A. Qadir & Company
1
1

Organized by
by
On June 4, 2012
2

• Taxation of Income from Salary _Value of Perquisites;
• Capital Gains on disposal of Immoveable Property, Cost &
Consideration;
• Tax Credit on Investment in Plant and Machinery;
• Tax credit for newly established industrial undertakings;
• Tax credit for industrial undertakings established before the first day of July, 2011;
• Special Provisions relating to Capital Gain Tax on disposal of listed Securities;
• Minimum Tax;
• Revision of Return of Income;
• Assessment ;
• Amendment of Assessment ;
• Procedure in Appeal;
3

• Decision in Appeal;
• Deducted v/s Deductable;
• Payment to Non-resident;
• Taxation of PE of a Non-Resident Person;
• Payment to Traders and Distributor;
• Condonation of time limit;
• Rate of tax for Individuals & AOPs;
• Reduction in tax rate;
• Exemptions from specific provisions;
• Opting out of Final Tax Regime;
• Initial Allowance and First Year Allowance;
• Capital Gain Tax on disposal of Securities by Insurance
Cos;
• Payment of tax by Exploration and Production Companies;
• Tax on Dividend Income of Banking Companies;
4

Loan received by an employee from the employer Section 13 (7)
Presently, where loan is received by an employee and either no profit on loan is paid, or the rate of profit on loan is less than the benchmark rate of 14% (Tax year 2012), the difference between profit and bench mark rate, is treated notional income for the purpose of taxation.
The Finance Bill now seeks to give relief to the employees availing loans up to Rs.500,000/-, where no such profit or difference of profit and bench mark rate would be included in the taxable salary and also proposes to fix the bench mark rate at 10% in order to provide relief to the employees.
A. Qadir & Company
5

Section 37 (1A), 76 & 77
The Finance Bill seeks to impose tax on capital gains on disposal of immovable property and accordingly new sub-section (1A) has been introduced; whereby, the capital gain derived from disposal of such property shall be taxable where such property is held for less than two years, at the following rates:-
6

Section 76 & 77
The Finance Bill also seeks to authorize the Board to make or prescribe rules for the determination of cost of and consideration received for any asset.
Apparently, this is proposed to avoid conflicts in the determination of cost & consideration and not to give discretionary power to the assessing officer.
A. Qadir & Company
7

Tax Credit on Investment in Plant and Machinery-
Section 65B
The Finance Bill proposed to amend sub-section (1), substitute sub-section (4) and (5) and insert subsection (6); whereby:-
(i) It has been elaborated that for the purpose of providing tax credit “tax payable” would include minimum tax and final tax payable;
(ii) The tax credit equal to 20% of the amount invested during 01-07-2011 and 30-06-2016, shall be available to the company set-up in
Pakistan before 01-07-2011.
A. Qadir & Company
8

(iii) In case of taxpayer being a Company set-up in Pakistan before the 01-07-2011, the unutilized tax credit may be carried forward and deducted from the tax payable up-to five tax years.
This section also provides that any credit is allowed and subsequently if it is discovered by the
Commissioner that any one or more of the conditions specified was, or were, not fulfilled, the
Commissioner may re-compute the tax payable by the taxpayer for the relevant year and the provisions of this Ordinance shall, so far as may be, apply accordingly.
A. Qadir & Company
9

The Finance Bill, proposes to amend sub-section
(1); whereby:-
(i) The tax credit under this section would also be available to the “Corporate Dairy Farming”;
(ii) It has been elaborated that for the purpose of tax credit, “Tax Payable” would include minimum tax and final tax.
A. Qadir & Company
10

(iii) It has been also clarified that the “Equity” is an amount which is raised through issuance of new shares for cash consideration and short term loans and finances obtained from banking companies or non-banking financial institutions for the purposes of meeting working capital requirements shall not disqualify the taxpayer from claiming tax credit under this section
(iv) The Finance Bill also proposed that an industrial undertaking shall be treated to have been setup on the date on which it is ready to go into production, whether trial production or commercial production.
A. Qadir & Company
11

In my view sub-section (1) provides that the tax credit is available for five years beginning from the date of setting-up or commencement of production, whichever is later. On the other hand sub-section (3) states that tax credit shall be deducted from the tax payable in respect of the tax year in which the plant or machinery is purchased and installed, which means a one time tax credit only would be allowed.
Generally tax is not payable in the first few years of set-up of new industrial undertaking; therefore I am of the view that there should be concept of carry forward of unabsorbed tax credit as it is available in section 65E (3) & (4) of the Ordinance.
A. Qadir & Company
12

The Finance Bill proposes to substitute Sub-Sections
(1), (2), (3) and (4); whereby:-
(i) The tax credit for a period of five years would also be available to “Corporate Dairy
Farming” for the purposes of:-
(a) expansion of plant and machinery already therein; or
(b) undertaking a new project.
(ii) The tax credit would be available for a period of five years from the date of setting-up or commencement of commercial production from the new plant or expansion project, whichever is later.
A. Qadir & Company
13

(iii) Where a taxpayer maintains separate accounts of an expansion project or a new project, as the case may be, the taxpayer shall be allowed a tax credit equal to one hundred percent of the tax payable, including minimum tax and final tax payable under any of the provisions of this Ordinance, attributable to such expansion project or new project.
(iv) It has been elaborated that for the purpose of tax credit “Tax Payable” would include minimum tax and final tax.
A. Qadir & Company
14

(v)Presently tax credit is allowable in the proportions, which exist between the total investment and such equity investment made by the industrial undertaking. Since the total investment and equity investment are not defined; therefore following appropriate substitution has been proposed through the Finance Bill, 2011.
“In all other cases, the credit under this section such proportion of the tax shall be payable, including minimum tax and final taxes payable under any of the provisions of this
Ordinance as is the proportion between the new equity and the total equity including new equity .
” vi) The Finance Bill also proposes to insert Sub- Section
(7); whereby the term “New Equity” has been defined which I have explained in detail while dealing with Section 65D.
A. Qadir & Company
15

Special Provisions relating to Capital Gain Tax on Disposal of listed Securities Section 2(35AA), 37A, 100B, 8 th Schedule
Section 37A was inserted by the Finance Act, 2010, which provides taxation of Capital Gains arising on or after July 1, 2010 on disposal of securities held for a period of less than a year, which was exempt for almost
36 years under Clause (110) of the First Schedule to the Ordinance. This provision is not applicable to the
Banks and Insurance Companies.
The SECP presented a concept paper early this year; wherein it was highlighted that the Capital Market has always shown willingness to pay taxes as CVT and withholding tax imposed in the year 2004, which were doubled in 2006 and were well absorbed by the market, since there was:-
A. Qadir & Company
16

 Ease of transaction;
 Economic Viability; and
Minimum interaction with tax authorities .
It was therefore proposed by the SECP that:-
(i) Applicability of Section 111 of the Ordinance, requiring unexplained income or assets may be deferred for funds invested in CM;
(ii)To abolish the WHT under Section 233A(1)(c);
(iii) Freeze the existing CGT rate at the current rate applicable for the tax year 2012; and
(iv) A centralized collection mechanism be allowed at
NCCPL, who shall act as a withholding agent for
CGT from investors’ transactions.
A. Qadir & Company
17

The Ordinance No.III of 2012 was promulgated on 24-04-2012 and the contents of the above Ordinance which have been made part of the proposals made through the Finance Bill,
2012 to have the legislative approval. Following are the highlights:-
(i) NCCPL has been made responsible to compute, determine Capital Gains, collect tax thereon and deposit on behalf of the investors excluding the following:-
(a)
(b) a mutual fund; a banking company, a non-banking finance company, and an insurance company subject to tax under the Fourth Schedule;
(c) a modaraba;
(d) a “foreign institutional investor” being a person registered with NCCPL as a foreign institutional investors; and
(e) any other person or class of persons notified by the
Boards
A. Qadir & Company
18

ii) Clause (c) of Sub-Section (1) of Section 233A is proposed to be omitted; which relates to adjustable tax collected by the Stock Exchange from its members, in respect of trading of shares by the members; iii) The respective provisions for collection and recovery of tax, advance tax and deduction of tax at source laid down in the Parts IV and V of Chapter (X) shall not apply on the income from capital gains subject to tax under this Schedule and these provisions shall apply in the manner as laid down in the rules made under this
Ordinance, except where the recovery of tax is referred by NCCPL to the FBR in terms of Rule 6(3) of Eight
Schedule to the Ordinance.
A. Qadir & Company
19

(iv) The CGT Rates proposed to have been freeze at the existing level. Following is the comparison
:-
S.
No.
1
Period
Where holding period of a security is less than six months
2
3
Where holding period of a security is more than six months but less than twelve months
Where holding period of a security is twelve months or more
A. Qadir & Company
Tax
Year
2011
2012
2013
2014
2015
2011
2012
2013
1014
2015
___
Existing
Rate of Tax
10.0%
10.0%
12.5%
15.0%
17.5%
7.5%
8.0%
8.5%
9.0%
9.5%
10.0%
0%
Proposed
Rate of Tax
10.0%
10.0%
10.0%
10.0%
17.5%
7.5%
8.0%
8.0%
8.0%
9.5%
10.0%
0%
20

( v)Regarding source of investment it is provided that _
(a) where a person has made any investment in the listed securities, enquiries as to the nature and source of the amount invested shall not be made for any investment made prior to the introduction of this
Schedule, provided that the amount remains invested for a period of forty- five days up-to 30th of June 2012; and
(b) Where a person has made any investment from the date of coming into force of this Schedule till June
30, 2014, enquiries as to the nature and sources of amount invested shall not be made provided that the amount remains invested for a period of one hundred and twenty days in the manner as may be prescribed ;
A. Qadir & Company
21

(vi) An investor may opt out from the provision of law in respect of determination and collection of CGT by
NCCPL by filing an irrevocable option with NCCPL and after having prior permission from the
Commissioner. In this case the exemption from inquiry regarding the source of investment in the shares of listed securities would not be available.
The Finance Bill also proposes to amend provisions of 37A to exclude exempt capital gains and also to provide formula for computation of capital gain on sale of listed securities.
A. Qadir & Company
22

Minimum tax is applicable on resident company, association of persons having annual turnover of Rs 50 million or above in the tax year 2007 or in any subsequent year or an Individual having annual turnover of Rs 50 million or above in the tax year 2009 or in any subsequent year. It is payable @ 1% of turnover where there is no tax payable or paid by above persons or tax payable or tax paid is less than the tax calculated @ 1% of turnover due to:-
•
Loss for the year;
• The setting off of a loss of an earlier year;
• Exemption from tax;
• The application of credits or rebate; or
• The claiming of allowance or deduction (including depreciation) and amortization deductio n.
A. Qadir & Company
23

However, the reduction in minimum tax payable is available to the various companies and class of business.
Minimum tax is also not payable by certain Companies and Sectors.
On examination of Budget Speech, Salient Features –
Budget 2012-13 and subsequent press conference; it is observed that it was stated by the honorable Finance
Minister that “minimum tax was levied @ 1% on gross turnover through Finance Act, 2010. Various sectors of economy agitated the enhanced rate of minimum tax.
Therefore, in the case of business community the rate of minimum tax is proposed to be reduced to 0.5% from 1% on gross turnover.
” However no amendment has been proposed through Finance Bill in Section 113 to give effect to the intention of the legislative body.
A. Qadir & Company
24

Revision of Return of Income Section 114(6)
Presently, any person who discovers any omission or wrong statement after filing of return may file revised return along with revised accounts or revised audited account and reasons for revision in writing duly signed by the taxpayer. The Finance Bill now seeks to impose a condition that the taxable income in revised return should not be less than or loss declared in revised return should not be more than the amount, as the case may be, determined by an order under sections121, 122 ,122A ,122C , 129 , 132 , 133 or 221
The Bill further proposes that the revised return filed by any person in contrary to the above conditions shall render such revised return invalid as if it had not been furnished..
A. Qadir & Company
25

Assessment Section 120(6)
A complete return filed by the taxpayer is deemed to be an assessment order issued by the Commissioner u/s 120(1) of the Ordinance. The Commissioner is authorized under section 120(3) to issue notice within the close of financial year in which return was furnished by the taxpayer, stating the deficiencies in the return filed by the taxpayer and allowing him to remove the deficiencies. Non compliance of said notice from taxpayer renders the return invalid u/s
120(4) as if it had not been furnished.
The Finance Bill now seeks to extend limitation period for issuance of such notice; whereby the Commissioner can issue notice within 180 days from the end of financial year in which return was furnished.
A. Qadir & Company
26

Amendment of Assessment Section 122
Presently, sub-section (1) provides that the
Commissioner may amend an Assessment Order treated as issued under Sections 120 or 121 of the
Ordinance or 59, 59A, 62, 63 or 65 of the repealed
Ordinance by making such alterations or additions as the Commissioner considers necessary.
The Finance Bill now seeks to provide power to the
Commissioner to amend the assessment order that has been issued u/s 122C of the Ordinance.
The Finance Bill also seeks to delete the references of sections 59, 59A, 62, 63 or 65 of the repealed Income
Tax Ordinance, 1979 being redundant and superfluous
A. Qadir & Company
27

Sub-Section (5A) of Section 122 of the Ordinance provides that the Commissioner may amend, or further amend an Assessment Order, if he considers that the assessment order is erroneous in so far it is prejudicial to the interest of revenue.
Corresponding Section 66A of the repealed Ordinance, however provided powers to the Inspecting Additional
Commissioner to make or cause to be made, such enquiry as deem necessary.
The Finance Bill seeks to extend similar powers to the
Commissioner to amend the order u/s 122(5A) after making or causing to be made, such enquiries as he deems necessary
A. Qadir & Company
28

Procedure in Appeal Section 128
Presently, the Commissioner Inland Revenue (Appeals), keeping in view the vested right and judicial pronouncements is granting stay of demand without any time restriction, in cases where the tax levied is causing undue hardship to the appellant. Now the Finance Bill seeks to give powers to the Commissioner (Appeals) to stay the recovery of tax levied in the assessment order in appeal for a period not exceeding 30 days in aggregate providing an opportunity of being heard to the
Commissioner against whose order appeal has been made. We feel that under the circumstance explained above, stay must be granted till the disposal of appeal or provision related to time limit to finalize the appeal within
30 days must be incorporated
A. Qadir & Company
29

Decision in Appeal Section 129
Presently sub-section (5) of Section 129 provides that where the Commissioner (Appeals) has not made an order on an appeal before the expiration of four months from the end of the month in which the appeal was filed, the relief sought by the appellant in the appeal shall be treated as having been given and all the provisions of this
Ordinance shall have effect accordingly.
The Finance Bill seeks to done away with the limitation period of 4 months for disposal of appeal by the
Commissioner (Appeals) prescribed in Section 129(5) of the Ordinance. Corresponding sections 129(6) & 129(7) have also been proposed to be omitted being become redundant and superfluous on omission of Section 129(5).
A. Qadir & Company
30

Appointment of the Section 130(4)
Appellate Tribunal
Upto the year 2007, only an officer of the Income Tax
Group equivalent in rank to that of a Regional
Commissioner was eligible for Accountant Member of ATIR.
The Finance Act, 2007 however made changes in the law adding the Commissioner Inland Revenue or
Commissioner (Appeals) to hold the position of
Accountant Member of ATIR who have served as
Commissioner or Collector for 5 years.
A. Qadir & Company
31

Appointment of the Section 130(4)
Appellate Tribunal
The Finance Bill now seeks to relax the minimum qualifying period of services of any Commissioner
Inland Revenue Services or Commissioner Inland
Revenue Services (Appeals) as Commissioner or
Collector from 5 years to 3 years for holding the post of Accountant Member of Income Tax Appellate
Tribunal Inland Revenue (ATIR).
Presently, the judicial member can be appointed as
Chairperson of the ATIR by the Federal Government unless special circumstances exist for appointment of Accountant Member as Chairperson.
A. Qadir & Company
32

Appointment of the Section 130(4)
Appellate Tribunal
The Finance Bill seeks to done away with the requirement of existence of special circumstances for appointment of Accountant Member as
Chairperson of ATIR.
Thus, either Accountant
Member or Judicial Member can be appointed as
Chairperson of ATIR.
In our view, the Legislator should reconsider the eligibility of appointment of Accountant Member as
‘Chairman’ of ATIR, being a Judicial Forum, should have its Chairman from Judicial exposure and experience.
A. Qadir & Company
33

Deducted V/S Deductable and insertion of “Required to be”
In section 148(7) & (8) and section 233 the words
“required to be” are being added to hold that not only the tax collected, but the tax required to be collected will be a final tax. Thus, even if the tax has not been collected for any reason the person will have to pay the same as it was required to be collected.
Similarly, in section 151, 152, 153, 154 ,156, 156A and 233 the tax “deducted” is being replace by tax
“deductable”.
This means that the default; if any would be determined if the tax was deductable and not if it was not deducted.
A. Qadir & Company
34

Payment to Non-Residents- Sections 152, 153 & 153A
Section 152 deals with the taxability of non resident persons.
Certain provisions relating to non-resident persons were appearing in other sections of the
Ordinance. The Finance Bill now proposes to consolidate such provisions as under:a) Non-resident Media Persons
The tax deducted from non-resident media person relaying from outside Pakistan has now been placed under Section 152 by inserting a new sub-section (1AAA).
Presently, such payments are covered u/s 153A of the
Ordinance. The rate of tax of 10% shall remain the same and the tax so deducted is final discharge of tax liability of non-resident media persons as Pakistan source Income.
A. Qadir & Company
35

b) Taxation of PE of a Non-resident Person
The Finance Bill proposes amendments in Sections 152,
153 and 153A of the Ordinance; whereby the word
“Permanent Establishment in Pakistan of a non-resident person” appearing in Section 153(1) and 153(3) of the
Ordinance and the word ‘153’ as appearing in Section
152(3)(a) of the Ordinance have been omitted.
Moreover there appears some error in the Finance Bill, as with the proposed consolidation of above referred sections, taxation of PE needs to be defined in Section
152 of the Ordinance.
Although deduction rates for payment to PE have been proposed in Clauses (4), (5) and (6) of Part-III of Division-II of First Schedule to the
Ordinance, but apparently proposed insertion of subsection required in the referring section is missing.
A. Qadir & Company
36

Payment to Traders and Distributors- Section 153A
The Finance Bill now proposes to substitute Section
153A ; whereby every manufacturer at the time of sale to distributors, dealers and wholesales shall be required to collect tax @ 1% as prescribed in Part IIA of the First Schedule. The tax so collected will be adjustable against the tax liability of distributor, dealers and wholesaler.
The proposed amendment appears to aim at the documentation of the economy and broadening of the tax net.
A. Qadir & Company
37

In our view, this will be an additional burden on distributors, dealers and wholesalers due to the following reasons:-
• Large distributors, dealers and wholesalers are mostly registered under the Sales Tax Act, 1990. Moreover, the existing sales tax law requires every registered person to provide CNICs of buyer and, accordingly, such persons are already in the tax net of FBR.
• Distributors, dealers and wholesalers in majority of cases, operate under fixed commission basis and the tax is deductible on their Income under Section 233 of the
Ordinance which constitutes full and final tax liability of income against such business. This will not only create extra financial burden but will also increase corruption.
A. Qadir & Company
38

Condonation of time limit Section 214A
This section was inserted through the Finance Act,
2009. However, it was not very clear that the condonation of time limit was for both the taxpayer as well as the subordinate authorities of the Board for any time or period specified under the provisions of the Ordinance or Rules there-under.
Therefore, the Finance Bill now seeks to clarify that
“any act or thing is to be done” includes any act or thing to be done by the taxpayer or by the authorities specified in Section 207.
A. Qadir & Company
39

Rate of tax for Individuals& AOP-The First Schedule
The Finance Bill proposes as under:-
I.
To increase basic threshold for charge of Income tax for both salaried and non- salaried persons has been raised from Rs. 350,000/- to Rs.
400,000/-.
II. Number of slabs in the case of a salaried person have been reduced from the existing 17 to 5 and in the case of an individual from 6 to 5.
III. Tax on AOP would be charged at the progressive rates prescribed for individuals instead of existing flat rate of 25%.
A. Qadir & Company
40

Reduction in tax rate Clause(9) of Part III of the
Second Schedule
As per this clause tax is collected at a reduced rate of 3% on import of raw material by an industrial undertaking for its own use. At present, the industrial undertakings are not required to obtain exemption certificate u/s 159 (1A) for such reduced rate on import.
The Finance Bill now proposes that such exemption will be available only after issuance of exemption certificate by the Commissioner to such taxpayers.
This could create hardship to genuine importers and may increase corruption.
A. Qadir & Company
41

Exemptions from Clauses 11B,11C 16A & 47B specific provisions of Part IV of the 2 nd Schedule
•At present, the inter-corporate dividends within the group companies entitled to group taxation or group relief under
Section 59AA or Section 59B are exempt under Clause
103A of Part I of Second Schedule. The Finance Bill proposes to provide exemption from withholding of tax on such dividends paid within the group companies entitled to group taxation or group relief under Section 59AA or
59B.
•Similarly, the profit on debt is subject to withholding of tax at the rate of 10%. The Finance Bill proposes to provide exemption from withholding of tax on such profit on debt paid within the group companies entitled to group taxation or group relief under Section 59AA or 59B.
A. Qadir & Company
42

•At present, in view of Clause (16A) of Part I, the provisions of section 153(1)(b) are not applicable to the news print media services in respect of the advertising services. As per proposed substitution by the Finance
Bill the persons making payments to electronic and printing media shall enjoy such exemption.
•At present, the provisions of sections 150, 151 and 233 are not applicable to any person making payments to approved retirement scheme or collective investment scheme, as provided under clause 47B of Part IV. Now, the Finance Bill proposes to allow such exemption to the payments made against Capital Gain on disposal of securities chargeable under Section 37A read with
Division VII of Part-I of First Schedule.
A. Qadir & Company
43

Opting out of Clauses 41A,41AA & 41AAA
Final Tax Regime of Part IV of the 2 nd Schedule
1. The Finance Bill proposes incentives for opting to
Normal Tax Regime (NTR) from Final Tax Regime
(FTR) for Importers, Exporters and Suppliers. For exercising the proposed option the minimum tax liability under NTR of the importers shall not be less than 60% of tax already collected u/s 148;
2. Whereas, the exporters shall exercise such option, their minimum tax liability under NTR must not be less than 50% of tax already deducted u/s 154; and
3. The minimum tax liability under normal law payable by suppliers on sale of goods shall not be less 70% of tax already deducted u/s 153 (1) (a).
A. Qadir & Company
44

Initial Allowance and Third Schedule
First Year Allowance
The Finance Bill proposes to reduce initial depreciation from 50% to 25% in case of building.
However on Plant and Machinery it would remain
50%
A. Qadir & Company
45

Capital Gain Tax on disposal of Fourth Schedule
Securities by Insurance Companies
The Finance Bill proposes to substitute Rule 6B of the
Fourth Schedule; whereby the following rates of tax on
Capital Gains on disposal of listed securities earned by the Insurance Companies have been rationalized.
S. No.
Tax Year Where holding period of securities is less than six months
3
4
5
(1)
1
2
(2)
2011
2012
2013
2014
2015
(3)
10.0%
10.0%
12.5%
15.0%
17.5%
Where holding period of securities is more than six months but less than twelve months
(4)
8.0%
8.0%
8.5%
9.0%
9.0%
A. Qadir & Company
46

Payment of tax by Exploration Fifth Schedule and Production Companies
Part-I of this Schedule prescribe rates for the computation of Profits and Gains of Petroleum Exploration and
Production (E&P).
The tax is payable by E&P companies as per Petroleum Concession Agreements signed by them with the Federal Government at minimum rate of 50% and maximum rate of 52.50 % to 55%; whereas, the tax authorities normally applies the maximum rate of 52.50% and 55% depending on the respective Concession
Agreements. Furthermore, the royalty paid by the E&P companies is not being allowed as deductable expenses. In the meantime the larger bench of the Appellate Tribunal
Inland Revenue of Pakistan vide its order dated 13 June,
2011 decided the impugned issues and confirm the interpretation of tax authorities.
A. Qadir & Company
47

The tax department after that decision initiated recovery proceedings and substantial amount of tax recovered from such companies.
The Finance Bill now seeks to offer an option to E&P companies to pay 40% tax of their Profits and Gains instead of 52.50% or 55% of tax levied by the tax authorities. The Finance Bill also proposes to allow the amount of royalty as deductable expense. However, only those E&P will exercise this option who
1. withdraws their pending appeals, references and petitions before the appellate forum; and
2. make payment of whole of the outstanding tax liability created under this Ordinance up-to tax year 2011 by 30 th
June, 2012.
The above option is available only for one time and irrevocable.
A. Qadir & Company
48

Tax on Dividend Income of Seventh Schedule
Banking Companies
The Finance Act, 2011 inserted Second Proviso to
Rule (6) of the Seventh Schedule to the Ordinance; whereby the rate of tax on “Dividend” received by the banking companies was enhanced from 10% to
20% in case it is received from its asset management company.
In fact investments in Government
Securities, Bonds, Treasury Bills is being made by the Fixed Income and Cash funds and bank mostly receive dividends from such Funds in cash or in the shape of stock dividends managed by various assets management companies including its own asset management company.
A. Qadir & Company
49

Therefore it was proposed that the aforesaid proviso may be substituted whereby the “Cash or Stock
Dividend” received by a banking company from fixed income funds or cash funds or its asset management company shall be taxed at the rate of 20% .
The Finance Bill now proposes to insert third proviso in Rule (6); whereby the dividend received from
Money Market Funds and Income Funds shall be taxed at the rate of 25% for tax year 2013 and at the rate of 35% for tax years 2014 and onwards.
We feel the words “Stock Dividend” should also be inserted in order to tax every form of dividend.
A. Qadir & Company
50

51