RGST and Banking Sector
Tuesday, November 30, 2010
Labels: RGST, Sales Tax, Taxation
posted @ 5:44 PM,
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Implementation Of Reformed GST In Pakistan
Monday, November 15, 2010
- GST will replace the existing regimes of sales tax and excises on services.
- GST will apply on both at import and local supply stages.
- Standard rate of 15% has been proposed instead of the present rate of 17% or multiple other rates going upto 25%.
- There shall be no fixed tax, reduced tax, enhanced tax, retail price-based tax or special tax scheme under the new GST system.
- A uniform enhanced annual exemption threshold of Rs.7.5 million (which is presently Rs. 5 million) shall be applied to keep small businesses including small traders/retailers/cottage industry out of mandatory tax compliance.
- All exports shall be zero-rated.
- Input tax adjustment of both direct and indirect constituents shall be allowed on “totals” basis (excluding entertainment and non-business use passenger vehicles).
- Sales tax on goods and services where so authorized by the Provinces shall be mutually adjustable so that double taxation does not occur.
- No general zero-rating shall be admissible on any commercial form of domestic supply or on any local consumption.
- The GST system will work purely on “self-assessment and self-policing” basis.
- Cash flow of businesses shall be facilitated through expeditious centralized (Electronic) refund payment system.
- Tax compliance shall be encouraged through transparent and fair audit system with increased use of modern information technology.
- Adjudication, appeal and alternative dispute resolution (ADR) systems have been provided as before.
- FBR will issue simplified rules to regulate the GST procedures and processes.
- The GST Bill 2010 shall take effect from such date as may be notified by the Federal government.
- The new GST system will be applied in FATA/PATA, the Province of Gilgit-Baltistan and AJ&K in due course.
Labels: Reformed GST, Sales Tax, Taxation
posted @ 11:59 AM,
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FBR Broadening Tax Base By 29 Percent
Wednesday, September 15, 2010
posted @ 8:57 PM,
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Taxation of Bonus Paid to Corporate Employees
Thursday, November 5, 2009
A proviso has been inserted in Clause (a)of sub section 2 of section 20 whereby any bonus paid or payable to corporate employees receiving salary income of Rs.One million or more (exculding bonus) shall be chargeable to tax at the rate of 30%. This is a one time levy and payable for the tax year 2010 only, so as to support the Internally Displaced People (IDP)for their rehabilitation.
Example # 1
Salary Income other than bonus = 1,000,000
Bonus amount = 300,000
Tax @ 9% at salary other than bonus = 90,000 (A)
Tax @ 30% at bonus = 90,000 (B)
Total Tax = 180,000 (A)+ (B)
Example # 2
Salary Income other than bonus = 900,000
Bonus amount = 100,000
Total Salary = 1,000,000
Tax @ 9% at salary other than bonus = 90,000 (A)
No Tax @30% at bonus as salary excluding bonus is less than one million (B)
Total Tax = 90,000 (A)+ (B)
Labels: Taxation
posted @ 1:32 PM,
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Last Date to File Income Tax Returns
Saturday, October 10, 2009
Who has to file return?
- Business individuals and AOPs
- Companies where accounts are closed on 30-12-2008
- Salaried individuals having income other than salary
- Employees claiming refund
- Those who availed investment tax scheme 2008
- Owners of immovable property (with land area of 250 sq. yards or more) or owner of a flat in specified areas
- Non-corporate cases with property income
- Non-corporate taxpayers having business income and having income falling under PTR
E-Filing of Income Tax Returns
Compulsory for
- Corporate
- Taxpayers registered for Sales Tax
- Association of Persons - AOPs
- Salaried individuals having income of Rs.500,000/-
- Claimant of refunds
- Optional for other non-corporate Taxpayers
Last Date for Filing of IT Returns
- Individuals, AOPs (IT-2) = 20th October 2009
- Companies where accounts closed on 31-12-2008 (IT-1) = 20th October 2009
- Companies where accounts closed on 30-06-2009 (IT-1) = 31th December 2009
Remember: Filing of Wealth Statement along with the returns is mandatory in case of individuals with income of Rs.500,000/- or more.
Labels: Income Tax Return, Taxation
posted @ 1:08 PM,
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Income Tax Audit In Pakistan
Saturday, July 4, 2009
What is an Income Tax Audit?
An income tax audit is an inspection conducted by a government representative to confirm that someone's taxes were prepared correctly. Tax audits are very intimidating for most taxpayers, and the important thing to remember about audit notices is that they are not accusations, and that taxpayers are not being required to prove that they are not guilty of something when they are audited. Audits are usually performed on an entirely random basis, with taxpayers being selected by the Commissioner of Income Tax.
In an income tax audit, the taxpayer is required to show documentation and support for every aspect of his or her tax return. For example, if someone claims itemized deductions, receipts for those deductions must be produced, in addition to justifications for why the taxpayer felt that those deductions were legitimate. Tax deducted by bank on Cash withdrawal on higher side than compare to business activity it also attract for tax audit. In addition, taxpayers must open their accounting methods to inspection, and demonstrate that all of their income was in fact properly documented and claimed on the tax return.
Audits are usually performed because a taxpayer was randomly selected by the Commissioner of Income Tax. Certain areas of tax returns are especially prone to errors, so the Commissioner of Income Tax may weight people with things like high income, high levels of deductions, or repeated business losses for audits. Taxpayers may also be selected for auditing when they fail to pay their taxes, or when they request an installment plan to pay taxes.
In a correspondence income tax audit, the taxpayer is sent a notice and asked to return documents by mail. There are two types of Income Tax Audit which are as follows:-
1. Field Audits
Many taxpayers in pakistan are not aware of this kind of income tax audit. Field audits occur when FBR agents come to the taxpayer in the office to discuss tax issues as such power was conferred by the FBR to the selected Chartered Accountants Firm in shape of outsourcing of tax audit in the recent Finance Act, 2009.
2. Office audits
Office Audit requires the taxpayer to show up in a government office like Regional Tax Office / Large Tax Payer Unit with supporting documentation on a specific day or time. The FBR agent/ relevant Income Tax Officer/ Commissioner of Income Tax assigned to the case will review the material and make a determination on the basis of that review.
Sometimes, someone's taxes are audited and everything appears to be in order, in which case no action is taken. In other instances, over or underpayment of taxes is detected, and the issue will need to be corrected. If the taxpayer engaged in activity which is fraudulent or illegal, he or she can face legal penalties in addition to fines.
Mistakes happen on everyone's taxes now and then, and as long as taxpayers can demonstrate that an error is a true accident or the result of an action taken in good faith, the government is usually satisfied with a correction and no other action. Taxpayers can make the audit process smoother by taking the time to fully prepare for an income tax audit so that all of the information is organized and available, and by being polite and helpful to the auditing team. Consulting chartered accountant or income tax lawyer can be advisable if someone is preparing for an income tax audit.
The business community in Sindh and Punjab is perturbed at the flurry of notices received from the tax department in the last number of months. In certain instances, the department had re-opened cases of tax returns filed over the past five years. Taxpayers have been advised to make prompt payment to avoid tax evasion.
From the FBR point of view, it was to improve recovery the FBR has started the exercise of selective audit to” bridge the gap between the tax potential and its realisation.”
Presently, a taxpayer is required to maintain prescribed documents and records for five years from the end of relevant tax year. As per recent amendment in U/s. 174,176, 177 & 210 of the Income Tax Ordinance, 2001, require the taxpayer to maintain documents and records till final decision in any proceedings for assessment, appeal, revision, reference, petition and any proceedings before Alternative Dispute Resolution Committee.
As reported, the Board is considering outsourcing of tax audits to Chartered Accountant Firms. To enable the Chartered Accountant Firms to conduct such tax audits, the Finance Act seeks to empower Chartered Accountant Firms, with the prior approval of the Commissioner of Income Tax, to obtain and retain information, record or computers for such time as necessary.
Similarly, the amendment empowers the Commissioner to delegate the powers to conduct the audit of persons selected for audit to a Firm appointed by the Board.
INSTRUCTIONS FOR INCOME TAX AUDIT
Instructions
Things you will need:
· Copies of all affected tax returns
· Copies of Profit & Loss account and Balance Sheet
· Copies of all relevant receipts and other information
· Copies of Tax Challans & Other evidences for deduction of taxes
· Copy of Tax Computation
· Name and contact information for a tax accountant or lawyer
1. Step 1
Read the notice carefully. Some audits involve only parts of a single year's tax return, while others can include entire returns for multiple years. In addition, some audits request information by mail, while others require a meeting with an FBR agent/ relevant Income Tax Officer/ Income Tax Commissioner. Understanding what the FBR is asking for is vital to ensure that you prepare precisely for the specified audit.
2. Step 2
Start immediately. You will need plenty of time to pull your information together, to request information from others, such as buyers/ sellers, charities, credit card companies, and banks and to work with a tax professional.
3. Step 3
Consult a tax accountant or lawyer. The tax payment codes are extremely complex, and require years of study to fully comprehend. It's best to take the advice of professionals when responding to an audit. They can tell you what the audit means, what the consequences might be, and the exact information you will need to provide.
4. Step 4
Gather the required information. Hopefully, you stored all of the relevant receipts and other information when you filed your tax return, and so you will have an easy time of creating copies in preparation for the audit. If not, then you will need to locate all of the required information.
5. Step 5
Organize your information. Now that you have all of your information in place, put it in the proper order. All of the information should be laid out as in the audit notice. That way, it will be easier for you and your tax professional to double-check your information and have it ready for the response.
6. Step 6
Respond to the audit. If your audit is in person, either you or your tax professional can represent you to the FBR agent/ relevant Income Tax Officer/ Income Tax Commissioner. If you are not required to be at the audit, have your professional attend alone with a power of attorney. If your audit requires that you mail your response to the FBR, then send copies only and ensure that you've answered all of the issues outlined in the audit notice.
7. Step 7
Act on the FBR findings. You may have to pay an additional amount to the FBR, return part of a refund, or you may receive money back. You also have the right to appeal the FBR agent's findings to the Commissioner Appeal or the Appeals Division, and you can take your case to the High Court’s Tax Bench.
By: Muhammad Mustafa Rahim, Rahman Sarfaraz Rahim Iqbal Rafiq,Chartered Accountants
Sources:Complete Tax Solutions, English Law Dictionary, FBR
Labels: Income Tax Audit, Taxation
posted @ 1:31 PM,
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Taxation Updates - From 01-06-09 to 06-06-09
Saturday, June 6, 2009
The Federal Board of Revenue (FBR) has imposed regulatory duty (RD), at the rate of 15 percent ad valorem, on export of molasses, with immediate effect. According to SRO 321(I)/2009 issued here on Saturday, 15 percent RD would be applicable on export of molasses.
No WHT exemption certificate on iron, steel supply:
The Federal Board of Revenue has rejected issuance of withholding tax exemption certificate on the supply of iron and steel products used as raw materials in the finished products such as auto parts by local manufactures
Industries Ministry lobbying to raise regulatory duty on molasses export:
The Ministry of Industries and Production is reported to be lobbying to raise regulatory duty (RD) on molasses export from 15 percent to 25 percent on the insistence of some top policy makers, sources in the Ministry told Business Recorder.
Property CVT to be deposited through new challan form:
The purchasers of the immovable property, including commercial and residential property within urban areas, are required to deposit the capital value tax (CVT) under the new challan form. In this connection, the FBR has amended the CVT Rules 1990 through SRO 416(I)/2009 issued here on Wednesday. The Federal Board of Revenue (FBR) has issued new CVT challan form on property transactions to introduce the system of Computerised Payment Receipt (CPR) by banks.
Penal surcharge for warehouse goods waived:
The Chairman, LCCI Standing Committee on Liaison with FBR, Aftab Ahmad Vohra has lauded the issuance of SRO 404 (I)/2009, wherein the Ministry of Finance, Economic Affairs, Statistics and Revenue have allowed to keep the warehouse goods in the warehouse till June 30, 2009 without any penal surcharge.
Sindh plans to raise sugarcane support price by 22 percent:
ITBA takes note of amendments to Income Tax Rules 2002:
Income Tax Bar Association (ITBA) has taken a serious note to the amendments made in Income Tax Rules 2002 vide SRO No 392(1) 2009 dated May 19th, even though the Bar and other Stakeholders had objected to the amendments.
Labels: Taxation
posted @ 1:52 PM,
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Lease Rental of Land
Tuesday, May 12, 2009
Does a company can capitalize rental payment against lease of land before the start of commercial production? What is the date of Commercial production? Further, briefly discuss the taxation implications of the said rental payment.
Comment:
Accounting Aspect:
As per para 14 of IAS-17, characteristic of land is that it normally has an indefinite economic life and lessee normally does not receive substantially all of the risks and rewards incidendtal to ownership, in which case its an Operating Lease.
ICAP's technical committee recomended in its accounting TR-21 that date of commencement of commercial production is the date when the plant is ready for the production of intended products in commercially feasible quantities. The cut off date so established is without regard when the plant actually commences commercial production. Where the construction of an asset is completed in parts and each part is capable of being used while construction continues on the other parts, capitalization of costs for each part should cease as it is completed.
Therefore, all expensed paid before the commencement of commercial production would be capitalized including rental payment to the lessor.
Taxation Aspect:
Witholding tax would be deducted under section 153 of the Income tax Ordinance under execution of other contracts provided any exemption certificate is produced by the lessor.
Labels: accounting, Taxation
posted @ 4:00 PM,
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Tax History
Wednesday, April 15, 2009
The first taxes of which we have a documentary record were applied in ancient Egypt. In ancient times, it is clear that taxpayers were expected to offer up a portion of the agricultural produce they raised from the land to the ruling power of the day.
As economies have evolved, governments and rulers have chosen to raise taxes in different ways. For a long time, many countries raised revenue primarily through taxing imports into the country.
In modern times, the income tax, which is charged as a percentage of all income earned in a period of time has become the most popular method by which governments in developed countries raise revenue. Corporation tax, a tax charged as a percentage of the profits made by incorporated companies, is also significant. Many countries also have sales taxes, or value added taxes, which are charged as a percentage of the selling price of a product or service.
Labels: Taxation
posted @ 12:09 PM,
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Sales Tax - hotels / restaurants
Monday, April 13, 2009
The Federal Board of Revenue has launched a campaign to collect due sales tax from hotels / restaurants sector.
- Non-registered hotels / restaurants get themselves voluntary registered immediately to avoid strict action.
- As responsible tax payer, issue sales tax invoice for every sale and e-file monthly sales tax return.
- law allows collectors to post sales tax officers at hotels /restaurants to monitor sales.
- Avoiding registration, non-issuance of sales tax invoice and non e-filing of monthly sales tax return attacts penalties and fines.
Labels: Taxation
posted @ 9:12 AM,
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Delivery of goods outside Pakistan - Accounting and Tax Treatment
Wednesday, April 1, 2009
Labels: Taxation
posted @ 2:55 PM,
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Cash Payment on Purchase of Prepaid Cards
Friday, March 20, 2009
- utility bills;
- freight charges;
- travel fare;
- postage; and
- payment of taxes, duties, fee, fines or any other statutory obligation;
In the context of above provision of income tax while making payment of Rs.200,000/- to a single party you are required to make payment through cross cheque and further witholding tax is also required to be deducted from it subject to non-availability of exemption certificate, if any.
However we can make plea that its impossible to purchase prepaid cards from one vendor therefore you have to make payments in cash as there are a lot of vendors involved.
Labels: Taxation
posted @ 3:14 PM,
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Last date of Advance Income Tax
Thursday, March 12, 2009
Last Date is 15th March, 2009- equal to the latest assessed income tax (where their latest assessed taxable income is Rs.200,000/- or more)
Companies (other than banking companies):
are liable to pay advance tax for the current year in 4 installments
- equal to the latest assessed income tax or
- income tax payable on the current year's estimated income
- advance tax is also payable in the absence of the last assessed income on the basis of estimated quarterly profits of the current year.
Ref: Income Tax Ordinance, 2001, FBR
Labels: advance income tax, Taxation
posted @ 2:16 PM,
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Mandatory Books of Accounts
Monday, March 2, 2009
For businesses, professionals & manufactureresBenefits of maintaining books of accounts:
- You can compute correct profit and loss.
- will help in justifying the declared results.
- Escape from penalty of Rs.10,000/-
- Profit and loss cannot be calculated.
- During audit declared results can be rejected resulting in furter tax liability.
- Penalty can be imposed.
- Books of accounts to be maintained by a compnay.
Books of accounts for Businesses:
With income up to Rs.200,000/-
- Serially numbered and dated cash-memo / invoice /receipt for each transaction of sale or receipt.
- Daily record of receipts, sales, payments, purchases and expenses; a single entry in respect of daily receipts, sales, purchases and different heads of expenses will suffice; and
- Vouchers of purchases and expenses.
With business income exceeding Rs. 200,000
(excluding wholesalers, distributors, dealers and commission agents:
- Serially numbered and dated cash-memo / invoice /receipt for each transaction of sale or receipt.
- Cash book and/or bank book or daily record of receipts, sales, payments, purchases and expenses; a single entry in respect of daily receipts, sales, purchases and different heads of expenses will suffice;
- General ledger or annual summary of receipts, sales, payments, purchases and expenses under distinctive heads;
- Vouchers of purchases and expenses and where a single transaction exceeds Rs. 10,000 with the name and address of the payee; and
- Where the taxpayer deals in purchase and sale of goods, quarterly inventory of stock-in-trade showing description, quantity and value.
Books of accounts for Professionals:(like medical practitioners, legal practitioners, accountants, auditors, architects, engineers etc.)
- Serially numbered and dated patient-slip / invoice /receipt for each transaction of sale or receipt.
- Daily appointment and engagement diary in respect of clients and patients: Provided that this clause shall not apply to general medical practitioners;
- Daily record of receipts, sales, payments, purchases and expenses; a single entry in respect of daily receipts, sales, purchases and different heads of expenses will suffice; and
- Vouchers of purchases and expenses.
Books of accounts for Manufacturers (with turnover exceeding Rs. 2.5 million):
- Serially numbered and dated cash-memo / invoice /receipt for each transaction of sale or receipt.
- Cash book and/or bank book;
- Sales day book and sales ledger (where applicable);
- Purchases day book and purchase ledger (where applicable);
- General ledger;
- Vouchers of purchases and expenses and where a single transaction exceeds Rs. 10,000 with the name and address of the payee; and
- Stock register of stock-in-trade.
For details see rule 30 of Income Tax Rules 2002!
Labels: Books of Accounts, Taxation
posted @ 11:31 AM,
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Tax Treatment of Salary
Thursday, February 26, 2009
Case from mszuberi_associates:
A Non Profit organization not deducted the tax from its' employees salary for several years.
Queries:
- Who is responsible? Organization, Employee, Or both?
- what is the panalty under Income Tax ordinance, 2001 and who would bear it.
Comment:
Section 149, Salary, of Division III, Deduction of Tax at Source of the Income Tax Ordinance, 2001 states that;
Every employer paying salary to an employee shall, at the time of payment, deduct tax from the amount paid at the employee’s average rate of tax computed at the rates specified in Division I of Part I of the First Schedule on the estimated income of the employee chargeable under the head “Salary” for the tax year in which the payment is made after making adjustment of tax withheld from employee under other heads and tax credit admissible under section 61, 62, 63 and 64 during the tax year after obtaining documentary evidence, as may be necessary, for
(i) tax withheld from the employee under this Ordinance during the tax year;
(ii) any excess deduction or deficiency arising out of any previous deduction; or
(iii) failure to make deduction during the year;
Sub Section (c) of Section 21 Decduction not allowed states that no deduction shall be allowed in computing the income of a person under head of income from business if that person any salary, rent, brokerage or commission, profit on debt, payment to non-resident, payment for services or fee paid by the person from which the person is required to deduct tax under Division III of Part V of Chapter X or section 233 of chapter XII, 1[unless] the person has 2[paid or] deducted and paid the tax as required by Division IV of Part V of Chapter X;
Conclusion:
According to above provisions of Income Tax Ordinance, 2001 it is clear that Organization (whether profitable or non profitable) is requied to deduct tax on salary at the time of payment and if it will not do so then its expense would be not allowed as admissible expense.
Labels: Query, Salary income, Taxation
posted @ 11:04 AM,
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Major Withholding Taxes Agents
Wednesday, February 18, 2009
Prescribed Persons / Withholding Agent U/S Relevant Sections- Collector of Customs U/S 148
- Authorized dealer in foreign exchange U/S 149, 154(1), 154(2)
- Registration Authorities (motor vehicles) U/S 231B
- Association of persons U/S 149, 152(1), 152(2), 156, 233
- Association of persons constituted by, or under, law U/S 149, 152(1), 152(2), 153(1), 153(3), 156, 233
- Banking Company U/S 149, 151(1)(a), 151(1)(b), 151(1)(d), 152(1), 152(2), 153(1), 153(3), 154(1), 154(2), 154(3), 155, 156, 231A, 233
- Body Corporate U/S 149, 151(1)(d), 152(1), 152(2), 153(1), 153(3), 155, 156, 233
- Body incorporated by or under the law of a country outside Pakistan relating to incorporation of companies U/S 149, 152(1), 152(2), 153(1), 153(3), 155, 156, 233
- CNG Stations (Gas consumption bill preparer) U/S 234A
- Company as defined under the Companies Ordinance, 1984 except a Small Company U/S 149, 151(1)(d), 152(1), 152(2), 153(1), 153(3), 155, 156, 233
- Consortium U/S 149, 152(1), 152(2), 153(1), 153(3), 156
- Co-operative Society U/S 149, 152(1), 152(2), 153(1), 153(3), 155, 156, 233
- Diplomatic Mission of a foreign state U/S 155
- Direct Exporter U/S 154(3B)
- Electricity Consumption Bill Preparing Authority U/S 235
- Export House registered under DTRE Rule, 2001 U/S 154(3B)
- Export Processing Zone Authority U/S 154(3A)
- Federal Government U/S 149, 151(1)(a), 151(1)(c), 152(1), 152(2), 153(1), 153(3), 155, 156, 233A
- Finance Society U/S 149, 151(1)(D), 152(1), 152(2), 153(1), 153(3), 155, 156, 233
- Foreign association, whether incorporated or not, declared to be a company by the Federal Board of Revenue U/S 149, 152(1), 152(2), 153(1), 153(3), 155, 156, 233
- Foreign consultant U/S 149, 152(1), 152(2), 153(1), 153(3), 156, 233
- Foreign contractor U/S 149, 152(1), 152(2), 153(1), 153(3), 156, 233
- Individual U/S 149, 152(1), 152(2), 153(1), 153(3), 156
- Local Authority U/S 149, 151(1)©, 152(1), 152(2), 153(1), 153(3), 155, 156, 233
- Manufacturer of motor cars U/S 231B
- Modaraba U/S 149, 152(1), 152(2), 153(1), 153(3), 155, 156, 233
- Motor Vehicle Tax Collection Authority U/S 234
- Non-profit organizations U/S 149, 152(1), 152(2), 153(1), 153(3), 155, 156, 233
- Persons selling petroleum products to petrol pump operators U/S 156A
- Company U/S 149, 152(1), 152(2), 155, 156, 233
- Trusts/Non-profit Sector U/S 149, 152(1), 152(2), 153(1), 153(3), 155, 156, 233
- Telephone (bill preparer) & Cards (issuer & Seller) U/S 236
- Provincial Government U/S 149, 151(1)(c ), 152(1), 152(2), 153(1), 153(3), 155, 156, 233
- Resident Company U/S 150
- Society established or constituted by or under any law for the time being in force U/S 149, 152(1), 152(2), 153(1), 153(3), 155, 156, 233
- Stock Exchange Registered in Pakistan U/S 233A
Ref: Income Tax Ordinance, 2001
Labels: CA Final Exam, Taxation, withholding tax agent
posted @ 4:41 PM,
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Tax accounting: Cash vs. Accrual
Tuesday, February 17, 2009
Query from Khurrum Shahzad, M.Com, ACMA, Head of Accounts Deptts. Rahim Baksh Group:
"A recreational club has received amounting Rs.2,000,000 on account of life membership of a person with family and charged 1,500/- on monthly basis. Can that club defer Rs.2,000,000 on different coming years rather than show as income of the year when it is received? Please advice from taxation point of view."
Answer:
Section 32. Method of accounting states that a company shall account for income chargeable to tax under the head “Income from Business” on an accrual basis, while other persons may account for such income on a cash or accrual basis.
Further, a person’s income chargeable to tax shall be computed in accordance with the method of accounting regularly employed by such person (wether accrual or cash)
Section 33. Cash-basis accounting states that a person accounting for income chargeable to tax under the head “Income from Business” on a cash basis shall derive income when it is received and shall incur expenditure when it is paid.
Section 34. Accrual-basis accounting states that;
A person accounting for income chargeable to tax under the head “Income from Business” on an accrual basis shall derive income when it is due to the person and shall incur expenditure when it is payable by the person.
- Due to a person means when the person becomes entitled to receive it even if the time for discharge of the entitlement is postponed or the amount is payable by instalments.
- Payable by a person means when all the events that determine liability have occurred and the amount of the liability can be determined with reasonable accuracy.
Taxable Income:
In the light of above provisions of income tax ordinance, 2001 that club must adopt accrual basis accounting (in case of company) and may adopt accrual basis accounting (in case of other person like AOP). On the basis of accrual accouting Rs.2,000,000/- would be treated as income when club is entitled to receive it irrespective the amount is postponed or payable in instalments.
Ref: Income Tax Ordinance, 2001
Labels: Taxation
posted @ 12:18 PM,
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Witholding tax on freight charges
Friday, February 13, 2009
According to section 153 (Payments for goods and services) of Income Tax Ordinance, 2001 every prescribed person making a payment in full or part including a payment by way of advance to a resident person or permanent establishment in Pakistan of a non-resident person is required to deduct tax
- for the sale of goods;
- for the rendering of services;
- on the execution of a contract, other than a contract for the supply of goods or the rendering services
Payment to transporters on account of freight charges are covered under rendering of services. Every prescribed person is required to deduct withholding tax @ 2.00% as mentioned in 2(i) division III, part III of first schedule of Income Tax Ordinance, 2001.
Labels: Taxation
posted @ 2:57 PM,
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Medical Allowance - Tax Treatment
Tuesday, January 20, 2009
According to Clause 139 of part 1 (Exemption from total income) of 2nd Schedule of Income Tax Ordinance, 2001- in accordance with terms of employment: The amount provided is fully exempt if NTN of medical practitioner and employer's attestation are available.
- Not in accordance with terms of employment: The amount provided is fully taxable
b) Medical Allowance provided: Tax Treatment is exempt upto 10% of Basic Salary
c) Medical allowance is provided in addition to medical facility or reimbursement in accordance with the terms: Tax Treatment is Medical allowance fully taxable and Facility / reimbursement is Fully Exempt if NTN of medical practitioner and employer's attestation are available.
d) Medical allowance is provided in addition to medical facility or reimbursement but NOT in accordance with the terms: Tax Treatment is Medical allowance is exempt upto 10 % of Basic Salary and Facility / reimbursement is Fully taxable.
Labels: Taxation
posted @ 10:11 AM,
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Refund of Excess Tax
Tuesday, January 13, 2009
Section 170: Refunds states that
(1) A taxpayer who has paid tax in excess of the amount which the taxpayer is properly chargeable under this Ordinance may apply to the Commissioner for a refund of the excess.
(1A) Where any advance or loan, to which sub-clause (e) of clause (19) of section 2 applies, is repaid by a taxpayer, he shall be entitled to a refund of the tax, if any, paid by him as a result of such advance or loan having been treated as dividend under the aforesaid provision.
(2)An application for a refund under sub-section (1) shall be –
(a) made in the prescribed form;
(b)verified in the prescribed manner; and
(c) made within two years of the later of –
(i) the date on which the Commissioner has issued the assessment order to the taxpayer for the tax year to which the refund application relates; or
(ii) the date on which the tax was paid.
(3)Where the Commissioner is satisfied that tax has been overpaid, the Commissioner shall –
(a) apply the excess in reduction of any other tax due from the taxpayer under this Ordinance;
(b) apply the balance of the excess, if any, in reduction of any outstanding liability of the taxpayer to pay other taxes; and
(c) refund the remainder, if any, to the taxpayer.
(4) The Commissioner shall, within forty five days of receipt of a refund application under sub-section (1), serve on the person applying for the refund an order in writing of the decision after providing the taxpayer an opportunity of being heard.
(5) A person aggrieved by-
(a) an order passed under sub-section (4); or
(b) the failure of the Commissioner to pass an order under sub-section (4) within the time specified in that sub-section, may prefer an appeal under Part III of this Chapter.
Ref: Income Tax Ordinance, 2001
Labels: Taxation
posted @ 2:26 PM,
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