Finance Bill 2010_2011 at a Glance<br />General <br /><ul><li>Changes of Finance Amendment Ordinance, 2009 incorporated in Finance Bill 2010-11 to avoid situation that results as a consequence of expiry of the Ordinance.
Issuance of Ordinance/amendment Ordinance in presence of Parliament in session and including administrative measures in money bill is also a violation of Article 70 to 77 (Legislative Procedures) i.e. Part III, Chapter 2 of the constitution of Pakistan</li></ul>Income Tax Ordinance 2001<br /><ul><li>Administrative and procedural changes earlier introduced by Finance Amendment Ordinance 2009 are now made part of Finance Bill e.g. Commissioners are now called Commissioners Inland Revenue, Appellate Tribunal is now Appellate Tribunal Inland Revenue.
Changes proposed in perquisites where loan given to employee is less than bench mark rate- If employees waives his right of interest to be received on his account with the employer. An amendment most likely for the benefit of banking sector employees only.
Capital gains were exempted on listed shares up till June 30, 2010 is now proposed to be taxed at various rates define (proposed section 37A). Consequential amendments are made in section 147 (Advance Tax), First Schedule (Rates) and Second Schedule (clause 110 omitted). Tax rates where holding period is less than 6 months 10% for tax year 2010 which eventually be raised to 17.5% for tax year 2014. If holding is more than six months for tax year 2010 7.5% which eventually be raised to 10% for tax year 2015. For banking companies where shares are held for less than a year still tax rate of 35% applies however, where period exceeds 12 months section 37A will come into play.
New section 65B inserted which is aimed at providing a tax credit of 10% of tax payable in case of investment in purchase and installation of plant and machinery during July 01, 2010 to June 30, 2015.
To encourage documentation of economy a tax credit for enlistment on stock exchange equal to 5% of the tax payable is proposed.-Section 65C
Tax liability of legal heirs in case of death of taxpayer is now proposed to be restricted to the extent of the capability of deceased estate.
Section 111 unexplained investment changes now any such unexplained credits, investments etc are subject to addition in the year to which they relate. By removing the limit of 5 years, the law proposes to be applied to year earlier than that however; the same cannot go beyond the date of promulgation of Income Tax Ordinance 2001. Further the time limits for keeping of records and selection for audit or amendment in assessments are also in conflict with this change thus apparently this will create an anomaly.
Section 113 is proposed to be extended to individuals whose turnover for tax year 2009 or any subsequent tax year exceeds 50 M and incase of AOPs whose turnover for tax year 2007 or any subsequent tax year exceeds 50 M. Tax rate is also increased from 0.5% to 1%
They are accompanied by the revised accounts or audited accounts as the case may be;
The reasons for revision of return, in writing, duly signed by the tax payer.
Penalty is proposed to be recovered with the amount of tax short paid with default surcharge from a person who voluntarily files a revised return before receipt of notice u/s 177 or 122(9)
Return in case of salaried person either via employer or through e-portal and statement u/s 115(4) is proposed to be filed on or before 31st day of August next following the end of tax year to which the return relates. Rest of the returns other than companies are required to be filed as before i.e. on or before 30th day of September next following the end of tax year to which they relate.
Through proposed amendments commissioner after recording reasons can call for records. However such power is restricted to past 6 years only from the end of tax year to which they relate. This time limit may give rise to conflict with section 111.
The Board is empowered to select cases for audit on the basis of computer ballot either randomly or on given parameters.
Cases falling under PTR having paid tax of 35,000 are now proposed to file wealth statement. Consequential amendments made in section 115 and 116. Previously tax limit was Rs. 25,000.
Commissioners are proposed to be empowered to amend assessments u/s 122(5A) in the same manner as provided for sub section 4 the amendment is proposed to take affect retrospectively from 4th July 2003
Income from property is now proposed to be taxed under normal law. However, no consequential amendments are made in section 147 therefore, though the income from property is covered under normal law yet is not subject to advance tax u/s 147
Section 147 is proposed to be amended to incorporate changes consequential to charge of tax on capital gains on securities and shares. Tax rates of 2% where securities are held for less than six months and 1.5% where securities are held more than six months are prosposed. Further the date of payments are now defined as for the quarter of September on 25th day of September, for December on 25th day of December, for march on 25th day of march and for june on 15th day of June. By such proposed changes the Govt. is once again trying to revert to the old methodology.
Tax on imports is raised to 5%. Further the tax on import of edible oil is a minimum tax and no more a final discharge. Tax on raw materials for industrial undertakings own use is still 3%
Profit on debt on Govt. Securities and treasury bills etc is proposed to be a full and final discharge u/s 151
Tax on non-residents other payments is reduced to 20% from 30% which is a good relief measure for non-residents
Through a proposed change in section 153 individuals having turnover of Rs. 50 M or more are not made withholding agents
Withholding tax statements are now required to be filed on quarterly basis on or before the twentieth day next following the close of each quarter
Limit for record keeping is proposed to be enhanced to 6 years. In cases of pending cases the period is extended to the time unless the proceedings are closed.
Active tax payers list is proposed to be kept. FBR has yet to issue rules. Probably aimed to restrict allow ability of expenses to active tax payers only.
Now commissioners are authorized to call record after recording the reasons in writings and such reasons must be communicated to tax payers
Income tax authorities are changed a change consequential to expiry of finance amendment Ordinance, 2009
FBR is authorized to select cases for audit on parametric or random computer ballot basis
Limitation period is proposed to exclude the period during which the cases are pending under litigation.
Advance tax on all kind of cash withdrawals i.e. either DD, PO, Online transfer is proposed to charged at 0.3%. Cross cheques are however excluded. This renders section 231A redundant.
Penalties are consolidated u/s 182 leaving rest of the sections redundant therefore, such sections are omitted
5% advance tax withholding is proposed on air tickets
In case of salary the maximum slabs are reduced to Rs. 4.5 Million thus creating a burden on tax payers previously the maximum slab started from 8.65M. Further the slabs are also reduced to 18 previously there were 20 slabs.
BTL limit is enhanced to Rs. 300,000 in salaried and non-salaried cases. Senior Citizen benefit is also enhanced to 1 M from 750,000/-
Tax rate of small companies is proposed to be enhanced to 25%
AOPs are now taxable at a flat rate of 25% effective from tax year 2010. Thus leaving this business at a disadvantage as the salaries and benefits allowed to partners is not allowable in these cases.
Rate of collection of advance tax where consumption exceeds Rs. 20,000 is proposed to be reduced to 5%
Specific reliefs are provided for FATA PATA affected areas
100% Depreciation allowances are proposed for ramps upto Rs. 250,000/- for disabled persons
Decommissioning expenses are allowed for Oil explorations and mining companies through changes in rule 4A of Part 1 of 5th schedule.
For SMEs a 5% allowance/provision is proposed for off balance sheet items and advances