Finance Act, 2015 in respect of Income Tax, Federal Sales Tax and Islamabad Capital Territory Sales Tax

Banking company – 4% of income

Persons other than a banking company having income equal to Rs. 500 million or more – 3% of income

Income for this purpose will be sum of profit on debt, dividend, capital gains, brokerage and commissions, taxable income under section 9, imputable income and income computed under 4th, 5th, 7th and 8th schedules.

This provision shall be applicable for the tax year 2015 and the cut-off period for the evaluation of reserves shall be before the filing of the tax return for the said tax year.

Where profit on debt does not exceed Rs. 25 million – 10%

Where profit exceeds Rs. 25 million but does not exceed Rs. 50 million – Rs. 2.5 million plus 12.5% of the amount exceeding Rs. 25 million

Where profit exceeds Rs. 50 million – Rs. 5,625,000 plus 15% of the amount exceeding Rs. 50 million

Mutual funds or a collective investment scheme or a REIT scheme shall deduct capital gain tax on redemption of securities as under:

National security issues

Natural disaster

National food security in emergency situations

Protection of national economic interests in situations owing to fluctuations in international commodity prices, removal of anomalies in taxes, development of backward areas, implementation of bi-lateral/multi-lateral agreements

However, such notification issued on or after July 1^st, 2015 if not withdrawn earlier, will stand rescinded on the expiry of financial year in which it is issued.

This new section provides that any profit or share in rent and share in appreciation for value of house paid by an individual shall be admissible as a deductible allowance from the income of the tax year.

The allowable deduction will be the amount equal to lower of 50% of taxable income or Rs. 1 million.

Any unadjusted amount of the allowance shall not be carried forward to the following tax year.

Period of tax credit will be 10 years from the date of setting up of new manufacturing unit

Tax credit will be allowed at 1% of tax payable for every 50 employees registered with EOBI and Employees Social Security Institutions (ESSI) subject to maximum of 10% of the tax payable

Employs more than 50 employees in tax year registered with EOBI and ESSI

The registered office of the new company should be in Pakistan

For availing tax credit, period of investment for extension, expansion and BMR extended to June 30, 2016.

Provisions of this section will be applicable to a Company whose income is subject to taxation as a Company (other than a banking Company) under Division II of Part-I of 1st Schedule or subject to minimum tax under this Ordinance

“Corporate tax” means higher of tax payable at normal rate and minimum tax

Any income other than the income subject to tax at normal rate or minimum tax will not be considered for computing ACT.

provisos

In case the Commissioner has not approved the revision of return within 60 days of application for revision, permission will be deemed to have been given.

Now an AOP and a Co are required to estimate tax payable for the relevant tax year before the 2nd instalment of advance tax is due and if it is more than the amount on the basis of which instalment of advance tax was paid, the taxpayer will pay 50% of such tax payable by the due date of 2nd instalment after adjusting the tax already paid in this respect. The balance 50% of estimated tax payable will be paid in equal instalments payable for the remaining 3rd and 4th quarters of the tax year.

However, any notification issued u/s (2) will remain in force until rescinded by the Board.

This new section provides that tax shall be chargeable @ 2% on purchase of locally produced edible oil by manufacturers of cooking oil or vegetable gee or both.

This 2% tax will be final tax on income arising from locally produced edible oil.

1. 
   A Company; and
   
2. 
   Any other person, in respect of profit which is subject to tax u/s 7B on the following:
   

1. 
   Yield on account, deposit or a Certificate under the National Savings Scheme or Post Office Savings account;
   
2. 
   Profit paid by a banking Company or financial institution on an account or deposit;
   
3. 
   Profit on any security (other than stated in (i) above, issued by the Federal or a Provincial Government or a local Government; or
   
4. 
   Profit paid on any bond, Certificate, debenture, security or instrument (Other than a loan agreement) to any person other than a financial institution by a banking Company, financial institution, a Company defined in the Companies Ordinance, 1984 and a body corporate.
   

Option will have to be exercised at the time of filing the return of income and the tax deducted will be the minimum tax.

(6)

The Commissioner can delegate his power to the special audit panel.

(13),(14),

(15),(16)

& (17)

1. 
   Officers of Inland Revenue;
   
2. 
   A firm of Chartered Accountants;
   
3. 
   A firm a cost and management Accountants; or
   
4. 
   Any other person.
   

Special audit panel will be headed by a Chairman who will be an officer of Inland Revenue.

Information u/s 175 and 176 can be called for and premises entered only by a member of the panel who is an officer of Inland Revenue.

Commissioner or the panel can make best judgement assessment if the requisite record etc. are not provided by the taxpayer.

In the absence of any member of the panel not being the chairman, proceedings may be continued by the remaining members.

After the amendment, penalty will be higher of 0.1% of taxable income per week or Rs 20,000.

Now this sub-section has been amended to replace the reference to section 187(3) by S. No. 10 of section 182(1). S. No. 10 of section 182(1) provides penalty for making false or misleading statement relevant to sections 114, 115, 116, 174, 176, 177 and general at higher of Rs 25,000 or 100% of tax short fall.

Rate of default surcharge for failure to pay tax, advance tax etc. has been reduced from 18% to 12% per annum.

This new section provides that case of a person shall be automatically selected for audit if he does not meet following conditions:

Complete return u/s 114(2) is filed within the due time including the time extended by the Board and Commissioner for 30 days;

Tax payable with the return is paid;

2% tax on turnover or tax on the basis of return whichever is higher, is paid by the person who files return within 90 days after the due date and in the preceding tax year, either did not file return or declared income BTL; and

A person who had filed return of income of previous tax year declaring taxable income, if 25% higher tax than the previous tax year is paid and files the return of income within 90 days after due date.

Application of this section will be from the date as notified by the Board.

This section has been amended to extend the scope of collection of advance tax on internet bills “and” prepaid cards for internet.

Furnishes a copy of passport to the educational institution as evidence that his stay in Pakistan in previous tax year was for less than 183 days;

Furnishes a Certificate that he has no Pakistan source income; and

Fee is remitted directly from abroad through normal banking channel to the educational institution.

Previously, individual sections under this Chapter provided that deduction or collection of advance tax will not apply to the following:

1. 
   The Federal or a Provincial Government;
   

A person who produces a NIL tax withholding Certificate from the Commissioner.

This new section now provides for overall non-applicability of Chapter XII to above categories and their reference in individual sections has been omitted.

Part-IV of 1^st Schedule

1. 
   Sale of any instrument including demand draft, pay order, special deposit receipt, cash deposit receipt, short-term deposit receipt, call deposit receipt, rupee traveller’s cheque etc.
   
2. 
   Transfer of any sum through cheque or clearing, interbank or intra bank transfers through cheques, online transfer, telegraphic transfer, mail transfer, direct debit, payments through internet or mobile phone, account to account funds transfer, ATM transfers etc.
   

This new section now makes a payment to a resident person for use or right to us industrial, commercial and scientific equipment (rent) a separate class of income.

Tax will be deductible @10% from the gross payment whether made in full or in part or by way of advance by the persons prescribed in section 153(7).

The tax deducted will be final tax.

1. 
   Agricultural machinery; and
   

“Education related expenses” include “tuition fee, boarding and lodging expenses and any expense related thereto”.

This new section provides for collection of advance tax from its members as under:

1. 
   @0.1% on purchase of future commodity contracts
   

PART – I

Division I

1,500,000

Rs 1,800,000

Rs 3,000,000

Rate of Tax for Companies

Rate of tax for a company, other than banking company will be 32% for the tax year 2016, 31% for tax year 2017 and 30% for tax year 2018 and onwards.

company, having income equal to

or exceeding Rs.500 million

Rate of Dividend Tax

3^rd

proviso

Rate of tax of 10% on dividend from mutual fund.

If a Developmental REIT Scheme with the object of development and construction of residential buildings is set up by thirtieth day of June, 2018, dividend received by a person from such Developmental REIT Scheme shall be reduced by fifty percent for three years from thirtieth day of June, 2018.

Division IIIA

Rate for Profit on Debt

(Section 7B)

This new Division provides rates of tax for profit on debt imposed under new section 7B as under:

exceed Rs 25,000,000

Rs 25,000,000 but does not

exceed Rs 50,000,000

Rs 50,000,000

exceeding Rs 50,000,000”;

No capital gain tax will be deducted if the holding period of securities is more than four years.