sections (1) and (2) are proposed to be omitted. Both these sections were related to set-off andcarry forward of losses of an AOP.

In sub-section (3) the words any loss are proposed to be substituted for the words, figures, commasand brackets to which sub-section (3) of section 92 does not apply, any loss for such association.

An omission of the words, figures, comma and brackets to which sub-section (3) of section 92 doesnot apply is proposed to be introduced in sub-section (4).

These proposed amendments refine and harmonize the treatment of losses of an AOP and omits theunnecessary sections/sub-sections/ clauses on the subject.


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Tax credit for investmentIn shares and insurance

Section 62(1)(b), (c) &62(3)(b)

The amendment in section 62(1)(b) & (c) seeks to enhance the limit of investment for the tax credit.

After the incorporation of proposed amendment the formula for computing tax credit for investment inshares and insurance reads as follows

(A/B) x C

Where

A is the amount of tax assessed to the person for the tax year before allowance of any tax creditunder this Part;

B is the persons taxable income for the tax year; and

C is the lesser of

(a) the total cost of acquiring the shares, or the total contribution or premium paid ;(b) twenty per cent( previously 15%) of the persons taxable income for the year; or(c) one million rupees (previously Rs. 500,000).

In clause (b) of sub-section (3), the word twenty-four is proposed to be substituted for the wordthirty six. The person has made a disposal of the share within thirty six months of the date ofacquisition; the amount of tax payable by the person for the tax year in which the shares weredisposed of shall be increased by the amount of the credit allowed. Hence, this proposed amendmentseeks to curtail the limit of holding period of shares.

Tax credit for investment

Section 65B(1)(4)(5)&(6)

The proposed amendment inserts commas and the words including on account of minimum tax andfinal taxes payable under any of the provisions of this Ordinance to succeed the word payable insub-section (1). This proposal allows a company investing in balancing, modernization andreplacement of the plant and machinery, already installed therein, in an industrial undertaking set upin Pakistan and owned by it, a tax credit equal to ten per cent of the amount so invested shall beallowed against the tax including on account of minimum tax and final taxes payable under any of theprovisions of the Ordinance.

Sub-section (4) and (5) are proposed to be substituted and sub-section (6) is proposed to be insertedadditionally as follows:

(4) The provisions of this section shall apply mutatis mutandis to a company setup in Pakistan beforethe first day of July, 2011, which makes investment during first day of July, 2011 and 30th day ofJune, 2016, for the purposes of balancing, modernization and replacement of the plant and machineryalready installed in an industrial undertaking owned by the company. However, credit equal to twentyper cent of the amount so invested shall be allowed against the tax payable, including on account ofminimum tax and final taxes payable under any of the provisions of this Ordinance. The credit shall beallowed in the year in which the plant and machinery in the purchase of which the investment asaforesaid is made, is installed therein.

(5) Where no tax is payable by the taxpayer in respect of the tax year in which such plant ormachinery is installed, or where the tax payable is less than the amount of credit as aforesaid, theamount of the credit or so much of it as is in excess thereof, as the case may be, shall be carriedforward and deducted from the tax payable by the taxpayer in respect of the following tax year and so


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on, but no such amount shall be carried forward for more than two tax years in the case of investmentreferred to in sub-section (1) and for more than five tax years in respect of investment referred to insub-section (4), however, the deduction made under this section shall not exceed in aggregate thelimit specified in sub-section (1) or sub-section (4), as the case may be;

(6) Where any credit is allowed under this section and subsequently it is discovered by theCommissioner Inland Revenue that any one or more of the conditions specified in this section was, orwere, not fulfilled, as the case may be, the credit originally allowed shall be deemed to have beenwrongly allowed and the Commissioner, notwithstanding anything contained in this Ordinance, shallre-compute the tax payable by the taxpayer for the relevant year and the provisions of this Ordinanceshall, so far as may be, apply accordingly;

Tax credit for newly establishedIndustrial undertakings

Section 65D(1)(2)(3)(4)&(5)

Following amendments are proposed to be inserted in Sub-section (1) including corporate dairy farming to replace for manufacturing in Pakistan,

including a corporate dairy farm after the words a new industrial undertaking, occurring forthe second time; and

,including on account of minimum tax and final taxes payable under any of the provisions of thisOrdinance, after the word payable

Where a taxpayer being a company formed for establishing and operating a new industrialundertaking for including corporate dairy farming sets up a new industrial undertaking including acorporate dairy farm, it shall be given a tax credit equal to hundred per cent of the tax payable,including on account of minimum tax and final taxes payable under any of the provisions of thisOrdinance, on the taxable income arising from such industrial undertaking for a period of fiveyears beginning from the date of setting up or commencement of commercial production,whichever is later.

Following amendments are proposed to be inserted in Sub-section (2)

The wording raised through issuance of new shares for cash consideration to substitute ownedby the company in clause (d);

Inclusion of the wording Provided that short term loans and finances obtained from bankingcompanies or non-banking financial institutions for the purposes of meeting working capitalrequirements shall not disqualify the taxpayer from claiming tax credit under this section; afterthe aforesaid amendment in clause (d).

Sub-section (3) regarding the amount of credit admissible under and deductable against tax payableby the taxpayer in respect of the tax year in which the plant or machinery referred in sub-section (1)is purchased and installed, is proposed to be omitted.

Following amendments are proposed to be inserted in Sub-section (4):

The word conditions to replace condition, and was for were;

A new sub-section proposed to be inserted after sub-section (4), to be read as follows:-

(5) For the purposes of this section and sections 65B and 65E an industrial undertaking shall betreated to have been setup on the date on which the industrial undertaking is ready to go intoproduction, whether trial production or commercial production.


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SECTION 65 E(Tax credit for industrial

Undertakings established beforeThe first day of July, 2011)

In this section for sub-section (1), the following shall be substituted, namely:-

(1) Where a taxpayer being a company, setup in Pakistan before the first day of July, 2011, investsany amount, with hundred per cent new equity raised through issuance of new shares, in thepurchase and installation of plant and machinery for an industrial undertaking, including corporatedairy farming, for the purposes of-

(i) expansion of the plant and machinery already installed therein; or(ii) undertaking a new project,

a tax credit shall be allowed against the tax payable in the manner provided in sub-section (2) andsub-section (3), as the case may be, for a period of five years beginning from the date of setting up orcommencement of commercial production from the new plant or expansion project, whichever is later.

In this section for sub-sections (2), (3) and (4) the following shall be substituted, namely:-

(2) Where a taxpayer maintains separate accounts of an expansion project or a new project, as thecase may be, the taxpayer shall be allowed a tax credit equal to one hundred percent of the taxpayable, including minimum tax and final taxes payable under any of the provisions of this Ordinance,attributable to such expansion project or new project.

(3) In all other cases, the credit under this section shall be such proportion of the tax payable,including minimum tax and final taxes payable under any of the provisions of this Ordinance, as is theproportion between the new equity and the total equity including new equity.

(4) The provisions of sub-section (1) shall apply if the plant and machinery is installed at any timebetween the first day of July, 2011 and the 30th day of June, 2016.

(5) The amount of credit admissible under this section shall be deducted from the tax payable,including minimum tax and final taxes payable under any of the provisions of this Ordinance, by thetaxpayer in respect of the tax year in which the plant or machinery referred to in sub-section (1) isinstalled and for the subsequent four years; and

(c) the existing sub-section (5), shall be re-numbered as sub-section (6) of that section and after sub-section (6), re-numbered as aforesaid, the following new sub-section shall be added, namely:-

(7) For the purposes of this section, new equity means equity raised through fresh issue of sharesagainst cash by the company and shall not include loans obtained from shareholders or directors:Provided that short term loans and finances obtained from banking companies or non-bankingfinancial institutions for the purposes of meeting working capital requirements shall not disqualify thetaxpayer from claiming tax credit under this section.

This section seeks to clarify and remove ambiguities.

Section 76COST

In this section after sub section 10 the following sub section shall be inserted to authorize FBR tomake rules for determination of cost for any asset.

(11) Notwithstanding anything contained in this section, the Board may prescribe rules fordetermination of cost for any asset.


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Section 77CONSIDERATION RECEIVED

In this section after sub section 5 the following sub section shall be inserted to authorize FBR to makerules for determination of cost for the determination of consideration received.

(6) Notwithstanding anything contained in this section, the Board may prescribe rules fordetermination of consideration received for any asset.

Section 100 BSPECIAL PROVISION RELATING

TO CAPITAL GAIN TAX

After section 100 A the following new section shall be inserted to introduce special provisions relatingto capital gain tax on disposal of securities.

100B Special provision relating to capital gain tax.-

(1) Capital gains on disposal of listed securities and tax thereon, subject to section 37A, shall be

computed, determined, collected and deposited in accordance with the rules laid down in theEighth Schedule.

(2) The provisions of subsection (1) shall not apply to the following persons or class of persons,namely:-

(a) a mutual fund;(b) a banking company, a non-banking finance company, and an insurance company

subject to tax under the Fourth Schedule;(c) a modaraba;(d) a foreign institutional investor being a person registered with NCCPL as a foreign

institutional investor; and(e) any other

Minimum Tax on the IncomeOf Certain Persons

Section 113

Explanation added to the section in order to explain the term Tax payable or Paid which states thatthe expression tax payable or paid does not include tax already paid or payable in respect of deemedincome which is assessed as final discharge of the tax liability under section 169 or under any otherprovision of this Ordinance. The added explanation merely explains the terms and does not cause anychange in the tax liability.

Return of IncomeSection 114

A new clause is added to the section which states the provisions regarding the filing of revised return.As per this new clause the taxable income declared shall not be less than the loss and the lossdeclared shall not be more than the income, as the case may be, determined by an order issued undersections 121, 122, 122A, 122C, 129, 132, 133 or 221

Moreover a proviso is also added to the sub section (6) which states that if the revised return is filedwhich is not accompanied by the revised accounts or revised audited accounts, as the case may be,the reasons for revision of return, in writing, duly signed, by the taxpayers are filed with the return orthe new clause inserted to this sub section shall be treated as invalid return as if it had not beenfurnished,


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AssessmentsSection 120

With the proposed amendment in the sub section (6) of this section the time period for the issuing thenotice by the Commissioner to the taxpayer informing him of the deficiencies and directing him toprovide such information, particulars, statement or documents by such date specified in the notice,

has been increased by 180 days. Now the notice can be issued before the expiry of one hundred andeighty days from the end of the financial year in which return was furnished

Best Judgement Assessment.Section 121

The proposed amendment to sub section (1) of this section explains that the assessment, if any,treated to have been made on the basis of return or revised return filed by the taxpayer shall be of nolegal effect. This amendment seeks to remove the ambiguity for ex-parte assessment.

Amendment of assessments.Section 122

The proposed amendment to sub section (1) of this section states that the commissioner may amendthe provisional assessment made under section 122C. Furthermore the section 59, 59A, 62, 63 or 65of the repealed Ordinance have been omitted from the scope of this section.

This amendment to sub section (5A) of this section empowers Additional Commissioner to conductenquires before amending an assessment order.

Provisional assessment.Section 122C

The proposed amendment adds explanation to the word Person and remove the ambiguities insection 122C

Furthermore another proviso in sub section (2) of this section is added which states that the existingprovisions of sub-section (2) of section 122 shall not apply to a company if return of income tax alongwith audited accounts or final accounts, as the case may be, for the relevant tax year are filed by thecompany electronically during the said period of sixty days. As a result of this amendment thecompany is allowed to file its return electronically within the specified period.

Appeal to the Commissioner (Appeals).Section 127

As the result of this proposed amendment the appeal against the assessment order issued undersection 122C cannot be made before commissioner (Appeals).

Procedure in Appeal.Section 128

The proposed amendment empowers the commissioner if in a particular case, the Commissioner(Appeals) is of the opinion that the recovery of tax levied under this Ordinance, shall cause unduehardship to the taxpayer he after affording opportunity of being heard to the Commissioner againstwhose order appeal has been made, may stay the recovery of such tax for a period not exceedingthirty days in aggregate.


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Decision in appeal.Section 129

As the result of the proposed amendment to this section now if the commissioner (Appeals) does notissue an order on the appeal before the expiration of 4 months the relief sought by the appellant inthe appeal shall not be treated as having been given.

Appointment of the Appellate Tribunal.Section 130

The proposed amendment to sub section (4) of this section adds word service to the word InlandRevenue in clause (a) of the sub section and it lessen the requirement of five years experience tothree years for the Commissioner Inland Revenue or Commissioner Inland Revenue (Appeals) asCommissioner or Collector to become an accountant member of an appellate tribunal.

As the result of the amendment proposed to sub section (5) of this section The Federal Governmentshall, in all circumstances, appoint a member of the Appellate Tribunal as Chairperson of the Tribunal,more over the condition of being a judicial member, for the person so appointed, is also eliminated.

Appeal to the Appellate Tribunal.Section 131

The proposed amendment empowers the Appellate Tribunal if on filing of application in a particularcase, the Tribunal is of the opinion that the recovery of tax levied under this Ordinance and upheld bythe Commissioner (Appeals), shall cause undue hardship to the taxpayer, the Tribunal, after affordingopportunity of being heard to the Commissioner, may stay the recovery of such tax for a period notexceeding one hundred and eighty days in aggregate.

Further the proposed amendment states that in computing the aforesaid period of one hundred andeighty days, the period, if any, for which the recovery of tax was stayed by a High Court, shall beexcluded.

Due date for payment of tax.Section 137

The proposed amendment states that the tax payer that the taxpayer may pay the tax payable prior toexpiry of the period of sixty days from the date of service of the notice to pay any tax which is payableunder an assessment order or an amended assessment order or any other order issued by theCommissioner under this Ordinance.

ImportsSection 148

The proposed amendment to the sub section (7) & (8) of this section tends to remove ambiguitiesonly.

Payments to non-residents.Section 152

The proposed amendment to sub section (1) of this section requires every person making a paymentfor advertisement services to a non-resident media person relaying from outside Pakistan shall deducttax from the gross amount paid at the rate of 10% of the gross amount paid.

The proposed amendment to this section adds another sub section 2A which states that if any personmade payment of insurance premium or re-insurance premium to a non-resident person which istaxable to the permanent establishment of a non resident in Pakistan than the person making thepayment shall not deduct tax before making such payment.


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The amendment proposed to sub section (3) of this section states that every person paying anamount to a non-resident person for goods, services and contracts made is required to deduct taxfrom the gross amount paid at the rate specified in Division II of Part III of the First Schedule.

Payments for goods, services and contracts.Section 153

The proposed amendment requires that any person making payment to the permanent establishmentof a non resident person in Pakistan for the sale of goods, for the rendering of or providing of servicesor on the execution of a contract, other than a contract for the sale of goods or the rendering of orproviding services, shall not deduct tax at the time of making the payment.

Payments to non-resident media persons.Section 153A

The amendment proposed replaces the provisions of section 153A and requires every manufacturer, tocollect tax at the time of sale to distributors, dealers and wholesalers, at the specified rate, from thepersons to whom such sales have been made.

Tax credit for the tax collected under this amendment shall be allowed in computing the tax due bythe person on the taxable income for the tax year in which the tax was collected.

Prizes and winnings.Section 156A

In sub section (2) of this section the word deducted is proposed to be substituted with the worddeductable.

Tax collected or deducted as a final tax.Section 169

Clause (a) of sub section (1) seeks to replace the words collection of advance tax with the words

advance tax required to be collected and shall be read as follows;The advance tax required to be collected is a final tax under sub-section (7) of section 148 or sub-section (5) of section 234 or section 234A, on the income to which it relates; or

Clause (b) of sub section (1) seeks to replace the word and figure section 153A with the words subsection (1AAA) and shall be read as follows;The deduction of tax is a final tax under sub-section (3) of section 151, sub-section (1B) or sub-section (1BB) of section 152, clauses (a), (c) and (d) of sub-section (3) of section 153, subsection(1AAA), sub-section (4) of section 154, sub-section (3) of section 156, sub-section (2) ofsection 156A or sub-section (1) and (3) of section 233 on the income from which it has beendeducted

Clause (b) of sub section (1) seeks to replace the expressing deduction of tax with tax required tobe deducted and shall be read as follows;The tax required to be deducted is a final tax under sub-section (3) of section 151, sub-section (1B)or sub-section (1BB) of section 152, clauses (a), (c) and (d) of sub-section (3) of section 153, section153A, sub-section (4) of section 154, sub-section (3) of section 156, sub-section (2) of section 156A orsub-section (1) and (3) of section 233 on the income from which it has been deducted

Clause (b) of sub section (1) seeks to replace the words has been deducted with the words wasdeductible and shall be read as follows;The deduction of tax is a final tax under sub-section (3) of section 151, sub-section (1B) or sub-section (1BB) of section 152, clauses (a), (c) and (d) of sub-section (3) of section 153, section 153A,sub-section (4) of section 154, sub-section (3) of section 156, sub-section (2) of section 156A or sub-section (1) and (3) of section 233 on the income from which was deductable.


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Clause (d) of sub section (2) seeks to omit the word andClause (e) of sub section (2) which states that there shall be no refund of the tax collected ordeducted unless the tax so collected or deducted is in excess of the amount for which the taxpayer ischargeable under this Ordinance. The proposed amendment states that the following seeks to beadded (f) Tax deductible has not been deducted, or short deducted, the said non- deduction or shortdeduction may be recovered under section 162, and all the provisions of this Ordinance shall applyaccordingly

Additional payment for delayed refundsSection 171

In sub section (1) the letter KIBOR is replaced by 15 percent which means that the rate of surchargeon delayed refund made by the Commissioner to the taxpayer will now be calculated at the specifiedrate mentioned.

Notice to obtain information or evidenceSECTION 176

Clause (c ) of Section 176 which give power to the Commissioner to ask Chartered Accountant firm

conduct audit of a business and to enter the premises of the business to obtain any informationrequired by the Commissioner the words selected is omitted to clarify the provision of section 176.

Tax Payer CardSection 181B

New section is proposed which states that the Board may make a scheme for introduction of a taxpayer honor card for individual taxpayers, who fulfill minimum criteria to be eligible for the benefits ascontained in the scheme. This section seeks to introduce Taxpayers Honor Card to provide benefits tohonest and compliant taxpayers.

Offences and penaltiesSection 182

In sub section (2) of section 182 a new provision is included which states that where the taxpayeradmits his default he may voluntarily pay the amount of penalty due under this section. This proposedprovision is provide an option to the taxpayer to pay the amount of penalty voluntarily

Power to compound offencesSection 202

In section 202 the word Director General is substituted with Chief Commissioner.

Default surchargeSection 205

Subsection (1) of Section 205 which states that A person who fails to pay

(a) any tax, excluding the advance tax under section 147 and default surcharge under this section;

(b) Any penalty; or(c) Any amount referred to in section 140 or 141, on or before the due date for payment shall beliable for default surcharge at a rate equal to KIBOR plus three per cent per quarter on the tax,penalty or other amount unpaid computed for the period commencing on the date on which the tax,penalty or other amount was due and ending on the date on which it was paid

The word KIBOR is now replaced by the rate of 18 percent


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Furthermore a provision is added to the sub section (1) which states that if the person opts to pay thetax due on the basis of an order under section 129 on or before the due date given in the notice undersub-section (2) of section 137 issued in consequence of the said order, and does not file an appealunder section 131, he shall not be liable to pay default surcharge for the period beginning from thedue date of payment in consequence of an order appealed against to the date of payment inconsequence of notice under sub-section (2) of section 137 .The proposed provision seeks to providerelief in the amount of default surcharge on payment of tax due after first appeal

Sub section (1A) which states that A person who fails to pay advance tax under section 147 shall beliable for default surcharge at a rate equal to KIBOR plus three per cent per quarter on the amount oftax unpaid computed for the period commencing on the date on which it was due and ending on thedate on which it was paid or date on which the return of income for the relevant tax year was due,whichever is earlier. The proposed amendment replace the word KIBOR plus three per cent with rateof eighteen percent.

Sub section (1B) which states that Where, in respect of any tax year, any taxpayer fails to pay taxunder sub-section (4A), or (6) of section 147 or the tax so paid is less than ninety per cent of the taxchargeable for the relevant tax year, he shall be liable to pay default surcharge at the rate of KIBORplus three per cent per quarter on the amount of tax so chargeable or the amount by which the taxpaid by him falls short of the ninety per cent, as the case may be; and such default surcharge

surcharge shall be calculated from the first day of April in that year to the date on which assessment ismade or the thirtieth day of June of the financial year next following, whichever is the earlier. Theword KIBOR plus three per cent shall be replaced by the rate of eighteen percent.

Sub section (3) which states that A person who fails to 9[collect tax, as required under Division II ofPart V of this Chapter or Chapter XII or deduct tax as required under Division III of Part V of thisChapter or Chapter XII or fails to] pay an amount of tax collected or deducted as required undersection 160 on or before the due date for payment shall be liable for default surcharge at a rate equalto KIBOR plus three per cent per quarter on the amount unpaid computed for the period commencingon the date the amount was required to be collected or deducted and ending on the date on which itwas paid to the Commissioner. The word KIBOR plus three per cent shall be replaced by the rate ofeighteen percent

Furthermore a provision shall be added which states that if the person opts to pay the tax due on thebasis of an order under section 129 on or before the due date given in the notice under sub-section(2) of section 137 issued in consequence of the said order and does not file an appeal under section131, he shall not be liable to pay default surcharge for the period beginning from the date of orderunder section 161 to the date of payment. The proposed provision seeks to provide relief in theamount of penalty on payment of tax due after first appeal

Income tax authoritiesSection 207

Sub section (3) states which states that The Chief Commissioners Inland Revenue and CommissionersInland Revenue (Appeals) shall be subordinate to the Board and Commissioners Inland Revenue, shallbe subordinate to the Chief Commissioner Inland Revenue shall be substituted with income tax

authorities specified in sub-section (1) except in clause (a) shall be subordinate to the Board. Theproposed change in the sub section (3) seeks to make all Income Tax authorities subordinate to FBRFurthermore after sub section (3) sub section (3A) shall be added which states that (3A)Commissioners Inland Revenue, Additional Commissioners Inland Revenue, Deputy CommissionersInland Revenue, Assistant Commissioners Inland Revenue, Inland Revenue Officers, Inland RevenueAudit Officer, Superintendents Inland Revenue, Auditors Inland Revenue and Inspectors InlandRevenue, shall be subordinate to the Chief Commissioners Inland Revenue. The proposed change seekto make all Income Tax authorities subordinate to FBR

DelegationSection 210

In sub section (1) of section 210, the word selected shall be omitted.


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Power or function exercised.Section 211

After sub section (2), the following new sub section is proposed to be added which states (3) theBoard or with the approval of the Board an authority appointed under this Ordinance, shall be

competent to exercise all powers conferred upon any authority subordinate to it . The proposed subsection seeks to authorize the Board and the others authorities to exercise the powers of subordinateauthorities

Condonation of time limitSection 214A

a) In this section the following explanation has been included

Any act or thing is to be done includes any act or thing to be done by the taxpayer or by theauthorities specified in section 207.

b) In this proviso, for the word Director General the words Chief Commissioner .shall besubstituted

Directorate General (Intelligence & Investigation),Inland Revenue

Section 230Following new section has been added

(1)The Directorate General (Intelligence and Investigation) Inland Revenue shall consist of aDirector General and as many Directors, Additional Directors, Deputy Directors and AssistantDirectors and such other officers as the Board, may by notification in the official Gazette,appoint.

(2) The Board may, by notification in the official Gazette,-

(a) Specify the functions and jurisdiction of the Directorate General and its officers; and(b) Confer the powers of authorities specified in section 207 upon the Directorate Generaland its officers.

Explanation: Presently the Directorate General Intelligence and Investigation is performing itsfunctions through an office order. It is proposed to provide legal cover as already done in Sales Taxand Federal Excise Laws through an amendment in the Income Tax Ordinance

Increase in cash withdrawal limitSection 231-A

Advance tax @ 0.2 % is withheld on cash withdrawal from banks where such withdrawal exceeds Rs.25,000 in a day. To facilitate the taxpayers it is proposed that the said limit of cash withdrawal is to be

enhanced to Rs. 50,000 per day.

Brokerage and commission.Section 233 Sub-Section 3

In this sub-section, after the word is the words required to be shall be inserted and for the wordsthe tax so collected the words such tax shall be substituted. After such change sub section is readas follows:

Where any tax required to be collected from a person under sub-section (1), such tax shall be thefinal tax on the income of such persons.


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Collection of tax by stock exchangeregistered in Pakistan.

Section 233A

In subsection (1)

(a) In this clause after the semicolon the word and shall be added;(b) In this clause for the semicolon and the words ;and a full stop shall be substituted; and(c) Clauses (c) and (d) shall be omitted, this change seeks to remove stock exchange as withholdingagent to collect tax on carry over trades.

In sub-section (2),For the brackets and letter (c) the brackets and letters (b) shall be substituted;

Collection of tax by NCCPLSection 233AA

The following new section has been included

NCCPL shall collect advance tax on from the members of Stock Exchange registered inPakistan, in respect of margin financing in share business at the rate specified in Division IIA of Part IVof First Schedule.;

First SchedulePart I, Division I

The following changes have been proposed:

In the heading, after the word individuals the words and Association of Persons shall beadded;

In clause (1), after the word individual the words and Association of Persons shall beinserted;

Tax Rate on Non-Salaried individuals;The minimum taxable income limit has been increased from Rs. 350,000 to Rs. 400,000. Therates of tax applicable to persons other than salaried individuals are as follows:

1 Where taxable income does not exceed Rs. 400,000 0%

2 Where the taxable income exceeds Rs. 400,000 but does notexceed Rs. 750,000

10% of the amount exceedingRs 400,000

3 Where the taxable income exceeds Rs. 750,000 but does notexceed Rs. 1,500,000

Rs. 35,000 + 15% of theamount exceeding Rs.750,000

4 Where the taxable income exceeds Rs. 1,500,000 but does notexceed Rs. 2,500,000

Rs. 147,500 + 20% of theamount Exceeding Rs.1,500,000

5 Where the taxable income exceeds Rs. 2,500,000 Rs. 347,500 + 25% of theamount exceeding Rs.2,500,000

Rates of Salaried individuals:The minimum taxable income limit has been increased from Rs. 350,000 to Rs. 400,000. Therate of tax applicable to salaried individuals is as follows

1 Where taxable income does not exceed Rs. 400,000 0%

2 Where the taxable income exceeds Rs. 400,000 but doesnot exceed Rs. 750,000

5% of the amount exceeding Rs400,000


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3 Where the taxable income exceeds Rs. 750,000 but doesnot exceed Rs. 1,500,000

Rs. 17,500 + 10% of the amountexceeding Rs. 750,000

4 Where the taxable income exceeds Rs. 1,500,000 but doesnot exceed Rs. 2,500,000

Rs. 92,500 + 15% of the amountExceeding Rs. 1,500,000

5 Where the taxable income exceeds Rs. 2,500,000 Rs. 242,500 + 20% of theamount exceeding Rs. 2,500,000

To provide relief to low income earners, basic exemption limit is now being raised for salaried andbusiness individuals to Rs. 400, 000. The existing rate slabs are proposed to be reduced from 17 to 5.These concessionary measures will exempt 64,420 taxpayers besides reducing the effective tax ratesand providing relief to the entire salaried and business communities.

Rate of Tax on Certain PersonFirst Schedule

Part I, Division IA

In Division IA under sub-section (1) of section 113A which is Tax on Income of certain persons, forthe words one per cent the figure and sign 0.50% shall be substituted

Explanation: To provide relief to the retailer tax payers final tax on their turnover has been reducedfrom 1% to 0.5%

Rate of Tax for Association of PersonsFirst Schedule

Part I, Division IB

Division IB which is Rates of Tax for Association of Persons shall be omitted,

Explanation: The normal progressive slab rates are being introduced for the Association of Persons(AOPs). The existing slabs are proposed to be reduced to 5 from 6. Basic exemption up to the incomeof Rs. 400,000 is also to be provided. This will reduce effective tax rates thereby providing relief to allAOPs in their tax burden.

Capital Gains on disposal of SecuritiesFirst Schedule

Part I, Division VII

S.No. Period Tax Year Rate of Tax

Older New

1 Where holding period of a securityis less than six months.

2011201220132014

2015

10%10%12.5%15%

17.5%

10%10%10%10%

17.5%2 Where holding period of a security

is more than six months but lessthan twelve months.

201120122013201420152016

7.5%8%8.5%9%9.5%10%

7.5%8%8%8%9.5%10%

3 Where holding period of a securityis twelve months or more.

- 0% 0%


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Capital Gains on disposal of Immovable PropertyFirst Schedule

Part I, Division VIII

The rate of tax to be paid under sub-section (1A) of section 37 shall be as follows:

S.No. Period Rate of tax1 Where holding period of Immovable property is up to one

year10%

2 Where holding period of Immovable property is more thanone year but not more than two years.

5%

Explanation: Capital Gain Tax (CGT) is being levied on the sale of property if it is disposed off withintwo years of its acquisition. This will act as a curb for investors who are either speculating or holdingreal estate for trading purpose.

Payment to non residentsFirst Schedule- Part III-Division II

After clause (2) the following clauses shall be added, namely:

(3) The rate of tax to be deducted under sub-section (1AAA) of section 152 which is Payment tonon resident, shall be 10% of the gross amount paid.

(4) The rate of tax to be deducted from a payment referred to in clause (a) of sub-section (2A) ofsection 152 shall be 3.5% of the gross amount payable

(5) The rate of tax to be deducted from a payment referred to in clause (b) of sub-section (2A) ofsection 152 shall be(i) in the case of transport services, two per cent of the gross amount payable; or(ii) In any other case, six percent of the gross amount payable.

(6) The rate of tax to be deducted from a payment referred to in clause (c) of sub-section (2A) ofsection 152 shall be six percent of the gross amount payable.

Payment to non resident media personsFirst Schedule- Part III-Division IIIA

Division IIIA shall be omitted; which formerly prescribed rate of tax for payment to non media person.

Tax on Motor VehiclesFirst Schedule- Part IV-Division III

Clause (i)

In case of goods transport vehicles, tax has been increased from one rupee to five rupee per kilogramof the laden weight.

Clause (2)

Tax on passenger transport vehicle plying for hire with registered seating capacity of twenty personsor more has been increased from Rs. 100 to Rs. 500.

Old Rate New Rate

a) Four or more persons but less than tenpersons.

Rs. 25 per seat perannum.


b) en or more persons but less thantwenty persons.




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c) wenty persons or more. Rs. 100 per seat perannum.


Purchase of Motor Cars and JeepsFirst Schedule- Part IV-Division III

Tax on purchase of Motor cars and Jeeps having engine capacity of 1301cc to 1600cc has beenincreased from Rs. 16,875 to Rs. 25,000

Second Schedule- Part I-Clause 23B, 23C

After clause (23A), the following new clauses shall be inserted, namely:-

(23B) The amounts received as monthly installment from an income payment planinvested out of the accumulated balance of an individual pension accounts with a pension fundmanager or an approved annuity plan or another individual pension account of eligible person orthe survivors pension account maintained with any other pension fund manager as specified in theVoluntary Pension System Rules 2005 shall be exempt from tax provided accumulated balance is

invested for a period of ten years:

Provided that where any amount is exempted under this clause and subsequently it isdiscovered, on the basis of documents or otherwise, by the Commissioner that any of theconditions specified in this clause were not fulfilled, the exemption originally allowed shall bedeemed to have been wrongly allowed and the Commissioner may, notwithstanding anythingcontained in this Ordinance, re-compute the tax payable by the taxpayer for the relevant yearsand the provisions of this Ordinance shall, so far as may be, apply accordingly

(23C) Any withdrawal of accumulated balance from approved pension fund that representthe transfer of balance of approved provident fund to the said approved pension fund under theVoluntary Pension System Rules , 2005;

Second Schedule- Part I-Clause 61

The Citizens Foundation has been added to the list of institutions to which donation is exemptsubject to the conditions and to the extent already specified.


The Citizens Foundation has been added to the list of institutions of whom income is exempt subjectto the conditions and to the extent already specified


Previously profits and gains of venture capital company and venture capital fund were exempt upto2014, but now this period is extended to 2024 subject to the conditions and to the extent alreadyspecified .

Second Schedule- Part II-Clause 9A

In this clause, for the full stop a colon shall be substituted and thereafter a proviso has been addedwhich states that in order to avail reduction in tax rate, the taxpayer will have to produce anexemption certificate issued by the Commissioner.

Second Schedule- Part IV-Clause 11B

A new clause has been inserted


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The provisions of section 150 which is deduction of tax on payment of dividend shall notapply in respect of inter-corporate dividend within the group companies entitled to grouptaxation under section 59AA or section 59B.;

Second Schedule- Part IV-Clause 11c

A new clause has been inserted

The provisions of section 151 which is deduction of tax on payment of profit on debt shallnot apply in respect of inter-corporate profit on debt within the group companies entitled togroup taxation under section 59AA or section 59B.

Explanation: The business community is demanding since long for exemption of withholding tax onprofits paid on intra group debt. It is proposed that profit on intra-group debt be exempted fromwithholding tax. Therefore the requirement of deduction of tax under section 151 which is Profit onDebts shall not be applicable on payment of inter corporate profit on debt.

Second SchedulePart IV

Exemption From Specific Provisions

In clause (16A) the word news print media services shall be substituted by persons makingpayments to electronic and print media.

After clause 41 the following new clauses shall be inserted namely :

(41A) The provisions of sub-section (7) of section 148 and clause (a) of sub-section (1) of section 169shall not apply in respect of a person if he opts the condition that minimum tax liability under normaltax regime shall not be less than 60% of tax already collected under sub-section (7) of section 148under the final tax regime .

(41AA) The provisions of sub-section (4) of section 154 and clause (b) of sub-section (1) of section169 shall not apply in respect of a person if he opts the condition that minimum tax liability under

normal tax regime shall not be less than 50% of tax already deducted under sub-section (4) of section154 under FTR.

(41AAA) The provisions of clause (a) of sub-section (1) of section 153 and clause (b) of sub-section(1) of section 169 shall not apply in respect of a person if he opts the condition that minimum taxliability under normal tax regime shall not be less than 70% of tax already deducted under clause (a)of sub-section (1) of section 153 under FTR.

In clause (47B), for the word and occurring first,. a comma shall be substituted and after the figure233 the words and Part I, Division VII of the First Schedule shall be inserted.

in clause (56), in sub-clause (iii), for the words, figures, brackets, commas and symbol No. S.R.O.1065(I)/2005, dated the 20th October, 2005 the words, figures, brackets, commas and symbols

No.492(I)/2009, dated the 13th June, 2009 shall be substituted;

Clause (76) shall be omitted; and

The words with or without shall be substituted in clause (77) in the place of word alongwith.

Third Schedule (Part II)Initial Allowance

[And First Year Allowance]


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As per part II of third schedule of Income Tax Ordinance 2001 the rate of initial allowance for plantand machinery and building under Sec 23 was 50%, now the rate of initial allowance has been revisedand restricted to 25% on new building.

Fourth ScheduleFor the Computation of the

Profits and gains of insuranceBusiness Rule [6B]

Gain on Sale of Shares in respect of Insurance Companies

(6B) Capital gains on disposal of shares of listed companies, vouchers of Pakistan Telecommunicationcorporation, modaraba certificate or instruments of redeemable capital and derivative products shallbe taxed at the following new rates:

S.No. Tax Year Where holdingperiod of securitiesis less than sixmonths

Where holdingperiod of securitiesis more than sixmonths but less

than twelve months

(1) (2) (3) (4)

1 2011 10.0% 8.0%

2 2012 10.0% 8.0%

3 2013 12.5% 8.5%

4 2014 15.0% 9.0%

5 2015 17.5% 9.0%

Fifth ScheduleRules for the Computation of the

Profits and Gains from the Exploration

And Production of Petroleum

In fifth schedule , in part I , rule 4, after sub rule (4) , the following new sub rule shall be inserted ,which provides a mechanism for computation of profit and gain and tax thereon in respect ofpetroleum exploration and production companies.

(4A) A person for tax year 2012 and onward may opt to pay tax at the rate of 40% of the profits andgains net of royalty , derived by a petroleum exploration and production undertaking :

Provided that this option shall be available subject to the withdrawal of pending appeals , referencesand petitions before appellate forum by the person and the payment of whole of the outstanding taxliability created under this ordinance upto tax year 2011 , by the 30 th June , 2012:

Provided further that, this option is available only for one time and shall be irrevocable .

Seventh ScheduleComputation Of The Profits And Gains

Of A Banking Company And Tax PayableTHEREON

[Rule-6]

In SEVEN SCHEDULE , in rule 6 in second proviso full stop shall be replaced by a colon and thereaftera new proviso shall be added which seeks enhance rate of dividend received by banks from moneymarket funds and income funds from 10% to 25% for tax year 2013 and 35% for tax year 2014 andonwards.


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EIGHT SCHEDULERules for the computation of capital

Gains on listed securities[Section 100B]

For the first time in the Income Tax Ordinance 2001 after the SEVEN SCHEDULE a new schedulenamely EIGHT SCHEDULE has been included which includes following provisions namely ,

1. Manner and basis of computation of capital gains and tax thereon

(1)Capital gain on disposal of listed securities under section 37 A , and to which section 100B applyshall be computed and determined under this schedule and tax thereon shall be collected anddeposited on behalf of taxpayers by NCCPL in the manner prescribed.

(2)For the purpose of sub rule (1) , NCCPL shall develop an automated system ..(3)Central Depository Company of Pakistan Limited shall furnish information as required by NCCPL fordischarging obligations under this Schedule .

(4)NCCPL shall issue an annual certificate to the taxpayer on the prescribed form in the respect ofcapital gains under this schedule for a financial year.Provided that on the request of a taxpayer or if required by the Commissioner, NNCPL shall issue acertificate for a shorter period within a financial year.

(5)Every taxpayer shall file the certificate referred to in sub rule (4) along with the return of incomeand such certificate shall be a conclusive evidence in respect of the income under this schedule .

(6)NCCPL shall furnish to the board within thirty days of the end of each quarter a statement of capitalgains and tax computed thereon in that quarter in the prescribed manner and format .

(7) Capital gains computed under this Schedule shall be chargeable to tax at the rate applicable inDivision VII of Part I of the First Schedule.

2. Sources of Investment

(1) Where a person has made any investment in the listed securities , no enquires shall be made as tothe nature and source of the amount prior to the introduction of this schedule , provided that

(a) a statement of investment is fled with the Commissioner along with the return of income andwealth statement for the tax year 2012 within due date as provided in section 118 of theOrdinance .

(b) that the amount remains invested for a period of forty- five days upto 30th of June 2012.

(2) Where a person has made any investment in the shares of a public company traded at a registeredstock exchange in Pakistan from the date of coming into force of this Schedule till June 30, 2014,

enquiries as to the nature and sources of amount invested shall not be made provided that

(a) the amount remains invested for a period of one hundred and twenty days in the mannerprescribed

(b) tax on capital gains, has duly been discharged in the manner laid down in this Schedule and

(c) a statement of investments is filed with the Commissioner along with the return of income andwealth statement for the relevant tax year within the due date as provided in section 118 of thisOrdinance .


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(3) For the purpose of this rule, amount of investment shall be calculated in the prescribed manner,excluding market value of net open sale position in futures and derivatives, if such sale is in a securitythat constitutes the said investment.

3. Certain provisions of this Ordinance not to apply

The provisions for collection and recovery of tax, advance tax and deduction of tax at source laiddown in the Parts IV and V of Chapter X shall not apply on the income from capital gains under thisSchedule and these provisions shall apply in the manner as laid down in the rules made under thisOrdinance, except where the recovery of tax is referred by NCCPL to the Board in terms of rule 6(3).

4. Payment of tax collected by NCCPL to the Board

The amount collected by NCCPL on behalf of the Board as computed shall be deposited in a separatebank account with National Bank of Pakistan and the said amount shall be paid to the Board alongwith interest accrued thereon on yearly basis by July 31st next following the financial year in which theamount was collected.

5. Persons to whom this Schedule shall not apply

If a person does not want to determine and make payment of tax as laid down in this Schedule, heshall file an irrevocable option to NCCPL after obtaining prior approval of the Commissioner. In suchcase the provisions of rule 2 shall not apply.

6. Responsibility and obligation of NCCPL

(1)Pakistan Revenue Automation Limited (PRAL), a company incorporated under the CompaniesOrdinance, 1984 or any other company or firm approved by the Board and any authority appointedunder section 209 of this Ordinance, not below the rank of an Additional Commissioner, shall conductregular system and procedural audits of NCCPL on quarterly basis to verify the implementation of thisSchedule and rules made under this Ordinance.

(2) Any recommendation approved by the commissioner as per audit report shall be implemented by

the NCCPL and make adjustments for short or excessive deductions .No panel action shall be taken against NCCPL on account of any error , omission or mistake that hasoccurred from application of the system as audited under sub rule (1).

(3) NCCPL shall have authority to refer a particular case for recovery of tax to the Board in caseNCCPL is unable to recover the amount of tax.

7. Transitional Provisions

In respect of tax year 2012, the certificate issued by NCCPL under rule 1(4) shall be the basis ofcapital gains and tax thereon for that period.


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SALES TAX

Assessment of TaxSection 11

The provisions of Section 36 have been omitted and combined with Section 11 to substitute it namelySection 11.

(1) Where a person who is required to file a tax return fails to file the return for a tax period bythe due date or pays an amount which, for some miscalculation is less than the amount of taxactually payable, an Officer of Inland Revenue shall, after a notice to show cause to suchperson, make an order for assessment of tax, including imposition of penalty and defaultsurcharge in accordance with section 33 and 34:

Provided that where a person required to file a tax return files the return after the due dateand pays the amount of tax payable in accordance with the tax return along with defaultsurcharge and penalty, the notice to show cause and the order of assessment shall abate.

(2) Where a person has not paid the tax due on supplies made by him or has made shortpayment or has claimed input tax credit or refund which is not admissible under this Act forreasons other than those specified in sub-section (1), an Officer of Inland Revenue shall, aftera notice to show cause to such person, make an order for assessment of tax actually payableby that person or determine the amount of tax credit or tax refund which he has unlawfullyclaimed and shall impose a penalty and charge default surcharge in accordance with section33 and 34.

(3) Where by reason of some collusion or a deliberate act any tax or charge has not been leviedor made or has been short-levied or has been erroneously refunded, the person liable to payany amount of tax or charge or the amount of refund erroneously made shall be served witha notice requiring him to show cause for payment of the amount specified in the notice.

(4) Where, by reason of any inadvertence, error or misconstruction, any tax or charge has notbeen levied or made or has been short-levied or has been erroneously refunded, the personliable to pay the amount of tax or charge or the amount of refund erroneously made shall beserved with a notice requiring him to show cause for payment of the amount specified in thenotice:

Provided that, where a tax or charge has not been levied under this sub-section, the amountof tax shall be recovered as tax fraction of the value of supply.

(5) No order under this section shall be made by an Officer of Inland Revenue unless a notice toshow cause is given within five years, of the relevant date, to the person in default specifyingthe grounds on which it is intended to proceed against him and the officer of Sales Tax shalltake into consideration the representation 15 made by such person and provide him with anopportunity of being heard:

Provided that order under this section shall be made within one hundred and twenty days ofissuance of show cause notice or within such extended period as the Commissioner may, forreasons to be recorded in writing, fix provided that such extended period shall in no caseexceed ninety days:

Provided further that any period during which the proceedings are adjourned on account of astay order or Alternative Dispute Resolution proceedings or the time taken throughadjournment by the petitioner not exceeding sixty days shall be excluded from thecomputation of the period specified in the first proviso.


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(6) Notwithstanding anything in sub-section (1), where a registered person fails to file a return,an officer of Inland Revenue not below the rank of Assistant Commissioner shall subject tosuch conditions as specified by the Federal Board of Revenue, determine the minimum taxliability of the registered person.

(7) For the purpose of this section, the expression "relevant date" means--

(a) the time of payment of tax or charge as provided under section 6; and 16(b) in a case where tax or charge has been erroneously refunded, the date of its refund;

The fifth ScheduleSection 4

Seeks to omit S. No.4 and entries relating thereto in column (2) and (3) of the Fifth Schedule towithdrawal facility of zero-rating on supplies against international tender.

The Sixth Schedule Table-1Imports or Supplies

Section 13 sub-section 1

Seeks to add S. No. 12 and entries relating thereto in column (2) and (3) of the Table-II in the SixthSchedule to exempt from sales tax the supplies against international tender and seeks for alignment ofPCT Headings with HS-2012 of Pakistan Customs Tariff.

In this table the heading nos. of the first schedule to the customs act has been amended as follows;


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Serial No Description Heading Nos. of the FirstSchedule to the Customs Act,1969 (IV of 1969)

1 Live Animals and Live Poultry 0101.2100 and0101.3100,0101.9000,0102.1010,0102.2110,0102.2120,0102.2130,0102.2190,0102.3900,0102.2910,0102.2920,0102.2930,0102.2990,

0102.9000,0104.1000,0104.2000,0105.1100,0105.1200,0105.1900,0105.9400,0105.9900,0106.1100,0106.1200,0106.1900,0106.2000,0106.3110,

0106.3190,0106.3200, 0106.3900and 0106.9000

11. Eggs including eggs for hatching 0407.1100, 0407.1900and 0407.2100,0407.2900

15. Edible fruits excluding imported fruits(except fruits imported from Afghanistan)whether fresh, frozen or otherwisepreserved but excluding those bottled orcanned [***].

0803.0000, 0804.1010,0804.1020, 0804.2000,0804.3000, 0804.4000,0804.5010, 0804.5020,0804.5030, 0805.1000,0805.2010, 0805.2090,0805.4000, 0805.5000,0805.9000, 0806.1000,0806.2000, 0807.1100,0807.1900, 0807.2000,0808.1000, 0808.3000,0808.4000, 0809.1000,0809.2000, 0809.3000,


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0809.4000, 0810.1000,0810.2000, [***],0810.4000, 0810.5000,0810.6000, 0810.9010,0810.9090, 0811.1000,0811.2000, 0811.9000,0813.1000, 0813.2000,0813.3000, 0813.4010,0813.4020 and0813.4090.

16. Red chillies excluding those sold in retailpacking bearing brand names andtrademarks.

0904.2110 and 0904.2210

31. Holy Quran, complete or in parts, with orwithout translation; Quranic Verses

recorded on any analogue or digitalmedia; other Holy books.

4901.9910,8523.2100,

8523.2910,8523.2990,8523.4910,8523.4920,8523.4190,8523.5100,8523.5200,8523.5910,8523.5990,8523.8010, 8523.8020and 8523.8090

The Sixth Schedule Table-IILocal Supplies only

Seeks to omit S.NO. 2 and entries relating thereto in column (2) and (3) of Table-II of the SixthSchedule to withdraw exemption of sales tax on locally produced oil obtained from cotton seed.

In this table following amendments shall be made;

a) Against serial number 2 in column (1), in column (2), after the word seed the wordsother than cotton seed shall be inserted;

b) After serial number 11 new serial number 12 shall be added;

c) Serial no. 2 and serial no. 12 has been amended as follows:-


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Serial No Description Heading Nos. of the FirstSchedule to the Customs

Act, 1969 (IV of 1969)

2. Supply of locally produced crude vegetable oilobtained from the locally produced seeds otherthan cotton seeds [***], except cooking oil,without having undergone any process exceptthe process of washing.

Respectiveheadings.

12 Supplies against international tender Respectiveheadings


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GOVERNMENT OF PAKISTANFEDERAL BOARD OF REVENUE

(REVENUE DIVISION)******

Islamabad, the 1st June, 2012.

NOTIFICATION(SALES TAX)

S.R.O. 589(I)/2012. In exercise of the powers conferred by sub-section (1) ofsection 4 and section 40 of the Federal Excise Act, 2005, section 219 of the Customs Act,1969 (IV of 1969), section 50 of the Sales Tax Act, 1990, read with sub-section (2) ofsection 8, clause (ii) of sub-section (2) of section 8B, sections 9, 10, 14, 21 and 28, clause(c) of sub-section (1) of section 22, section 26, sub-section (6) of section 47A, sections 48,50A, 52, 52A and 66 thereof, the Federal Board of Revenue is pleased to direct that thefollowing further amendments shall be made in the Sales Tax Rules, 2006, namely:-

In the aforesaid Rules,

(1) In rule 5, in sub-rule (1), in clause (c),

(a) in the proviso, -

(i) the word further shall be omitted; and(ii) for full stop at the end a colon shall be substituted;

(b) after the existing proviso, amended as aforesaid, the following new provisoshall be added, namely:-

Provided further that the Federal Board of Revenue may transfer theregistration of any registered person or any business of a registered personto an area of jurisdiction where the place of business or registered office ormanufacturing units is located.;

(2) in rule 7, after sub-rule (3), the following new sub-rule shall be added, namely:-

(4) The change of nature of business (e.g. from individual to AOP or corporateperson) shall be allowed as under, namely:-

(i) in case of transfer of individual business from any person to his spouses orchildren, the change shall be made by LRO on receipt of verification of

documents from RTO;(ii) in case of change in nature of business from individual to AOP, the change

shall be made by LRO on receipt of verification of documents from RTO;(iii) in case of change of nature of business from AOP to corporate entity, the

same shall only be allowed by LRO on receipt of verification from RTO or LTU, however, thischange shall only be allowed in cases where the same persons who are members of AOP arenominated as directors in the corporate entity; and

(iv) in case of transfer of business or change in nature on any other account, anew Sales Tax Registration Number shall be issued to the entity.


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(3) In rule 12, for sub-rules (1), (2), (3), (4) and (5) the following shall be substituted,namely:-

Where the Commissioner or Board has reasons to believe that the registeredperson is to be suspended or blacklisted, the procedure as prescribed by the Boardshall be followed;

(4) in rule 46, the expression In terms of clause (a) of section 4 read with Serial No. 4of the Fifth Schedule to the Act, shall be omitted.

(5) for rules 50A, 50B and 50C the following shall be substituted, namely:-

50A.Application.- The provisions of this Chapter shall apply to supply of locallyproduced taxable goods by sales tax registered persons against international tendercontracts awarded by the Federal and Provincial departments, local governments,autonomous and semi-autonomous bodies and public sector organizations.

50B. Procedure and conditions for making exempt supplies.-In terms of sub-

section (1) of section 13 of the Act read with serial No. 12 of Table-II of the SixthSchedule thereto, supplies of locally produced goods against international tendercontracts shall be exempt from sales tax subject to the following procedure andconditions, namely:

(a) the supply shall be made against international tender issued by the Federaland Provincial departments, local governments, autonomous and semi-autonomous bodies and public sector organizations (hereinafter referred toasthe contract awarding person);

(b) the exempt supply of goods against international tender shall be to theextent of foreign grant, aid or loan component of the tender. The foreigncomponent of the international tender shall be received in foreign currency

which shall be surrendered by the contract awarding person to the StateBank of Pakistan as per State Bank of Pakistans procedure and foreignexchange regulations;

(c) the invitation of bids for international tender shall be published in reputednewspapers or journals of international circulation and on website of thecontract awarding person for international competitive bidding;

(d) the contract awarding person or the successful bidder shall apply to theBoard to avail the benefit of exemption to supplies against the internationaltender alongwith the following documents, namely:-

(i) application giving full particulars of the applicant viz name, address,telephone numbers, e-mail address, NTN, STRN, if applicable, and

any other information that he wants to submit;(ii) a certificate from the contract awarding person that Public

Procurement Regulatory Authority Rules, 2006 have been compliedwith during the process of international competitive bidding ori

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