comments on finance act 2013

8/13/2019 Comments on Finance Act 2013

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COMMENTSON

FINANCE ACT, 2013

A.R.KHAN & COMPANYCHARTERED ACCOUNTANTS


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Comments on Finance Act-2013

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1 | P a g e w w w . a r k h a n c o . c o m

TABLE OF CONTENTS

Page #

Income Tax 03-30

Sales Tax 31-37

Federal Excise 38-39

Income Support Levy Act, 2013 40


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Comparison

The Comparison of Finance Act, 2013 with Finance Bill-2013 containsamendments made through Finance Act 2013 relating to Income Tax, SalesTax, Federal Excise Duty and Income Support Levy Act, 2013.

All changes through the Finance Act 2013-14 are effective from July 1, 2013,except for the amendments made in Federal Excise Act, 2005 and Sales Tax

Act, 1990 which are effective from June 13, 2013.

All the amendments enabled through Finance Act 2013 were highlighted withgreen colour and non-existent amendments were crossed with red colour.


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FINANCE ACT-2013

INCOME TAX

SECTION 8General provisions relating to taxes imposed under section 5,6, & 7

By omission of proviso to this section, withholding tax on dividend income of

companies now considered as final tax.

SECTION 15Income from property

15(6)(7)-Omitted

By omission of Sub Section 6 of section 15, the rate card for chargingincome from property is deleted. Now the property income is subject tonormal taxation.

Through amendment of Sub Section 7 of section 15, the relaxation forindividuals or AOP in shape of non-chargeability of income tax wherethe rentals not exceeding 150,000 in a tax year with the condition thatthe individual or AOP doesnt derive taxable income under any otherhead has now been withdrawn.

The rental income of individual and AOP is now subject to normaltaxation irrespective of quantum of income.

SECTION 15A-NewDeductions in computing income chargeable under the head Incomefrom Property

15A(1)In computing the income of a person chargeable to tax under the head Income from Property for a tax year, a deduction shall be allowed forthe following expenditures or allowances namely:-

(a) In respect to repairs to a building, an allowance equal to 1/5 ofthe rent chargeable to tax inrespect of the building for the year,computed before any deduction allowed under this section.

(b) Any premium paid or payable by the person in the year to insurethe building against the risk of damage or destruction.


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(c) Any local rate, tax, charge or cess inrespect of the property, notbeing the income tax.

(d) Any ground rent paid or payable.

(e) Any profit on borrowed money to construct, renovate, extend orre-const ruct the property.

(f) Any share in rent payable or paid to HBFC or a scheduled bank.

(g) The amount of interest paid for mortgage or charge.

(h) Any expenditure related to collection charges of rent notexceeding 6% of rent.

(i) Any expenditure paid or payable for legal services acquiredrelated to subject property.

(j) Where there are reasonable grounds for believing that anyunpaid rent inrespect of the property is irrecoverable, anallowance equal to the unpaid rent is allowable where:-

i) The tenancy was bonafide, the defaulting tenant hasvacated the property or steps have been taken to compelthe tenant to vacate the property and the defaulting tenantis not in occupation of any other property of the person.

ii) The person has taken all reasonable steps to inst itute legalproceedings for the recovery of unpaid rent or hasreasonable grounds to believe that legal proceedingswould be useless.

iii) The unpaid rent has been included in the income of theperson chargeable to tax under the head Income fromProperty for the tax year in which the rent was due andtax has been duly paid on such income.

15A(2) -NewWhere any unpaid rent was recovered the amount would be chargeableto tax.

15A(3)Where any person allowed a deduction for any expenditure and aperson has not paid the liability or part of liability within 3 years, theunpaid amount of the liability shall be chargeable to tax.

15A(4)

If any expenditure is allowed as a deduction for rent, the same shall notbe allowed under any other head of income.


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15A(6)The provisions of section 21 of the Income Tax Ordinance, 2001 shallapply in determining the deductions allowed to a person under this

section in the same manner as they apply in computing Income fromBusiness

SECTION 56Set of f of losses

According to section 56 the person shall be entitled to set off the loss againstthe income under any other head of income.

Through amendment, Salary income is no more available as part of income

in terms of set off of losses.

SECTION 56Set of f of losses

According to section 56 the person shall be entitled to set off the loss againstthe income under any other head of income.

Through amendment by Finance Act, 2013, Salary income and propertyincome are no more available as part of income in terms of set off of losses.

SECTION 59AA & 59BGroup Taxation

59AA(5) & 59B(2)(g)The option of group taxation and group relief is available to those groupcompanies which comply with such corporate governance requirements andgroup designation rules or regulations as specified by the SECP.

SECTION 80Persons

80(2)(b)(v)This definition of company has been broken into two parts, in clause v onlyco-operative society, finance society or any other society are included.

80(2)(b)(va) & (vb)A non-profit organization is now separated as clause (va) and a trust, anentity or body of persons established or constituted by or under any law forthe time being enforce, as clause (vb).

As a result of bifurcation of clause (v) into clause (va) and (vb), non-profit

organization is now separately mentioned in clause (va).

SECTION 111Unexplained income or assets


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111(1) provisoThe credit of agricultural income to the extent of payment of provincialincome tax paid as per provincial laws shall be acceptable while probe u/s

111 of the Ordinance.

SECTION 113Minimum tax on the income of certain persons

113(1)(e), 113(2)(b) & 113(2)(c)The rate of minimum tax is enhanced from 0.5% to 1% which was earlierreduced to 0.5%, which was now restored at 1%.

113AA new tax framework is now introduced for builders in which where a builder

derives income from the business of construction and sale of residential,commercial or other buildings, he shall pay tax @ Rs. 25/- per sq. ft. as perthe construction or site plan approved by the relevant regulatory authority.

The tax shall be computed on the basis of total number of sq. ft. sold orbooked for sale during the year.

The tax paid under this section shall be minimum tax on the income ofbuilder from sale of such residential, commercial or other buildings.

113AA new tax framework is now introduced through Finance Bill 2013 forbuilders in which where a builder derives income from the business ofconstruction and sale of residential, commercial or other buildings, he shallpay tax @ Rs. 25/- per sq. ft. as per the construction or site plan approved bythe relevant regulatory authority.

However, the Finance Act, 2013 now enunciates that the rate of minimumtax, mode and manner of payment shall notify in the official gazette.

The tax paid under this section shall be minimum tax on the income ofbuilder from sale of such residential, commercial or other buildings.

113BA new tax framework is introduced for land developers also, where a landdeveloper derives income from the business of development and sale ofresidential, commercial or other plots, he shall pay tax @ Rs. 50/- per sq.yds. as per the layout or site plan approved by the relevant regulatoryauthority.

The tax shall be computed on the basis of total number of sq. yds. sold orbooked for sale during the year.


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The tax paid under this section shall be minimum tax on the income of thedeveloper from sale of such residential, commercial or other plots, sold orbooked.

113BA new tax framework is introduced through Finance Bill 2013 for landdevelopers also, where a land developer derives income from the businessof development and sale of residential, commercial or other plots, he shallpay tax @ Rs. 50/- per sq. yds. as per the layout or site plan approved by therelevant regulatory authority.

However, the Finance Act, 2013 now enunciates that the rate of minimumtax, mode and manner of payment shall notify in the official gazette.

The tax paid under this section shall be minimum tax on the income of thedeveloper from sale of such residential, commercial or other plots, sold orbooked.

SETON 114Return of Income

114(1)(b)(viii)The limit of annual bill for filing tax return being a holder of commercial orindustrial connection of electricity is reduced from 1,000,000 to 500,000.

114(1)(b)(ix)A new clause is finally inserted after clause 114(1)(b)(viii) whereby anyperson is registered with any Chamber of Commerce or any other trade orbusiness association or any market committee or any professional bodyincluding Pakistan Engineering Council, Pakistan medical & Dental Council,Pakistan Bar Council or any Provincial bar Council, Institute of Chartered

Accountants of Pakistan or Institute of Cost and Management Accountants ofPakistan is required to furnish return of total income.

114(1A)

By amendment through Finance Act 2013, the limit of income from businessfor every individual is now enhanced from 350,000 to 400,000 regarding filingof tax return.

114(4)By introducing the amendment the statutory time limit of 30 days for filing taxreturn has been done away with.

114(6)(ba)At present no approval from Commissioner was required to file revisedreturn. However, by introducing a new clause 114(6)(ba), prior approval of

Commissioner made mandatory for filing revised return.

SECTION 115Persons not required to furnish a return of income


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115(1) & proviso-OmissionBy omission of sub section 1 and proviso to this sub section, all salariedpersons, whether having other source of income or not, are required to file

return of income regardless of quantum of taxable salary income.

Annual Statement of withholding tax from salary, filed by the employer ofsuch taxpayer will no more treat as return of total income furnished by thesalaried person.

SECTION 116Wealth Statement

116(1), (2), (3), (4)Before amendment, this section was required to file wealth statement

alongwith wealth reconciliation by every individual having income of1,000,000 or more. The member of an AOP whose share from AOP was Rs.1000,000 or more was also obliged to file wealth statement. The personhaving FTR income was also obliged to file wealth statement where tax paidis 35,000 or above in a tax year.

Now, in the light of proposed amendment, all individuals are required to filewealth statement alongwith wealth reconciliation statement regardless ofquantum of taxable income.

SECTION 116Wealth Statement

116(1), (2), (3), (4)Before amendment, this section was required to file wealth statementalongwith wealth reconciliation by every individual having income of1,000,000 or more. The member of an AOP whose share from AOP was Rs.1000,000 or more was also obliged to file wealth statement. The personhaving FTR income was also obliged to file wealth statement where tax paidis 35,000 or above in a tax year.

Now, in the light of amendment made through Finance Act 2013, allindividuals having business income, salary income or income subject to finaltaxation are required to file wealth statement alongwith wealth reconciliationstatement regardless of quantum of taxable income.

All the amendments made through Finance Act-2013 in section 116 of theIncome Tax Ordinance, 2001 shall be effective for the Tax Year 2013.

SECTION 118Method of furnishing returns and other documents

118(1)No employer certificate is required to file from the salaried persons. Now allthe salaried persons, having taxable salary are required to file tax returnsalongwith wealth statement and reconciliation irrespective of quantum orthreshold of taxable income.


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118(2A)The insertion of section 118(2A) is same as deleted proviso to sub section 1of section 115 which requires that where salary income is 500,000 or more,

the taxpayer shall file the return, electronically accompanied by the proof ofpayment of tax and wealth statement.

118(3), 118(6)By amendment of this sub section Employers Annual statement is no moretreated as return, hence out of the ambit of schedule of filing return of incomeand other documents.

SECTION 119Extension o f time

119(1)Clause(b)-Omission119(2), (3)-amendment.

The word employer certificate or certificate is now omitted and no more betreated as return for salaried persons, hence extension of time will not beallowed.

SECTION 120AInvestment Tax on Income

Section 120A dealt with powers of Board to issue amnesty scheme. Byomitting this section powers of FBR to issue Investment Tax Scheme(Amnesty Scheme) regarding undisclosed income stand withdrawn.

SECTION 122CProvisional Assessment

In the light of amendment made through Act, duration of provisional status ofassessment u/s 122C reduced from 60 to 45 days.

SECTION 130

Appointment of the Appellate Tribunal

130(3)(C)The criteria of appointment of judicial member of the Appellate Tribunal isnow revamped and an Officer of Inland Revenue who is law graduate havingservice of atleast 15 years in BS 17 is proposed to be qualify for the post.

130(3)(C)The criteria of appointment of judicial member of the Appellate Tribunal isnow again revamped through the Finance Act-2013 and now an Officer ofInland Revenue service in BS 20 who is law graduate also is eligible to

qualify for the post.

130(5)-NewThe addition in criteria of appointment of accountant member of the AppellateTribunal is introduced by Finance Act, 2013.


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Now a Chartered Accountant who has practices professionally for a periodnot less than ten years is also eligible for the post.

SECTION 147Advance tax paid by the taxpayer

With the corresponding changes in Section 147, the Act now includes thepersons having rental income, in the list of taxpayers who required to payadvance tax.

SECTION 148Imports.

148(7)(e)

The Act now make the tax should be withheld on import of foreignproduced film imported for the purpose of screening and viewing atimport stage.

SECTION 149Deduction of tax at source from salary:

The Finance Bill sought to withdraw the facility of adjusting advancetax deducted from various bills of employees from tax liability, uponobtaining documentary evidences by the employers. After the proposedamendment, the employees shall file refund application in order toobtain tax refunds.

SECTION 149Deduction of tax at source from salary:

The Finance Bill sought to withdraw the facility of adjusting advance taxdeducted from various bills of employees from tax liability, upon obtainingdocumentary evidences by the employers. After the proposed amendment,the employees shall file refund application in order to obtain tax refunds

However, the act has not adopted the above proposal and employers are stillempowered to adjust tax deductible from salary upon obtaining documentaryevidence on account of taxes withheld from employees.

SECTION 152Payment to non-residents

It is proposed that definition of prescribed persons shall be adoptedfrom section 153(7) of the Income Tax Ordinance, 2001 for the purposeof withholding tax from payment to permanent establishment inPakistan of a non-resident person.

SECTION 152Payment to non-residents


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The withholding tax on property income in Pakistan of a non-resident personis now liable to deducted u/s 155 of the Ordinance read with Division V, PartIII of the First Schedule.

Further, It is now enables by the finance act that definition of prescribedpersons shall be adopted from section 153(7) of the Income Tax Ordinance,2001 for the purpose of withholding tax from payment to permanentestablishment in Pakistan of a non-resident person.

SECTION 153Payment for goods, services and contracts

153(7)(j)-InsertionThis newly introduced strategy is to enlarge the ambit of withholding tax by

including the sales tax registered persons as prescribed persons for thepurpose of withholding taxes.

153A-OmittedSection 153A was introduced by FA 2008 earlier it was substituted by FA2012 to withhold advance tax while making sale to distributors, dealers andwholesalers made by every manufacturer. This section is now re-introducedby Finance Act 2013 as section 236G.

SECTION 155Income from property

155(3)In order to enlarge the scope of withholding tax, the following persons arenow included in the list of prescribed persons:

a) Charitable institution

b) A private educational institution, a boutique, a beauty parlour, ahospital, a clinic or a maternity home.

c) Individual or AOP paying gross rent of Rs. 1,500,000 or above in ayear.

SECTION 164Certificate of collection or deduction of tax

164(2)By this amendment only challans are now acceptable as attachement withthe return at the time of filing.

SECTION 165

Statements

165(1) ExplanationAccording to newly added explanation to sub section (1) of section 165, allthe prescribed requirements of this section has to be filed with the FBR.


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165(6) proviso-omissionBy omitting the proviso filing of annual statement for the prescribed thresholdof Rs. 300,000 to 350,000 is no longer required.

SECTION 165AFurnishing of information by banks

By insertion of newly introduced section 165A after section 165, everybanking company will make arrangement to provide to the FBR the followinginformation:

a) Online access to database of account holders.

b) A list containing particulars of deposits aggregating Rs. 1,000,000 or

more made during the preceding calendar month.

c) A list of payment made against credit card aggregating Rs. 100,000 ormore during the preceding calendar month.

d) A list of loans written off exceeding Rs. 1,000,000 during a calendaryear.

e) A copy of each currency transaction report and suspicious transactionreport generated and submitted by it to the financial monitoring unitunder the Anti-Money laundering Act, 2010

165A(2)Each banking company will nominate senior officer to coordinate with theofficers of the FBR in order to provide documents and information in additionto those listed in Section 165A(1).

165A(3)The banking company shall not be liable to any civil, criminal or disciplinaryproceedings for furnishing information required under this ordinance.

165A(4)Subject to section 216, all information received under this section shall beused only for tax purposes and kept confidential.

SECTION 168Credit for tax co llected or deducted.

168(3)The Act now enables to keep clause (a) (c) and (d) of sub section (3) ofsection 153 and section 234(5) out from the list as envisaged in section168(3) of the Ordinance, comprising no tax credit shall be allowed which is

final tax

SECTION 169Tax collected or deducted as a final tax.


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169(3)Before amendment dividend received by the company was taxed at normal

rates, now with the proposed amendment the dividend is subject to FTR in

the hands of company.

SECTION 169Tax collected or deducted as a final tax.

169(1)

Before the amendment made through Finance Act, the advance tax socollected from any person being the owner of goods transport vehiclewas final tax on the income of such person from plying or hiring out ofsuch vehicle and no other tax was payable on such income.

Now the advance tax collected under this section shall be adjustableand treated as advance tax.

The act omits the reference to section 153 (3)(a)(c) and (d) andmaking a general reference to type of withholding taxes classified asfinal tax under section 153(3).

169(3)

Before amendment, dividend received by the company was taxed atnormal rates, now with the proposed amendment the dividend is

subject to FTR in the hands of company.

The omission has been made in section 169(3) and as a result theincome from property has been brought to normal tax regime.

SECTION 171Addi tional payment for delayed refunds.

171(2)-ExplanationThe newly introduced explanation to sub section 2 of section 171 is nowenacted in order to clarify that for the purpose of compensation, the refund

become due from the date refund order is made and not from the date theassessment of income treated to have been made u/s 120.

SECTION 172Representatives.

172(3)(b)-ExplanationThe newly introduced explanation to clause (b) of sub section 3 of section172 is enacted in order to widen the term business connection by definingthe term which includes transfer of an asset or business in Pakistan by anon-resident.

SECTION 177Audi t.


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177(10)-ExplanationIn the tax year 2010 section 214C was introduced being selection of audit bythe Board only and powers of commissioners to select the cases for audit

was stand withdrawn, but Commissioners continued to select cases for auditand left no option for taxpayers but to approach Honable High Courts forrelief.

The Honable High Courts given due relief to taxpayers and instructCommissioners not to select the cases for audit.

Now with the amendment, it is declared that powers of the Commissionersu/s 177 are independent of the powers of the Board u/s 214C. TheCommissioners are now empowered to conduct audit and call for the records/ documents including books of account, independently.

SECTION 181Taxpayers registration

181(3)-provisoIt is enacted by newly added proviso that FBR may allow use of CNIC inplace of NTN, in case of individuals.

SECTION 181CDisplaying of NTN

This newly added section now restricts every person who have an NTN, todisplay the same at a visible place of his business.

SECTION 182Offences and penalties

Penalty for non-filing of return

Before amendment the penalty for non-filing of return was 0.1% of taxpayable for each day of default subject to minimum penalty of 5,000 and

maximum penalty of 25% of tax payable in respect of that tax year.

After amendment, the maximum penalty should increase to 50% of taxpayable with the provision that if the penalty worked out as aforesaid is lessthan Rs.20,000 or no tax is payable for that tax year such person shall pay apenalty of Rs.20,000.

Penalty for non-filing of statement u/s 115, 165 or 165A

It is now proposed to impose a penalty of Rs. 2500 for each day of defaultsubject to minimum penalty of Rs.50,000.

Penalty for non-filing of wealth s tatement /reconcil iation181(1)(1AA)


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It is now enacted to impose a penalty of Rs.100 for each day of default. Nominimum / maximum penalty is proposed. The amount of penalty shouldcalculate on the days of default @ Rs. 100/- only.

Penalty for non-compliance of notices u/s 177

It is enacted that penalty should enhance from Rs. 5,000 to Rs. 25,000 iftaxpayer fails to produce the records and documents on receipt of first notice,from 10,000 to 50,000 on receipt of second notice and from 50,000 to100,000 on receipt of third notice.

Penalty for non-displaying of NTN

It is enacted that penalty should be Rs. 5000 for non-displaying of NTN at the

place of business.

SECTION 214CSelection for audit by the Board.

214C(1A)A new sub Section 214C(1A) is inserted after Sub-Section (1) of section214C, where by the Board shall keep the audit selection parameters,confidential.

214C(3)-Explanation

In the tax year 2010 section 214C was introduced being selection of audit bythe Board only and powers of commissioners to select the cases for auditwas stand withdrawn, but Commissioners continued to select cases for auditand left no option for taxpayers but to approach Honable High Courts forrelief.


However, it is declared that powers of the Commissioners u/s 177 areindependent of the powers of the Board u/s 214C. The Commissioners arenow empowered to conduct audit and call for the records / documentsincluding books of account, independently.

SECTION 233AACollection of tax by NCCPL

By the proposed amendment in addition to collection of advance tax frommembers of stock exchange of Pakistan, NCCPL shall collect advance tax

from members of margin financer, trading financiers and lenders.

SECTION 233AACollection of tax by NCCPL


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By the amendment introduced by the Act, in addition to collection of advancetax from members of stock exchange of Pakistan, NCCPL shall collectadvance tax from members of margin financer, trading financiers andlenders.

A proviso to section 233AA of the Ordinance has been added by Finance Act2013 clarifying that this section shall not apply to any Mutual Fund specifiedClause 57(2) of Part 1 of Second Schedule.

SECTION 234Tax on motor vehicle

234(1)Division III of part IV of First Schedule is proposed to be categorizing forcollection of advance tax along with motor vehicle tax.

234(2)As a streamline measure, if motor vehicle tax is collected in installments orlump sum the advance tax may also be collected in like manner.

234(5)Before the proposed amendment the advance tax so collected from anyperson being the owner of goods transport vehicle was final tax on theincome of such person from plying or hiring out of such vehicle and no othertax was payable on such income.

Now it is enacted through Finance Act 2013 that advance tax collected underthis section shall be adjustable which means that the income should be taxedunder Normal Tax Regime (NTR). It is worth mentioning that provisions ofsection 113 regarding minimum tax should also be attracts where turnover is50 million rupees or more.

SECTION 236DAdvance tax on funct ions and gather ing.A new section 236D is introduced whereby every owner, lease holder,an operator or manager of a marriage hall, marquee, hotel, restaurant,

commercial lawn, club, a community place or any other place used for suchpurpose, is required to collect advance tax @ 10% on the total amount of billfrom a person arranging or holding a function including food, service or anyother facility, in the places, mentioned above.

For the purpose of this section, function means, wedding related event,seminar, workshop, a session, an exhibition, a concert, a show, a party orany other gathering held for such purposes.

SECTION 236EAdvance tax on foreign produced f ilms, TV plays and serials .

A newly added section is now legislated to collect advance tax at variousrates ranging from Rs. 100,000 to Rs. 1,000,000 before screening andviewing the foreign produced film, TV drama serial or a play. The authority


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responsible for issuing censor certificate shall be responsible to collectadvance tax at the rates specified in Division XII of Part IV of First Schedule.

The advance tax so collected shall be adjustable.

SECTION 236FAdvance tax on cable operators and other electronic media.

A newly added section is ordained to collect advance tax at various ratesranging from Rs. 5,000 to Rs. 875,000 before issuance of license fordistribution services or renewal of the license. M/s Pakistan Electronic Media

Regulatory Authority (PEMRA) shall be responsible to collect advance tax atthe rates specified in Division XIII of Part IV of First Schedule.


SECTION 236GAdvance tax on sale to d is tr ibutor, dealers and wholesalers

This section authorized every manufacturer or commercial importer ofelectronics, sugar, cement, iron and steel products, fertilizers, motorcycles,pesticides, cigarettes, glass, textile, beverages, paint or foam sector tocollect advance tax @ 0.1% of gross amount of sales, from distributors,dealers and wholesalers.

Earlier this section was introduced by FA2008 as section 153A, which wassubstituted by FA 2012. The provision of this section was held in abeyancetill 30.6.2013. This section is now re-introduced by Finance Act 2013 assection 236G.

The tax collected is adjustable tax and the credit for the tax collected underthis section is allowed while computing tax on taxable income for the sametax year.

SECTION 236HAdvance tax on sale to retailers

This section authorized every manufacturer or commercial importer ofelectronics, sugar, cement, iron and steel products, fertilizers, motorcycles,pesticides, cigarettes, glass, textile, beverages, paint or foam sector tocollect advance tax @ 0.5% of gross amount of sales, from retailers.

The tax collected is adjustable tax and the credit for the tax collected underthis section shall be allowed while computing tax on taxable income for thesame tax year.

SECTION 236ICollection of advance tax by educational institut ions


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The newly introduced section authorized every person preparing fee voucheror challan to collect advance tax @ 5% of tuition fee and all other chargesreceived by the educational institution by whatever name called excluding the

amount which is refundable, from parents or guardian.

As per proposed section, advance tax shall not be collected where annualfee doesnt exceed Rs. 200,000/-

The tax collected is adjustable tax against the tax liability of either of theparents or guardian.

SECTION 236JAdvance tax on dealers, commission agents and arhatis etc.

A newly added section is now legislated to collect advance tax at variousrates ranging from Rs. 5,000 to Rs. 10,000 from dealers, commission agentsand arhatis. The market committee shall be responsible to collect advancetax at the rates specified in Division XVII of Part IV of First Schedule.


FIRST SCHEDULERates of tax for individuals and AOP

There is no change in basic limit of exemption which is maintained at Rs. 400,000/-

for both individual and AOP.

The proposed Slab as would be applicable both for business Individuals and firms isasunder;

Individual & AOP

S.# TAXABLE INCOME RATE OF TAX

1 Upto 400,000 0%

2 400,001 -750,000 10% of the amount exceeding400,000

3 750,001-1,500,000 35,000+15% of the amountexceeding 750,000

4 1,500,001-2,500,000 147,500+20% of the amountexceeding 1,500,000

5 2,500,001-4,000,000 347,500 + 25% of the amountexceeding 2,500,000


7 6,000,001 and above 1,322,500 + 35% of the amountexceeding 6,000,000

Salaried Persons

S.# TAXABLE INCOME RATE OF TAX

1 Upto 400,000 0%2 400,001 -500,000 5% of the amount exceeding 400,000

3 500,001-800,000 5000+7.5% of the amount exceeding500,000


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4 800,001-1,300,000 27,500+10% of the amountexceeding 800,000

5 1,300,001-1,800,000 77,500 + 12.5% of the amountexceeding 1,300,000

6 1,800,001-2,200,000 140,000 + 15% of the amount

exceeding 1,800,0007 2,200,001-2,600,000 200,000 + 17.5% of the amount

exceeding 2,200,000






Salaried PersonsS.# TAXABLE INCOME RATE OF TAX1 Upto 400,000 0%

2 400,001 -750,000 5% of the amount exceeding 400,000

3 750,001-1,400,000 17,500+10% of the amount exceeding750,000

4 1,400,001-1,500,000 82,500+12.5% of the amount exceeding1,400,000

5 1,500,001-1,800,000 95,000 + 15% of the amount exceeding1,500,000

6 1,800,001-2,500,000 140,000 + 17.5% of the amount

exceeding 1,800,0008 2,500,001-3,000,000 262,500 + 20% of the amount exceeding

2,500,000


10 3,500,001-4,000,000 475,000 + 25% of the amount exceeding3,500,000



Marginal Relief-omission

The facility of Marginal relief to salaried persons is no more available.

Division II Part IRate of Tax for Companies

The rate of tax is 34% for the TY 2014 for company only.

Division VI Part IIncome from property

The rate of tax to be paid u/s 15 in the case of an individual and an AOP

shall be


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Part III Division V

The rate of tax to be deducted u/s 155 in the case of an individual and an

AOP shall be

S.No Gross amount of rent Rate of Tax

1 Upto 150,000 Nil

2 150,000-1,000,000 10% of thegrossamountexceeding150,000

3 Exceeds 1,000,000 85,000+15%of the grossamount

exceeding1,000,000

The rates of tax to be deducted u/s 155 in the case of company shall be 15%of the gross amount of rent.

DIVISION VI PART III

The rate of withholding tax on prizes and winnings is now enhanced from10% to 15% on prize bonds and cross word puzzle.

Part IV Division IIA

The provision of withholding tax @ 10% applicable on financing of carry overtrade (badla) deducted by Stock Exchange, is now withdrawn.

Part IV Division IIBRates for collection of tax by NCCPL

The rate of deduction u/s 233AA proposed to be 10% of profit or mark-up orinterest earned by the member, margin financier or securities lender.

Part IV Division III(4)

The new tax rates is proposed to be added where motor vehicle tax iscollected in lump sum


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DIVISION V PART IVThe rate of advance tax to be collected from the bi lls of telephone usersis now enhanced from 10% to 15%.

Part IV Division VICash withdrawl from bank

The rate of tax to be deducted u/s 231A is proposed to be enhanced from 0.2to 0.3%

Part IV Division VIIPurchase of Motor cars and jeeps

Part IV Division VIIIAdvance tax at the t ime of sale by auct ion

The rate of collection of tax u/s 236A is proposed to be enhanced from 5 to10% of the gross sale price of any property or goods sold by auction.

Part IV Division XI-addit ionAdvance tax on funct ions and gather ing

The rate of tax to be collected under each sub-section (1) and (2) of section236D shall be 10%


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Part IV Division XII-addit ionAdvance tax on foreign produced fi lms and TV plays.

Rate of collection of tax u/s 236E shall be as follows:

Part IV Division XII-addit ionAdvance tax on foreign produced fi lms and TV plays.

Rate of collection of tax u/s 236E shall be as follows:

1 Foreign produced TV Drama Serial Rs. 100,000 perepisode

2 Foreign produced TV play (singleepisode)

Rs. 100,000

Part IV Division XIII-additionAdvance tax on foreign produced fi lms and TV plays.

Rate of collection of tax u/s 236F shall be as follows:

Part IV Division XIII-additionAdvance tax on foreign produced fi lms and TV plays.

Rate of collection of tax u/s 236F in case of cable TV operators shall be asfollows


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LicenceCategoryasprovided

inPEMRARules

Tax onLicencefee

Tax onRenewal

H 7500 10000

H1 10000 15000

H-II 25000 30000R 5000 30000

B 5000 40000

B-1 30000 50000

B-2 40000 60000B-3 50000 75000

B-4 75000 100000

B-5 87500 150000B-6 175000 200000B-7 262500 300000

B-8 437500 500000

B-9 700000 800000B-10 875500 900000

The rate of tax collected by PEMRA u/s 236F in the case of IPTV, FM Radio, MMDS, MobileTV, Mobile Audio, Satellite TV Channel and landing rights shall be 20% of the permission feeor renewal fee, as the case may be.

Part IV Division XIV-addit ionAdvance tax on sale to d is tr ibutor, dealer or wholesaler :

The rate of collection of tax u/s 236G is proposed to be 0.1% of the grossamount of sales.

Part IV Division XV-additionAdvance tax on sale to retailers

The rate of collection of tax u/s 236H is proposed to be 0.5% of the grossamount of sales.

Part IV Division XVI-additionCollection of advance tax by educational institutions

The rate of collection of tax u/s 236I is proposed to be 5% of the grossamount of fee.

Part IV Division XVII-additionAdvance tax on dealers, commission agents and arhat is etc.

The proposed rates of collection of tax u/s 236J are as follows:


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SECOND SCHEDULEExemptions

The following amendments have been proposed in the second schedule:

Part I

The following clauses are proposed to be omitted / amended:

Clause # Omission /Amendment

Effect

53A Omitted The perquisites relatedto free or concessionalpassage provided byairlines to its employeesand family is proposed tobe withdrawn, hence nofree passage toemployees and their

family is available.92 Omitted The Income of university

or other educationalinstitution, which wasestablished not forpurpose of profit, is nowtaxable.

126E Amendment The income derived by azone enterprise isexempt for a period of 10years starting from thedate the developer

certifies that the zoneenterprise hascommenced commercialoperation.

SECOND SCHEDULEExemptions

The following amendments have been proposed in the second schedule:

Part I

The following clauses are proposed to be omitted / amended:


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Clause # Omission /Amendment

Effect

53A Omitted The perquisites relatedto free or concessionalpassage provided byairlines to its employeesand family is proposed tobe withdrawn, hence nofree passage toemployees and theirfamily is available.

58A Addition The Income of Universityor other educationalinstitution being run bynon-profit organization

existing solely foreducational purposesand not for purpose ofprofit is now exempt.

92 Omitted The Income of universityor other educationalinstitution, which wasestablished not forpurpose of profit, is nowtaxable.

126E Amendment The income derived by azone enterprise is

exempt for a period of 10years starting from thedate the developercertifies that the zoneenterprise hascommenced commercialoperation.

Part II-reduct ion in tax ratesClause (28)-addition

The rate of tax u/s 148 on import of hybrid cars is proposed as under:

Part III-Reduction in Tax Liability

Clause

#

Omission /

Amendment

Effect

1 Omitted 1a)Any amount received as flying allowance by pilots,flight engineers, navigators of Pakistan Armed Forces,Pakistani Airlines or Civil Aviation Authority, JuniorCommissioned Officers or other ranks of Pakistan


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research institution, shall be reduced by an amountequal to 40% of tax payable on his income from salary.]

The reduction in tax liability shall be reduced from75% to 40% for teachers etc. as defined in Clause 2

Part III Second Schedule.

7 Amendment Where any taxpayer engaged in the business ofdistribution of cigarettes manufactured in Pakistan isrequired to pay minimum tax on the amountrepresenting its turnover under section 113, theamount of tax payable under the said section shall bereduced by eighty percent.

For the word company the word taxpayer shall besubstituted, which certainly means that thereduction of minimum tax to the tune of 80% isproposed to be available to all taxpayers including

company.

Part IV- Exemption from specific provisions

Clause#

Omission /Addition

Effect

56A Addition The provisions of sub-section (7) of section 148 andclause (a) of sub-section (1) of section 169 shall notapply to a person who is liable to withholding tax undersection 236E.

The above provisions relates to PTR which was not

applicable to section 236E which relates towithholding of advance tax on foreign producedfilms, TV plays and serials.

59(iv)(a) Omitted (iv) in the case of any resident individual, no taxshall be deducted from income or profits paid on,-

a)Defence Savings Certificates, Special SavingsCertificates, Savings Accounts or Post Office Savings

Accounts, or Term Finance Certificates (TFCs), wheresuch deposit does not exceed one hundred and fiftythousand rupees; and

As a resul t, the income on deposits upto 150,000

which was paid on DSC, SSC POSA and TFCs isnow subject to withholding tax @ 10%.

72A Addition The provisions of clause (l) of section 21, sections 113 and

152 shall not apply in case of a Hajj Group Operator in

respect of Hajj operations provided that the tax has been

paid at the rate of Rs.3,500 per Hajji for the tax year 2013

and Rs.5,000 per Hajji for the tax year 2014 in respect of

income from Hajj operations.

In t he year 2011, FBR has agreed in their minutes of

meet ing w ith the representat ives of HGOs to accept Rs.

2500 per haji as tax on income from hajj operat ions in t heyear 2012 and Rs. 3000 for TY 2013. Now in the budget

2013, the agreed rat es of Rs. 3,000 are enhanced to 3,500

and fix rat e of Rs. 5,000 per haj i is now proposed to be

paid for TY 2014.


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72B Addition the provisions of section 148 shall not apply to anindustrial undertaking if the tax liability for the currenttax year, on the basis of determined tax liability for anyof the preceding two tax years, whichever is the higher,has been paid and a certificate to this effect is issued

by the concerned Commissioner.

The proposed addition is self-explanatory. Theindustrial undertaking has to produced exemptioncertificate issued by the concerned Commissioner,having jurisdiction in order to get exemption fromWHT at import stage.

THIRD SCHEDULE-Part IIInitial Allownce and First Year Allownce

Clause#

Omission /Addition

Effect

1 Amendment The rate of initial allowance u/s.23 of the Income TaxOrdinance, 2001 has been reduced from 50 to 25% onplant and machinery

SEVENTH SCHEDULE

Rule # Omission /Addition

Effect

6 Amendment The rate of tax of 35% is proposed to be withdrawn onthe dividend received from money market funds and

income funds.


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SALES TAX

SECTION-2Definitions

The Finance Act-2013 introduced / amended the following definitions:

(5AC) CREST means the computerized program for analyzing and crossmatching of sales tax returns, also referred to as Computerized Risk basedEvaluation of Sales Tax.

(22A) Provincial Sales Tax means tax levied under provincial laws or lawsrelating to Islamabad Capital Territory, which are declared by the FederalGovernment through notification in the official Gazette, to be provincial salestax for the purpose of input tax;;

(33A) supply chain means the series of transactions between buyers andsellers from the stage of first purchase or import to the stage of final supply;;

(44)(a) By the amended definition, a time frame is now included in order to

determine the time of supply which is the goods delivered or made availableor the time when any payment is received by the supplier, whichever isearlier.

(44)(c) The proposed amendment related to part payment received by thesupplier before delivery of goods.

The following points should be accounted for:

(i) for the supply in a tax period, it shall be accounted for in the return for thattax period; and

(ii) in respect of exempt supply, it shall be accounted for in the return for thetax period during which the exemption is withdrawn from such supply;;

In case of payment received before delivery of goods, the same should bereflected in relevant tax period and sales tax shall be paid accordingly insuch period.

SECTION 3Scope of tax

The rate of sales tax has been increased from 16% to 17% wef from June13, 2013.


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SECTION 21De-Registration, blacklisting and suspension of registration.

21(3)By the proposed amendment, during the phase of blacklisting the invoicesissued by him shall be rejected through a self-speaking appealable order andrefund or input tax credit shall not be claimable.

21(4)New sub section is proposed to be added where if a person is engaged inissuing fake or flying invoices, claiming fraudulent input tax or refunds, doesnot physically exist or conduct actual business, or is committing any otherfraudulent activity, the Board, Commissioner or such officer may afterrecording reasons in writing, block the refunds or input tax adjustments of

such person and direct the concerned Commissioner having jurisdiction for furtherinvestigation and appropriate legal action.

SECTION 22Records

22(1)(ea)-additionNow gate passes both inwards or outwards and transport receipt have beenmade part of Record to be maintained by the registered person. Beforeamendment, there was no legal cover to such Records. This will help todiscourage issuance of fake and flying invoices.

SECTION 25

Access to records, documents etc.

In the tax year 2010 section 72B was introduced being selection of audit bythe Board only and powers of commissioners to select the cases for auditwas stand withdrawn, but Commissioners continued to select cases for auditand left no option for taxpayers but to approach Honable High Courts for

relief.


Now with the proposed amendment it is declared that powers of theCommissioners u/s 25, 38, 38A, 38B and 45A are independent of the powersof the Board u/s 72B. The Commissioners are now empowered to conductaudit and call for the records / documents including books of account, accessto premises, call to provide information, independently.

SECTION 40C-additionMonitoring or tracking by electronic or other means.


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After section 40B the new section proposed to be inserted in order to control/ monitor the production, sales, clearance, stocks or any other related activityof the registered person at factory / mill premises.

The relevant rules and regulation are not yet issued till date.

SECTION 45BAppeals

The Commissioner (Appeals) is proposed to be empowered to stay therecovery for 30 days in total.

SECTION 57Rectification of mistakes

The scope of the provision has been widen and brought in the line of Section 221 of the Income Tax

Ordinance, 2001.

SECTION 73Certain transactions not admissible

Presently, under the explanation given in section 73 regarding definition ofbusiness bank account it was sufficient to declare the same to theCommissioner having jurisdiction. Now it is mandatory to report the businessbank account through prescribed form STR1 or change in particular

application should be moved to FBR.

3rdSCHEDULE:Retail itemsUnder the proposed amendment, the following new serial numbers andentries shall be added:


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NOTIFICATIONS

The following SROs have been notifi ed dated: June 12, 2013 effective from June 13,2013; specified otherwise.


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INCOME SUPPORT LEVY ACT, 2013

Introduction

The old concept of wealth tax is now re-introduced by using newname i.e Income Support Levy Act, 2013 The levy is applicablefrom TY 2013.

Charge of levy:

The income support levy tax is not chargeable to immovableassets. Only net movable wealth exceeding one million rupeesshall be chargeable to tax @ 0.5% of the value declared afterdeducting liabilities related to movable assets, if any.

Time and Manner o f Payment

A person shall pay the levy alongwith wealth statement.

Default Surcharge

Where a person fails to pay levy, or the levy so paid is less thanthe amount payable, he shall be liable to pay default surcharge @16% per annum on the amount not paid.

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comments on finance act 2013

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