Amendments of Income Tax Ordinance, 2001

Proposed Amendments

Sub-section (17B) in Section 2 – New Insertion

The proposed insertion seeks to introduce “digital means”. Through the said insertion certain enforcement measures intended to broaden the tax base, enforce tax compliance, and enhance documentation.

A new rule requires all companies to make business payments through digital means for such amounts to be claimed as deductible for tax purposes.

Accordingly, all companies, regardless of size must make business payments through “digital means” in order for their expenses to qualify for tax admissibility. This implies that business taxpayers will no longer be allowed to pay business expenses by cheque or pay-order.

Section 21, Clause (Ia) – Amendment

Certain business expenditure payments through digital means made mandatory for claiming deductibility in case of companies.

The proposed amendment seeks this clause shall be made effective from such date as the Board may notify.

Sub-section (3) of Section 153 – Amendment

The proposed amendment seeks to clarify that the income of resident person referred to in sub-section (3) means the amount on which tax is deductible under sub-section (1) or (2) of this section.

Previously it was the amount on which tax deducted and not deductible.

Clause (e) in Section 165A – New Insertion

The bill proposed to insert new clause (e) whereby banks shall be under the legal obligation to provide a list of persons containing particulars of their business accounts opened or re-designated during each preceding calendar month.

Section 165A of the Income Tax Ordinance, 2001 inserted through the Finance Act, 2013 requires banking companies to provide information to FBR. By virtue of amendments introduced in section 165A of the Ordinance through the Finance Act, 2018 banks are obliged to make arrangements for providing the following information to the Board in the prescribed form and manner:-

a) List of persons containing particulars of cash withdrawals exceeding Rs. 50,000/- in a day and tax deduction thereon aggregating to Rs. 1 million or more during each preceding calendar month.

b) A list containing particulars of deposits aggregating Rs. 10 million or more made during the preceding calendar month.

c) A list of payments made by any person against bills raised in respect of a credit card issued to that person, aggregating to Rs.200,000/- or more during the preceding calendar month.

d) A list of persons receiving profit on debt and tax deduction thereon during the preceding financial year.

It would be pertinent to mention that banks shall be obliged to provide the information mentioned at Serial No (i), (ii) and (iii) to the Board on a monthly basis whereas the information at Serial No (iv) is to be provided on an annual basis.

Clause (t) in Section 216 – New Insertion

The bill proposed to insert new clause (t) whereby any high level public officials and public servants in BPS-17 and above, their spouses, children or benamidars, or any person in relation to whom the afore-mentioned persons are beneficial owner shall be legally obliged to make the information and documents confidential. However, nothing in clause (t) shall apply to those who are expressly excepted under clause (iv) of sub-section (m) of section 5 of the National Accountability Bureau Ordinance, 1999 (Ordinance No. XVIII of 1999).

Further for the purpose of this section here “High-level public officials” mean politically exposed persons as defined by a rule, regulation, executive order or instrument; or under any law for the time being in force.”;

Sub-section (3) of Section 233– Amendment

Section 233 relates to taxation of Brokerage and Commission.

The proposed amendment seeks to clarify that the Brokerage and Commission income of the advertising agent referred to in sub-sections (2B) and (3) means the amount on which tax is deductible under sub-section (1) or (2A) of this section.

Previously it was the amount on which tax deducted and not deductible.

Section 236CA – New Insertion

Advance tax on TV plays and advertisements

The bill proposed to insert new section 236CA whereby;

(1) Any licensing authority certifying any foreign TV drama serial or a play dubbed in Urdu or any other language, for screening and viewing on any landing rights channel, shall collect advance tax at the rates specified in Division XA of Part IV of the First Schedule.

(2) Any licensing authority certifying any commercial for advertisement starring foreign actor, for screening and viewing on any landing rights channel shall collect advance tax at the rates specified in Division XA of Part IV of the First Schedule.

(3) The tax required to be collected under this section shall be minimum tax in respect of income arising from such drama serial or play or advertisement referred to in sub-section (1) or (2) of this section.”;

Section 236Q – Amendment

This section relates to taxation of payment to residents for use of machinery and equipment.

The proposed amendment seeks to clarify that for the removal of doubt, it is explained that the income of person referred to in sub-section (3) means the amount on which tax is deductible under sub-section (1) or (2) of this section.”;

AMENDMENTS IN FIRST SCHEDULE

In Part I, in Division III

In clause (c) tax shall be 0% in case of dividend received by a REIT scheme from Special Purpose Vehicle and 35% in case of dividend received by others from Special Purpose Vehicle as defined under the Real Estate Investment Trust Regulations, 2015.

Previously tax rate under this clause was 25%.

In Part III, in Division I

The rate of tax to be deducted proposed to be 0% in case of dividend received by a REIT scheme from Special Purpose Vehicle and 35% in case of dividend received by others from Special Purpose Vehicle as defined under the Real Estate Investment Trust Regulations, 2015.

Previously tax rate under this clause was 25%.

In Part IV - In Division V

The bill proposed to seek amendment whereby the rate of collection of tax under section 236 in the case of subscribers of internet, mobile telephone and prepaid internet or telephone card shall be 15%.

Previously such rates are 10% for tax year 2022 and 8% onwards.

In Division VII - In clause (3) of the TABLE

S. No. Engine Capacity Tax

(1) Up to 1000cc Rs.100,000 Previously it is Rs. 50,000/-

(2) 1001cc to 2000cc Rs.200,000 Previously it is Rs. 100,000/-

(3) 2001cc and above Rs.400,000 Previously it is Rs. 200,000/-

Division XA – New Insertion

Advance Tax on TV plays and advertisements

The bill proposed to insert new section 236CA whereby the rate of tax to be collected under section 236CA shall be;

(a) Foreign-produced TV drama serial or play. Rs.1,000,000 per episode.

(b) Foreign-produced TV play (single episode). Rs.3,000,000.

AMENDMENTS IN SECOND SCHEDULE

In the Second Schedule;

In Part I:

In Clause (99) – New Insertion

The bill proposed to insert the words “Special Purpose Vehicle” after the words “REIT Scheme”.

In Clause (99A) – New Insertion

The bill proposed to insert after the word “property”, the words “or shares of Special Purpose Vehicle” shall be inserted; and

In clause (47B) in Part IV

The bill proposed to insert after the word “scheme”, occurring for the second time, the word including Special Purpose Vehicle“.