1.
TURNOVER TAX:
Previously retailers were liable to pay turnover @ of .75% having turnover up
to 5 million and 1% where turnover exceed 5 million. Through finance bill
2006 amendment has been made in section 113(b). Now the retailers having
turnover exceeding 5 million rupees tax is to be levied in the form of the
single stage sales tax @ 3% including 1% Income Tax.
2.
PAYMENT OF ADVANCE TAX:
Companies are liable to pay advance tax in equal four installments in
accordance with last declared or assessed Tax whichever is higher. Previously
penalty can be imposed @ 12% per annum where tax paid is less than 80% of
the tax payable as advance tax. Through finance bill 2006 proposed to raise
the above threshold of 80% to 90%.
3.
EXEMPTION CERTIFICATES:
Previously the Commissioner of income Tax is empowered to allow a
reduction up to 100% of the rate of advance tax payable at the import stage
where a manufacturer import raw material for its own use. The bill restricts
the power of Commissioner to allow reduction up to 75% of the advance tax
payable at the import stage.
Furthermore where a Taxpayer not being a commercial importer or
manufacturer importing plant and machinery is liable to pay tax at import
stage, the tax so deducted treated as final tax.
4.
PAYMENT FOR SERVICES RENDERED:
Payment for services rendered to a resident person was liable to withholding
tax @ 5%. The tax so deducted is adjustable against final tax liability.
Through finance bill 2006 tax deducted on services rendered to a resident
person shall be brought in final tax regime.
Further more services rendered to certain exporters such as stitching, dying,
printing, weaving, sizing, embroidery, is sought to be liable to withholding tax
at the rates which shall be the same as are applicable to the exporter of goods.
(0.75% to 1.5%).
5.
HIGHER RATE OF WITHHOLDING TAX.
Higher rate of withholding tax apply for payment to person not providing
NTN or CNIC. The bill seeks to impose additional pecuniary burden on
person attempting to keep themselves outside tax-net. Where a person not
having NTN or CNIC withholding tax shall be increased by 2% over the
prescribed rate.
6.
REDUCE RATE ON CERTAIN SUPPLIES WITHDRAWN:
Payment on account of supply of raw hides, skins and on account of
transportation subject to withholding tax at special rate. The said exemption is
withdrawn now payment on account of supply of raw hides, skins and
transportation through goods transport vehicles are subject to normal
applicable withholding rates.
7.
BROCKRAGE AND COMMISSION:
Previously commission Income of Indenting Commission Agents, Advertising
Agents and Yarn Agents was subject to withholding tax @ 5%. Through
finance bill 2006 the same has been increased to 10%. Now Brokerage &
Commission of kinds shall be liable to withholding tax @ 10%. The tax so
deducted shall be the final tax.
8.
FOREIGN INDENTING COMMISSION:
Foreign indenting commission is now subject to final tax by seeking to amend
sub-section (4) of section 154.
9.
WITHHOLDING TAX ON CASH WITHDRAWALS:
Withholding Tax on cash withdrawals from bank has been increased form
0.1% to 0.2%. The limit of 25,000/- per transaction has also been change to
per day. Where aggregate amount of a singe day increase Rs. 25,000/withholding @ 0.2% shall be charged.
10.
INCOME FROM PROPERTY
The bill seeks to introduce taxation of income from property on gross basis.
The gross rent is now proposed to be subject to withholding tax @ of 5% of
the rent received and the tax so deducted shall be the full and final discharge
of tax liability. Rent received up Rs. 300000/- per annum is not subject to
deduction of tax at source. This exemption has also been withdrawn. The
Taxpayer is obliged to file statement u/s 115(4) instead of Return of Income
u/s 114.
11.
PROFIT ON DEBT:
Profit on Debt received on an account, deposits, and certificates, saving
schemes, post office saving Accounts, debenture any securities is subject to
withholding tax @ 10%. Previously the tax so deducted was adjustable.
Through Finance Bill 2006 taxation on profit on debt brought under the final
tax regime in case of Individuals and Companies as well. The Taxpayer is
obliged to file statement u/s 115(4) instead of Return of Income u/s 114.
12.
INCOME FROM SALARY:
As per existing section 21 any expenditure paid or payable by the employer on
the provision of perquisites and allowances to an employee that exceeds 50%
of the employee’s salary for a Tax Year is treated as inadmissible expenditure
and added in the Income of Employer, through Finance Bill 2006 this
provision of section 21 is proposed to be omitted.
The bill proposed substantive changes in the basis of taxation of salary
income. The value of perquisites and allowances shall be included in the
taxable Income and Income Tax shall be lived on gross salary as per new rates
of Tax described. However, Medical allowance (medical treatment or
hospitalization or both remains) valid or unchanged.
Basic Exemption is proposed to be increase from 100,000/- to 150,000/- for
salaried Taxpayer. In case of women Salaried Taxpayer form 100,000/- to
200,000/TABLE OF NEW PROPOSED TAX RATES
GROSS SALARY
Upto Rs. 150,000/150,001 to 200,000/200,001 to 250,000/250,001 to 300,000/300,001 to 350,000/350,001 to 400,000/400,001 to 500,000/500,001 to 600,000/600,001 to 700,000/700,001 to 850,000/850,001 to 950,000/950,001 to 1,050,000/1,050,001 to 1,200,000/1,200,001 to 1,500,000/1,500,001 to 1,700,000/1,700,001 to 2,000,000/2,000,001 to 3,150,000/3,150,001 to 3,700,000/3,700,001 to 4,450,000/4,450,001 to 8,400,000/Over Rs. 8,400,000/-
RATE OF TAX (%)
Nil
0.25
0.50
0.75
1.50
2.50
3.50
4.50
6.00
7.50
9.00
10.00
11.00
12.50
14.00
15.00
16.00
17.50
18.50
19.00
20.00
13.
SENIOR CITIZEN REBATE:
Age limit for obtaining 50% rebate of senior citizen in Tax payable has been
reduced form 65 year to 60 year. The limit of income has also been increased
from 300,000/- to 400,000/- rupees.
14.
INCOME FORM REAL ESTATE INVESTMENT TRUST:
Bill proposed that any income derived by a Real Estate Investment Trust shall
be exempt from tax if not less than 90% of its income of that year is
distributed amongst the unit-holders.
15.
FILLING OF STATEMENT U/S 165.
CBR has directed the stock exchanges to file statement under section 165 on
monthly basis. Finance bill 2006 proposed filling of statements of certain
other deductions on a monthly basis is the legislature empowers the CBR to
do so. E-Filling of WHT statements by certain prescribed withholding agents
proposed to be made mandatory.
At present Commissioner of Income Tax is not empowered to grant extension
of time for filling of annual and quarterly statements. The bill seeks to
empower the Commissioner of Income Tax to grant extension of time.
16.
NEW RATES OF INCOME TAX:
Basic Exemption of Rs. 100,000/- for individuals other than salaried
individuals and A.O.P shall remain unchanged. However, Exemption for
woman Taxpayer is increased to Rs. 125,000/- Table of new tax Rates is as
under: TAXABLE INCOME
Upto Rs. 100,000/100,001 TO 110,000/110,001 TO 125,000/125,001 TO 150,000/150,001 TO 175,000/175,001 TO 200,000/300,001 TO 400,000/400,001 TO 500,000/500,001 TO 600,000/600,001 TO 800,000/800,001 TO 1,000,000/1,000,001
TO 1,300,000/Over Rs. 1,300,000/-
RATE OF TAX (%)
NIL
0.50
1.00
2.00
3.00
4.00
7.50
10.00
12.50
15.00
17.50
21.00
25.00
17.
CVT ON PROPERTY
CVT @ 2% is proposed to be imposed on value of land as per registered Sales
Deed on property measuring 500 sq. yds or 1 canal whichever is lesser.
However this limit is not applicable to commercial property.
18.
WITHHOLDING TAX AND CVT ON SALES/PURCHASE OF
SHARES:
Withholding Tax and CVT on sales/purchase of shares has been doubled
withholding tax in trading transaction has been increased form 0.005% to
0.01%. The CVT has been raised from 0.1% to 0.2%.
19.
FILLING OF RETURN BY NON-PROFIT ORGINASATIONS:
The Bill proposed to make filling of Return of Income mandatory for any
Non-Profit Organizations and welfare institutions.
20.
WITHHOLDING TAX ON IMPORT OF COMPUTER HARDWARE:
Withholding Tax on import of Computer Hardware has been slashed from 6%
to 1%. Custom duty @ 5% has also been withdrawn. However, Sales Tax @
15% has been imposed on Import of Computer Hardware.
21.
COLLECTION OF WHT AT IMPORT STAGE:
In case of goods import for trading the bills introduce 22 items on which
withholding tax is proposed @ 1 % and 3 items on which withholding tax is
proposed @ 2% at import stage. For the purpose the bill seeks to insert clause
(13G) & (13H) to section 148.
22.
EXPORT OF LOCALLY PRODUCED TELEVISION PROGRAMMES:
The bill proposed to exempt export of locally produced television
programmes.
23.
RATE OF TAX ON DIVIDEND RECEIVED BY (PVT) LITD. CO.:
The rate of dividend received by a resident private limited company, insurance
company and any other resident company, which is presently 10%, is
proposed to be curtailed to 5%.