FINANCE ACT 2024---Updated.pptx presentation

Presentation on finance act, 2024

1. FI N A N C E A C T 2024 AM E N D M E N T S O F I N C O M E T A X O R D IN A N C E 2 1 ( XL I X O F 2 01 ) Amer Javed Ahmad Ra f aq a t B a b a r & C o , C h a r te re d A cc o un t a n t s Fi r s t Fl oo r , Aman C e n t e r , N ear Cu s t o m Ho u s e U n i v e r s ity R o a d , P esh a w ar P h o n e : + 92 - 91 - 5 70 3 1 5 1 - 2, Fa x : + 9 2 - 9 1 - 5 7 3 1 53 amer@ r a f a q a tba b a r . c o m ww w . r a f a q a tba b a r . c o m

2. PRESENTATION TOPICS AMENDMENTS IN INCOME TAX ORDINANCE 2001 (XLIX OF 2001) INCOME FROM SALARY NON-SALARIED INDIVIDUAL & ASSOSIATION OF PERSONS REAL-ESTATE SECTOR CAPITAL GAINS- PRIVATE COMPANY SHARES ADVANCE TAX & WITHHOLDING TAX NON-RESIDENT PERSONS RETURNS & STATEMENTS AUDIT, ASSESMENT, APPEALS,RECTIFICATION & ADRC ANTI-AVOIDANCE PROVISONS PENAL PROVISIONS ADMINISTRATIVE CHANGES AND CORRECTIONS OTHERS CVT

3. INCOME TAX ORDINANCE  2001  

4. INCOME FROM SALARY

5. INCOME FROM SALARY : Tax rates of Salaried Individuals Paragraph 2, Division I, Part-I, First Schedule; Surcharge, Section 4AB; Super Tax, Section 4C; Reduction in tax liability of a teacher, researcher, Clause 2, Part-III, Second Schedule; Deduction of tax by employer, Section 149. A salaried individual is a person whose salary is in excess of 75% of his taxable income. The new applicable rates on salaried individual as follows:

6. S No. Taxable Income Rate of Tax 1 Where the taxable income does not exceed Rs.600,000. 0% 2 Where the taxable income exceeds Rs.600,000 but does not exceed Rs.1,200,000. 5% of the amount exceeding Rs.600,000. 3 Where the taxable income exceeds Rs.1,200,000 but does not exceed Rs.2,200,000. Rs.30,000 + 15% of amount exceeding Rs.1,200,000. 4 Where the taxable income exceeds Rs.2,200,000 but does not exceed Rs.3,200,000. Rs.180,000 + 25% of  amount exceeding Rs.2,200,000.  5 Where the taxable income exceeds Rs.3,200,000 but does not exceed Rs.4,100,000. Rs.430,000 + 30% of amount exceeding Rs.3,200,000. 6 Where the taxable income exceeds Rs.4,100,000. Rs.700,000 + 35% of the amount exceeding Rs.4,100,000.

7. In a d diti o n to the above, a s u r c har g e of 1 0% of tax li ab ility under Divisi o n I above i s a l so pay ab l e under s e ctio n 4AB in cas e of an i n divi du al (inc l u d i ng s a l a r ied ind i vi d ual) or A ssoc i at i on of P er s o n having tax a ble income i n e xces s of R s .1 m i llio n; The surcharge is applicable in respect of tax liability under Division I only therefore if a person has FTR or fixed tax regime income, such FTR/ Fixed tax regime income and tax liability thereupon shall not be considered for the purpose of calculation of surcharge; Section 149 has been modified whereby the employer is required to estimate tax liability including surcharge under section 4AB and deduct tax from salary accordingly; Teachers and researchers working in Government and non-profit organizations are eligible for 25% reduction in tax liability in respect of their income from salary. In the finance bill, this facility was proposed to be withdrawn, however it was finally decided not to be withdrawn hence this proposed change had not been enacted through Finance Act, 2024. Please see below detailed workings of a salaried individual at various levels of income.

8. Income of salaried person Tax liability 2025 Tax liability 2024 Effective tax rate Annual Monthly Tax Div I Surcharge Total Tax Div I 2025 2024 Increase 900,000 75,000 15,000 - 15,000 7,500 2% 1% 100% 1,200,000 100,000 30,000 - 30,000 15,000 3% 1% 100% 1,500,000 125,000 75,000 - 75,000 52,500 5% 4% 43% 1,800,000 150,000 120,000 - 120,000 90,000 7% 5% 33% 2,100,000 175,000 165,000 - 165,000 127,500 8% 6% 29% 2,400,000 200,000 230,000 - 230,000 165,000 10% 7% 39% 2,700,000 225,000 305,000 - 305,000 232,500 11% 9% 31% 3,000,000 250,000 380,000 - 380,000 300,000 13% 10% 27% 3,600,000 300,000 550,000 - 550,000 435,000 15% 12% 26% 4,200,000 350,000 735,000 - 735,000 600,000 18% 14% 23% 4,800,000 400,000 945,000 - 945,000 765,000 20% 16% 24% 5,400,000 450,000 1,155,000 - 1,155,000 930,000 21% 17% 24% 6,000,000 500,000 1,365,000 - 1,365,000 1,095,000 23% 18% 25% 7,200,000 600,000 1,785,000 - 1,785,000 1,515,000 25% 21% 18% 8,400,000 700,000 2,205,000 - 2,205,000 1,935,000 26% 23% 14% 9,600,000 800,000 2,625,000 - 2,625,000 2,355,000 27% 25% 11% 10,800,000 900,000 3,045,000 304,500 3,349,500 2,775,000 31% 26% 21% 12,000,000 1,000,000 3,465,000 346,500 3,811,500 3,195,000 32% 27% 19%

9. F u r t her, s u p e r tax i s a l so a p p l icable o n sal a rie d i n div i d u al having i nc o m e i n e x c e s s o f R s.1 5 m illi o n as def i ned in s e c t ion 4C of Inc o m e T a x O r din a nc e , 200 1 . Pl e ase n ote that t he a p plic a bili t y of s u p e r tax is not i ntr o d u c e d thr o ugh c u r ren t fin a nce act but a l re a dy applicable under sect i on 4C and there i s n o c hange in rat e s of su p e r tax. S. No Income Under Section 4C Rate of Tax TY 2022 TY 2023 & onwards 1   Where Income exceeds PKR 150 million but does not exceed PKR   200 million 1% 1% 2   Where Income exceeds PKR 200 million but does not exceed PKR   250 million 2% 2% 3   Where Income exceeds PKR 250 million but does not exceed PKR   300 million 3% 3% 4   Where Income exceeds PKR 300 million but does not exceed PKR   350 million 4% 4% 5   Where Income exceeds PKR 350 million but does not exceed PKR   400 million 6% 6   Where Income exceeds PKR 400 million but does not exceed PKR   500 million 8% 7   Above Rs. 500 million 10%

10. WHAT A SALARIED PERSON DO NOW?

11. Z a k a t c hildr e n e d uc a tion e x penses ca n be claim e d a s d e du cti o n ; Medical facili t y and m e dical a ll o wa n c e ; Allo w ance for official e xp e ns e s ; Reim b urs e m e nt of o ffi ci a l e x p e ns e s ; Secti o n 6 1 – t a x cr e dit on d o n a ti on s ; Secti o n 63 – t a x cr e dit on c o n tribut i on t o a p proved p e n s i o n f u n d ; Advance tax – Purc h a se/Reg i stration of n e w ca r (Secti o n 231B) ; On a nnu a l re n ew a l of ca r re g istration ( S ect i on 234) ; On Tel e phone and inte r net u sage (inc l udi n g m o bile p h on e ) (S e ctio n 2 36 ) ; Aucti o n p u r c h ases (Sec t i o n 2 36 A ) ; Sa l e / p u r c hase of i m movabl e prop ert y ( S ec t ion 2 3 6 C & 2 3 6 K ) ; Remitt i ng am o u n t s ab r oad t h roug h ca r ds ( S ectio n 2 36Y ) .

12. NON-SALARIED INDIVIDUALS & ASSOCIATION OF PERSONS (AOPs)

13. 2. NON-SALARIED INDIVIDUALS & A S SO C IATIO N OF P E R S O N S : No n - sal a rie d indiv i d u al i s a person wh o se tax a ble in co m e fro m sal a r y is 75% or l e ss of his t otal tax a ble in c o m e . T h e r a tes o f tax fo r no n - s a l a rie d indiv i du a ls and A s so c i at i on of Pe r sons have be e n increas e d a n d new a p plicab l e r a tes a r e as f ollows: Rates of tax under Paragraph-I, Division-I, Part-I, First Schedule; Surcharge, Section 4AB; Super Tax, Section 4C; Member of AOP where income of AOP is in excess of Rs.300 million; Chartared Accountant Firms, Provision to Division-I, Part-I, First Schedule.

14. The r a te of t a x under serial 6 a bove has b ee n f i xe d a t 4 0% i n s t ea d o f 45% for part n ershi p firms (like C A, ICM A ) wh o are pr o h ibit e d by law t o f o r m a lim i t e d li a bil i ty c o m pany. Sr. No Taxable Income Rate of Tax 1   Where taxable income does not exceed Rs.600,000   0% 2   Where taxable income exceeds Rs.600,000 but does not   exceed Rs.1,200,000   15% of amount exceeding Rs.600,000 3   Where taxable income exceeds Rs.1,200,000 but does not   exceed Rs.1,600,000   Rs.90,000 + 20% of amount exceeding   Rs.1,200,000 4   Where taxable income exceeds Rs.1,600,000 but does not   exceed Rs.3,200,000   Rs.170,000 + 30% of amount exceeding   Rs.1,600,000 5   Where taxable income exceeds Rs.3,200,000 but does not   exceed Rs.5,600,000   Rs.650,000 + 40% of amount exceeding   Rs.3,200,000 6   Where taxable income exceeds Rs.5,600,000   Rs.1,610,000 + 45% of amount   exceeding Rs.5,600,000

15. T h e  provis i o n s  rel a ting  to  s u r c har g e  and  super  tax  a r e  same  as  ex p l a i n e d  a b o v e  fo r  sal a ried indiv i d uals i .e . s u r c har g e under s e ctio n 4 A B wil l be calc u l a ted o n tax l i ability a r is i ng on normal t ax regime income while super tax will be applicable under section 4C as per definition of income defined therein. T h e i nc o m e of an indi v i d ual represen ting s hare fro m as s ociati o n of pe r son i s ex e mp t wher e AOP h a s paid tax on its income. A provision has been added whereby such exemptions shall not remain available to the individual if the AOP does not submit audited financial statements along with its tax return. The condition of submission of audited financial statements is only applicable in respect of an AOP whose turnover during the tax year or in any of the preceding financial year was more than Rs. 300 million. The audit shall be conducted by the firm of chartered accountants od cost and management accountants. In our opinion, this being a procedural provision is applicable for the annual tax returns to be filed for the year 2024 due on September 30, 2024.

16. REAL ESTATE SECTOR

17. 3. Real Estate Sector: Ta x o n build e r s & dev elopers, Se c tion 7F Surch a rg e , S e ction 4A B ; Super Tax , S e ction 4C Minimum T a x , Se c tion 113 ; Alternate C o r p o r ate T ax, S ection 11 3 C . Se c ti o n 7F has been i nserted f or introduction o f a n ew tax regi m e f or the r ea l estate sec t or with f ollowing key e l eme nts: Th e t a x wil l b e levied o n the “t a x a b l e p r ofi t s” o f t h e bu i ld er s and de v e l o p e rs ;

18. A per s on c ann ot ta k e cr e dit of i n co me m ore than ab o v e l i mit s fo r t he p urpose o f exp l a i ning sour c e u n der secti o n 1 11 ; Ho w ever , i f t h e pe r son h a s t ax a ble i n co me m ore th a n a b ove l i mi t s, th e n s u c h pe r son ma y p a y tax a n d ta k e b ene fit of exce s s tax a ble i n c o me ; Any i ncome o ther t han i nc o m e f r om abo v e activit i e s sh a l l be tax a b l e a s p e r a p plic a ble tax l aw . Activity Taxable Profit Applicable Tax Rates Construction and sale of  residential, commercial or other buildings 10% of gross receipts from such activities Slab rates for individuals & AOPs Development and sale of residential, commercial or other plots 15% of gross receipts from such activities 29% for companies Activities as mentioned in (a) and (b) above 12% of gross receipts from such activities 20% for small companies The taxable profits are fixed as follows:

19. The provisions of this section shall not apply to a builder or developer established by an Act of the Parliament or a Provincial Assembly or by a Presidential Order and who is engaged in activities for the benefit of its employees or otherwise including activities for the planning and development of and for providing and regulating housing and ancillary facilities in a specified or notified area; Thi s is an i n t er e sti n g c ha n g e and allows flexibi li t y on cl aim of e x penses whi c h m a y lead to tax avoidance p articu l arly wit h re s pect of withho l d i ng tax provisions and cash p ay me n t s ; Th e term “ g ros s receipt s” is not d efi n e d but plain re a d i ng ap p e a r s to sugge s t t h at it shall i n clud e advances re c ei v e d d ur i ng t he year.

20. Arguably super tax is no more applicable on builders & developers who are being taxed under section 7F; Arguably surcharge under section 4AB shall not be applicable on builders & developers who are being taxed under section 7F; Arguably minimum tax under section 113 is no more applicable on builders & developers who are being taxed under section 7F; Arguably Alternate corporate tax under section 113C is no more applicable on builders & developers who are being taxed under section 7F.

21. 3. Advance Tax on sale or transfer of immovable property, Section236C 4. Exemption of capital gain, Clause 114B, Part-I, Second Schedule Secti o n 2 3 6 C p rovide s f or c o l lecti o n o f tax at the time o f disp o sal or tr a n s fe r of im m o vabl e pr o pert y . An exempti o n f r o m c ol l ect i on o f tax i s av a il ab le where: T h e seller is d ependen t of S hahe e d be l o n gin g to Pak is t an Armed Fo r ce s or a person wh o di e s w hi l e in the service of t he Pak i st a n Arm e d F orc e s or the servi c e of F e deral or Prov i nci a l G o vernm e nt ; a n d The property has been allotted by acquired from or allotted by the Federal Government or Provincial Government or any authority duly certified by the official allotment authority and the property acquired or allotted is in recognition of or for services rendered by the Shaheed or the person who dies in service; and The sale is first sale of aforementioned immovable property.

22. This exemption is now extended to first sale of similar immovable property by a war wounded person while in service of Pakistan Armed Forces or Federal or Provincial Government or an ex-serviceman and serving personnel of armed forces or ex- employees or serving personnel of Federal and Provincial Government. Claus e 1 1 4B, Par t I, S e c o nd S c hed u le has also been a m ende d to provide e x e m p t ion to capit al gain s on firs t s ale o f immovable p ropert y referr e d a bov e . A p art   fro m   above,   t h e   ap p licable   rate s   of   tax   on   sa l e   or   tra n sfer   of immovable property have been revise d fo r fil er s and no n - fil er s whi le a new categor y has a l s o been i n trod uced i . e . late r f i lers.

23. The new rates of tax under section 236C prescribed for filers, non-filers and later filers are summarized hereunder: Consideration received Filer Late filer* Non- filer Up to Rs.50 million 3% 6%       10% More than Rs.50 million up to Rs.100 million 3.5% 7% More than Rs.100 million 4% 8% *Late filer not applicable in respect of persons who has timely filed returns for last three years and is a first-time defaulter for the tax year.

24. 5. Advance tax o n purchase o f im m ova b l e p r operty, S ection 2 3 6 K The a p plic a ble r a tes of tax o n p u r c hase of i mm o v a ble pr o perty have b e e n rev i sed for filer s a n d n o n -filer s w hi l e a new cate g ory has a l so b ee n int r o d uc e d i. e . l a ter file r s . The new r a tes of tax presc r i b e d for file r s, n o n - file r s a n d l ater filer s a r e s um ma r ized h e r e und e r : Fair Market Value Filer Late filer* Non- filer Up to Rs.50 million 3% 6% 12% More than Rs.50 million up to Rs.100 million 3.5% 7% 16% More than Rs.100 million 4% 8% 20%

25. 6. Rate o f tax o n ga i n o n sa l e o f im mov a ble p r operty, Se c tion 37( 1 A ) The f ollow i ng r a te of tax a r e now pro v id e d under div i si o n VII I , Pa r t I o f F i rs t Schedule:     Acquired on or before June 30, 2024   Acquired after June 30, 2024 S. No Holding period Plot Constructed Property Flat 1 Up to one year 15% 15% 15% 15% for persons appearing on the Active Taxpayers’ List on the date of disposal of property and at the rate specified in Division I for individuals and association of persons and Division II for companies in respect of persons not appearing on the Active Taxpayers’ List on the date of disposal of property:   Provided that the rate of tax for individuals and association of persons not appearing on the Active Taxpayers’ List, the rate of tax shall not be less than 15% of the gain. 2 More than one but less than two years 12.5% 10% 7.5% 3 More than two but less than three years 10% 7.5% 4 More than three but less than four years 7.5% 5%   5 More than four but less than five years 5% 0%   6 More than five but less than six years 2.5%     7 More than six years 0%    

26. CAPITAL GAINS & PRIVATE COMPANY SHARES

27. 4. CA P ITAL GAI N S – PRIVA T E COM P ANY S H A RES: Secti o n 37 i n t e r a l ia provid e s t hat g a in on s h a r e s of a p r iv a te c o m pa n y s h a l l be sub j ec t to tax a ti o n under s e ctio n 37 under t he normal t a x r e gim e whil e t h e b uyer is re q uired to wi t h ho l d a d justab l e adv a nce tax @ 1 % o f fai r ma r k e t val ue of s h a r e s d et e rmine d under sect i on 1 1 A ( 4) of Inc o m e T ax Ordinance , 200 1 . Previo u sly t he tax req u ired to be w i t h he l d at t h e time of pa y me nt f ro m t h e gro s s amo u nt pa i d however now the t a x is re qu ired to be pa i d at the ea r lier of: payme n t or regi stration of s h a r e s by t he Secu riti e s a n d Exchange Co m mi s s ion of Pa k istan or regi stration of s h a r e s by t he State Bank of P a ki s t a n . 1. Capita l g ain o n sa l e o f share o f priv a t e c ompany, Se c tion 37

28. ADVANCE TAX & WITHHOLDING TAX

29. 5. ADVA N C E T AX, WITHH O LDI N G T A X: 1. Dividend , Se c tion 5 The r a te o f t a x o n div i d e nd paid by m u t u a l fun d s i s e n hanced fr o m 15% to 25% i n c ase of m u t u a l funds deriving fifty percent or more income from profit on debt. 2. Capita l ga i n o n disposal o f securit i es , S e ction 3. 37A 100% E x tra T ax f or N on- F i l ers , Te n th S c h e du le T h e tax r a tes on capit al g a ins a r ising o n disp o sal of s e c u ritie s has b ee n m o difi e d fo r securit ie s acquir e d after Jun e 3 0, 2 024, however f o r securiti e s acquir e d on or before J u ne 3 0, 2024, t h e applica b le r a t e of tax has n o t b e e n c hang e d. For securit i e s acq u ir e d after Jun e 3 0, 2 02 4 , the r a te o f t a x is f i xe d @ 15% f or pe r sons appea r ing on the active ta x paye r s ’ lis t . I t is pert i ne n t to n o te that the pe r son sh a l l be appea ri ng on ac t ive taxpaye r s ’ l i st on t he d a te of a c qu i siti o n a n d date of d i sposal.

30. If a per s on is n ot a p pear i ng o n active ta x p a yer s ’ l i st on t h e date of ac q u isiti o n or d i sp osa l , t he in co me of s uch person fr o m cap i tal g a ins under s ectio n 3 7A sh a ll be su b j e c t to tax at the r a tes s pec i fie d i n Divisi o n I or D i visio n II of Pa r t I of First S c h e d u le i . e . u n der t h e no r ma l t a x regim e . Ho w ever , for i n d iv i d u a l s a n d AOP s , the r a t e of tax s h a l l not be le s s t h an 15% i .e . t h e i n div i d u a l s a n d AOPs s hall be subject to tax a tion o n c a pital g a ins u n d e r s ectio n 37A a t t he hi g her of fo ll o w i n g : Applic a ble sl a b r a tes un d e r Divisi o n I of Pa r t I of Se c o n d Sch e d u le; or 15% of ga i n The r a te of d e d u c ti o n of c a p i tal g a in tax by st o c k fun d s h a s been i n cre as e d fro m 10% t o 15%. I n cas e of i nd i vid u a l s a n d A OP s , t he r a te o f o t her fun d s h as a l so be e n i n cre a sed fro m 10% to 15%. I n c a se of stock fun d s hav i ng div i d e nd r eceipt s le s s t han cap i tal g a in s , t he r a te of tax has b een increas e d fr o m 12.5% to 1 5 %.

31. Te n t h Sche d u l e has a l so b e e n mad e a p p l icable w h ere b y 10 % e xtr a tax s hall be applic a ble in respe c t of pe r s ons wh o a r e n o n -file r i .e . w h ose name i s no t a p pear i ng i n active ta x paye r s ’ li s t . T h er e a r e no oth e r c h a nges in Divisi o n VII , Pa r t I of Fi r st Sch e d ule wit h resp e c t of tax a tion o f capit al g a ins a r ising on s e cu r ities under s ectio n 3 7 A ho weve r the table and provi so s there u n d e r have been re p l a ce d comple t el y by the F in ance Act 2024 appa r entl y to avoid conf u s i on a r ising ou t of differ e nt c h anges. The complet e divis i on a s re p l a ce d by F i na n c e Act 2 024 i s a s f o ll o w s :

32. S. No. Holding period Acquired from 01.07.22 To 30.06.24 Acquired after June 30, 2024 1 Up to one year 15% 15% for persons appearing on the Active Taxpayers’ List on the date of acquisition and the date of disposal of securities and at the rate specified in Division I for individuals and association of persons and Division II for companies in respect of persons not appearing on the Active Taxpayers’ List on the date of acquisition and date of disposal of securities: Provided that the rate of tax for individuals and association of persons not appearing on the Active Taxpayers’ List, the rate of tax shall not be less than 15% in any case. 2 More than one but less than two years 12.5% 3 More than two but less than three years 10% 4 More than three but less than four years 7.5% 5 More than four but less than five years 5% 6 More than five but less than six years 2.5%   7 More than six years 0% 8 Future commodity contracts entered into by members of Pakistan Mercantile Exchange 5% 5%

33. Provid e d that for securit i e s e x c e p t a t S . N o. 8 o f t he T a b le – the r a te of 12 . 5% tax s hall b e c har g e d on c apit a l g a in a r i s ing o n d i spos a l wher e the s e c u ritie s a r e acquir e d o n or after t h e firs t day of Jul y 2013 b ut on or b efor e t he 30 t h day o f Jun e 2 022; and the r a te of 0% tax s h a l l be c har g e d o n ca p it a l g a in a r is in g on d i sposal wher e t he s e c urities a r e acquir e d b efo r e t h e firs t day of Jul y 20 1 3 . Provid e d f u r t h e r that t he r a te f or c o m pa n ies i n res p ec t of d e bt secur i ties s hall be a s s p e cifi e d in Divisi o n II of P a r t I o f the Fir s t Sche d ule Provid e d a l so that a m u t ual f u n d or a c ol l ectiv e i nv e stment s c h e m e or a R EI T sch e m e s h a l l d e du c t C a pital G a ins T ax a t the r a tes a s s p e cifi e d b e low, on r e dempti o n o f s ec u r i ties a s presc r i b ed , n a mely : Category Rate Individual and AOP 15% for stock funds 15% for other funds Company 15% for stock funds 25% for other funds

34. Provid e d a ls o that i n cas e o f a s t ock f und i f d ivid e nd re c eipt s of the f u nd a r e l e ss t h an capit al g a i n s , the r a te of t a x d e d u c ti o n s h a ll be 1 5 % ; Provid e d a ls o that n o capit al g a in s hall be deduct e d, i f t he ho l ding p erio d of t he security a c q u ir e d on or befo r e 3 t h day of J u ne 2024 i s mor e t han s i x ye ar s ; Explan a ti o n – For the re m o v al of d o u b t, it i s cla r ifi e d t hat p rov i si o ns of this pro v iso s h a l l be a p plic a b le only i n c a se of m u t ual f u nd o r collectiv e i n v est m e nt s c h e m e o r a R E IT s c h em e . 4. A d v a nce Tax , Se c t i on 1 47 S e ction 14 7 has been m o d i fie d as follows: S e ction 1 4 7(4) provides wher e the taxpayer fail s to pr o vi d e t u r n o v e r or t h e t u rnov e r fo r t h e q u ar te r is not known, it sha l l be taken to be on e -f o ur t h of o n e h u n d re d a n d ten ( 1 10) perce nt of t h e t u rnov e r of t h e lat e st tax year fo r whi c h a retur n has been fil ed . N o w i n ste a d of 1 1 0%, the t u r n o v e r fo r t h e q u arter shall be taken as on e- fourth of 1 2 0% of last yea r ’ s t u r n o v e r if t h e ta xpay e r fail s to provide t u rnov e r or t h e turno v e r fo r t h e qu arter is n ot known.

35. Secti o n 147(6) a l lows t he taxpayer t o fil e own e stimate if he est imat e s h i s tax li a b i l i ty to be le s s than tax li a bil i ty under sect i on 1 47. S u b - s ectio n 6B h a s been i n s ert e d by Fi n a nce Act 2 2 4 wh ic h require s t h at t he e stimate s h a l l c o n ta i n: turnover f or t h e complet e d q uarte r s of the relev a nt tax ye ar , esti m at e d tu r nov e r for t h e rem a ining q u ar te r s , sup p orting e v i de n c e of e x p e n s e s or d e duc t io n s i n com p u t ing i n c o me , evidenc e of tax paym e nts a n d t a x cr e dits , a n d computat i on o f e stimat e d tax a ble i n c o m e . T h e C o mm i s s i oner h a s be e n em powe r e d t o rejec t t he e stimate i n t he absence of d ocumenta r y evidenc e a n d/ or detai l s p r ovid e d by ta x paye r . T his is restorat i o n o f simil a r provi s ion i n s er te d ea r lier a nd a p pears an unn e ce ssary a n d i ll ogical pr o vis io n to creat e har a s s m e nt onl y . Adva n c e tax o n e x p o r t e r s

36. Su b - s ecti o n 6C has been a d d e d to sec t ion 1 4 7 where b y one p ercent additional advance t ax is t o be c o llected b y withhol d ing a gen t s specifi e d in secti o n 154 in r espec t of expor t of g o ods s ubject to collect i on of tax u nd e r secti o n 154. Thi s is in a ddition to o n e percent minimu m tax collec t e d under section 154 on ex p ort of g o ods.

37. 5. Imports, Se c tion 148 Secti o n 1 48 p rovide s fo r c o llecti o n of a d vanc e tax o n imp o r t s. T h e S ect i on has b ee n m o difi e d t o em power Bo a rd , thr o ugh no tificati o n i n o f ficia l g a zette , t o de t ermin e minim um val u e of g o o d s f or the p u r p ose of co l lecti o n o f adv a nce t a x un der sect i on 1 4 8. 6. Dedu c tion o f t a x o n p aym ent t o n o n - res i dent (exe m ption ce r t i fi c a t e ) , Se c ti o n 152 Secti o n 152( 4 A) empower s CI R to i s sue e x em pt i on certi f icate or r e d u c e d r a te cer t ifi c ate to Perm a n e n t Est a blishm e nt of no n -r e si d e nt per s on w h er e the tax d ed u c ted i s n o t minimu m t a x . T he power o f issu a nce of e x em pt i on certi f icate has be e n wit h dra w n whil e p ower to i s s u e of re d uc e d certifica t e i s now l i mit e d to a maxi m um o f 80% of the applic a ble t a x r ate.

38. 7. Deducti on o f tax o n payment to re s i d en t (exem p t ion c e rti fi c ate), Secti o n 1 5 3 S e ction 1 5 3 ( 4) e m powers CIR to is s ue e x e m p t i on c e rti ficat e or r educe d rat e c e rtifica t e to a re s i d en t perso n wher e t h e tax ded u c t e d is not minimum ta x . Th e p owe r of issuance o f e x e m p t ion c e rti ficat e has been wit h d raw n whil e power to issue o f reduced c e rti ficat e i s now limi t e d to a m a ximu m o f 80% o f th e a p p l icable tax rate . Th e C I R sha l l issue such c ertificat e wit h i n 15 d a ys of ap p li c ation and u p on e x p i r y of 15 days, t h e c e rti ficat e shall b e dee m e d to h av e bee n granted.

39. 8. Exports , Se c t i on 154 Th e e x port of g o ods u n der se c t i on 1 5 4 wa s su bject to fina l tax re gime howev e r t h e Fina n c e Act 2 24 has change d t h ei r re gime to normal tax re gime. T h e tax ded u cted u n der se c t i on 1 5 4 shall now be minimum tax whi le an ad d i t ional 1% advance tax u n der se c t i on 1 4 7 is a l so requi re d to be c o ll e cte d by withhol di n g a g ent s pres c rib ed u n der se c tio n 1 5 4. Thi s chang e now e x poses e xpo r ter of g o ods to other provisions li k e d i sallowance of ded u ction u n der se c t i on 2 1, minimum tax u n der se c t i on 1 1 3, alterna t e corp ora te tax u n der se c t i on 1 1 3C, su r charg e u n der se c t i on 4 A B and su p e r t a x u n der sec tio n 4C.

40. Befo r e Fin a n c e A c t , 2024 Aft e r Fin a n c e A ct , 2024 Fin a l Ta x u/s 154(4 )   Before Finance Act, 2024   After Finance Act, 2024   Final Tax u/s 154(4)   Minimum Tax u/s 154(4)   Advance tax u/s 147 1% 1% 1% Consequential amendments have also been made in section 168 and section 169 .

41. 9. Rate o f a d v a nce tax o n v e hicle regi s tr a tion/ trans fe r etc., Se c ti o n 231B The r a te of tax on regi strati o n of m otor ve h icle i s revis e d a s f o ll o w s :   S. No   Engine Capacity   TY (2024)   TY 2025 1 up to 850CC Rs.10,000 0.5% of value 2 851CC to 1000CC Rs.20,000 1% of value 3 1001CC to 1300CC Rs.25,000 1.5% of value 4 1301CC to 1600CC Rs.50,000 2% of value 5 1601CC to 1800CC Rs.150,000 3% of value 6 1801CC to 2000CC Rs.200,000 5% of value 7 2001CC to 2500CC 6% of value* 7% of value 8 2501CC to 3000CC 8% of value* 9% of value 9 3001CC and above 10% of value* 12% of value

42. 10. Rate o f co l lection o f tax inter n et , phone calls , Sect i on 236 Th e rat e of colle c tion of t ax h as been p r esc r ibed at 75% amount of bill or sale price of intern et pr e -paid ca r d or prepaid te leph o ne c a rd or sale o f units t o a ny el e c t r o nic med i u m or wha t eve r for m . Thi s r ate is applicab l e only in respec t of persons appearing in ge n e r al order is sued u n der section 1 1 4B i.e. p e r sons who s e name is not appe a rin g in AT L . 11. Adva n c e tax o n sale to distributors, dea l er s and who l esaler s , Section 23 6G Section 2 36G r e q u ires ma n ufacturers and com mer c ial importe r s to collec t ta x fro m dis t ributors , dealers and wholesa l ers . P revious l y the appl icat i on of this s ectio n w a s limited t o a fe w s ect o rs a n d now it has been ex t ende d to all s ect o rs . Th e r ate of ta x is .25 % fo r acti v e taxpayers and 2% for no n -act i v e taxpayers.

43. 12. Adva n c e t ax o n sale to retaile r s, Section 2 3 6 H Section 23 6H re q uires manufa c turers, dis t ributor , d eal e r , w h ol e s aler a nd com mer c ial impor t er s to collec t tax fro m retailers . P r evi o u sly t he appl icat i on of this s ectio n w a s limited t o a fe w s ector s a n d now it has been ex t ended t o all sectors. Th e r ate of tax is .5 % fo r act i v e ta x payers and 2.5% f or non - active ta xp ayers.

44. NON-RESIDENT PERSONS

45. 6. NON-RESIDENT PERSONS: 1. Geogr a ph i ca l sour c e i nc o me , Se c tion 1 1 Secti o n 11 pr o vide s t hat a r e si d e nt per s on s h a l l be s ubj e c t to tax a ti o n in Pak istan fo r his wo r ldwi d e income h owever a no n -res i de n t per s on i s subject to t a xatio n i n Pak i stan i n resp e c t of h i s Pak is t an sour c e i n c o m e . Secti o n 1 01 p r ovid e s par am eter s fo r de t ermin i ng Pak ist a n source i n c o m e and f oreign source i n c o me of a pe r son. Secti o n 101( 3 ) prov i des t h e circ u m s t a nces u nder wh i c h busin e ss i nc o m e o f a n o n - reside nt per s o n s h a l l be tre a ted as Pak ist a n source in co me . Sect i on 1 1 ( 3)(d) tre a ts b u s i ness in co me of a no n -re si de n t person t o be Pak istan source i n c o m e to the e x tent to wh i c h it is directly or indire c tly att r i b u t a ble to a ny “ b u s i n e ss c on nect i on” i n P a kista n . T h e def i nit i on of t he te r m busin e ss c o nnecti o n h a s a l re a dy rem a in e d a d e bat a ble issue i n va r i o u s case s w hile o n the other ha n d t h e tax a ti o n of entitie s ca r ryi ng o ut bus i n es s digit a lly i s a l so a tee t h i n g p r ob lem .

46. Fi n a n c e Act 2 024 h a s a d d e d s u b - sec t i o n 3A a n d 3 B af t e r su b - s e ctio n 3 o f sect i on 101 wher e by t h e sc o pe of te r m busin e ss c o n nect i on is ex p a n d e d to include “ sign i fican t e c onomic pres e nce i n Pak ista n ”. T h e term “si g nific a nt e c onomic pres e nce i n P a kista n ” is d e f i ned to mean: Transaction in respect of any goods, services or property carried out by a non-resident with any person in Pakistan including provision of download of data or software in Pakistan, if the aggregate of payments arising from such transactions or transactions during the tax year exceeds such amount as maybe prescribed. S yst e mati c a n d contin u o us solic i ting o f b u s i ness activi t ies or engag i ng in interac t ion th r ou g h digital mea n s wit h s uch n umber of u s e r s in Pak istan as m ay be presc r i b ed , ir r es p e ct i v e of wh e th e r or not – the a g reem e nt for s uch tr ans actio n s or act i vitie s i s sign e d i n P a ki s t a n . the n o n -res i d e nt has a reside nce or place o f busin e ss i n P a kistan; or the n o n -res i d e nt r e n d e r s s ervice s i n P a ki s t a n .

47. Pleas e note th a t t h e a bove c hanges a r e n o t likely t o have im p a c t in re s p ec t o f no n -r e s i de n t p e r sons bel o nging to c o u ntries h a vi n g tre a ties fo r a voidanc e of d o u b le taxati o n w ith Pak i sta n . 2. Tran s actions between associates, Se c tion 108 Pleas e see ch a nges i n sec ti on 1 08 d i sc us sed i n c o m m entar y under the he a ding a nti-avo i dance p r o vi s i on s .

48. RETURNS & STATEMENTS

49. 7. RETURN & STATEMENTS: 1. Wealt h Sta te m ent , S e c tion 116 S e ction 1 1 6 requi re s fil i n g of we a l t h statem e nt by re s i d en t perso ns a nd e m powers C o m m iss i oner to requi r e we a l t h s t atem en t fro m an i n divid u al providing detai l s of ass ets and l iab i li t ies. T h e wor d “ ass ets and liabili t ie s” has been replac e d by “ ass ets i n clud i n g for e ign ass ets a n d lia b ilit ie s inclu d i n g foreig n l i a bil i t i e s ” . Thi s replacem e nt ca n provide a sig n if ican t boo s t to th e argume nt t h at for e ign assets and for e ign lia b il i t i e s wer e not previously r e q u ired to b e d i sclo sed in t h e we a l t h statem e n t . An e x p l ana t ion to this effe c t woul d have str e ng t hened F B R ’ s cas e b u t t h is replace m en t i s likely t o w eake n F B R ’ s c a s e.

50. 2. Assets in the name o f s p o u se Another chang e has b ee n m a de to cla r ify that assets of the sp o use sh a ll o n ly be inc l ud e d in t he wealth statement if t h e spou s e is dependent. Accordingly, the preparers o f wealt h statement need to take note o f th i s .

51. ANTI AVOIDANCE

52. 8. ANTI-AVOIDANCE: 1.Transa c t i ons between ass o ciates , Section 108 S e ction 1 8 is an an t i - avoidance provision to cate r fo r tax avoid a nce sche m e between a s so ciate s. Fi n ance Act 2 24 ad d s su b - se c t i on 6 to sect i on 1 8 to d i sall o w 2 5 % of t h e e x pen d i t ure i n curre d on sale pr o m o t i on, a d v e rti se m en t and p u b l ic i ty fo r tax y e a r 2 24 and o nwar d s. T h e said e xp en d i t u r e shall be all o cate d to t h e n o n - r e s i d e n t . Th e above d i sallowance of e x pen d i t ure shall b e m a de by t h e C o m m i s sioner, aft e r issui n g noti c e to taxp a yer wh o cla ims ro yalty as ded u ction fo r t h e tax year or f o r any of t h e two prece d i ng tax years. Th e d i sall o wanc e shall be m a de if t h e taxpayer fail s to f u r n ish any e x p l anat i on or e v i d enc e t h at no benef it has been c o n f err e d o n t h e a s so cia t e. Th e retro s p e c t i v e ap p lication of t h is provision fo r tax y e a r 2 24 is li k ely to l ead to li t igation. I t is u n cle a r as to how t h e allocation of e xpens e s to no n -re s i d en t perso n wil l b e used whe n roy al t y is su b je c t to f i nal d ischarge of tax l iab i li t y.

53. 2. Unex p l ained ass ets, ex p endi ture etc. , S e ction 111 S e ction 1 1 1 i n ter alia p ro v i d e s fo r taxation of u n e x p l ain e d ass ets, ex p endi ture as i n c o m e fr o m other s ource. Section 1 1 1 ( 2) ( ii) provides t h at for e ign ass e t s , e x pen d i t ure o r i n c o m e i s to b e i n cl u ded in th e i n th e perso n ’ s i n c o m e c hargeab l e to tax fo r t h e tax year i m m e d i ately prece d i ng t h e tax year i n whi c h t h e d i sco v e r y i s m a de b y Commissi o ner. Fina n c e Act 2 24 has ad d e d an e x p l anat i on whereb y “ y e a r of d i scov e r y ” sha l l m e an t h e year in whi c h t h e C o m m issioner has issued a not i c e requiring the pe r so n to e x p l ain the na t ure and so urce o f such for e ign ass ets, e xpend i t ure or c o nc e al e d i n c o me .

54. PENAL PROVISIONS

55. 9. PENAL PROVISON: 1. Non-Fil e r s & Late filer s , S e ction 100 BA Secti o n 1 00BA re a d wit h T e nth S c h e d u l e provi d e s h ig h e r r a te of tax fo r per s o n s n ot appea r ing i n active taxpay e r s ’ list. T h e section a n d T e n t h Sch e d ule h a v e been modi f ied to p r ovide higher r a tes o f tax f or l a te fil e r s i . e . pers o ns wh o have n ot file d re t urn by t h e d ue d a te 2. Power s t o e n force fil i ng o f t a x r et u r n, S ecti o n 1 1 4 B 3. Rate o f col l ection o f tax internet, phone calls , Se c tion 236 Secti o n 11 4 B gr a nts FBR p o we r s to di s a b le mo b ile p h o ne/ s i m s a n d di s c o n nect el e ctricit y & g a s connecti o n s t hrou g h a g e n e r a l order i n r e s p e c t o f persons n o t a p pear i ng i n active t a x p a y e r ’ s list b ut a r e liable to fi l e tax re t ur n s.

56. Section 11 4 B has be e n furthe r amen d e d and n o w FBR is grante d power to r e s t ri c t no n - f i lers f r om f oreign t r avel if t h e person is a c i tizen of Pa k istan. Th i s restrict ion s h all not app l y on per s ons h o l ding N a tional I de n ti t y Car d fo r Overse a s Pakista n is (NI C OP ) , mi n ors, s t u de n t s , p erson s proceed i n g abroad f or Hajj or Umrah and such other c l asses of perso n s a s notified by the Board. T h e perso n s rest r ic t e d fro m travel s h all be notified through a ge n era l o r d e r by FBR.

57. if a perso n beco mes fil er or it is c o n f irmed t h at p er s on is not requi red t o fil e r e t u rn S e ction 1 1 4B ( 3 ) provid e s power to t h e board and C o m m issioner to re s tore m o b i l e p h ones, s i m s , ele c tr i ci t y c o n n e c t i on and ga s c o n n e c t i o n s. Such p o we r shall b e e x er c ised when t h e C o m m issioner is satisfied t h at the p e rs o n has fil e d t h e ret u rn, o r th e perso n wa s not lia b le to fil e th e return . H ow e v e r , n o power has b e e n granted to t h e Board or C o m m i ssio ner to a llow for e ign trave l to a perso n whos e na m e i s i n clud e d i n th e i n c o m e tax g e neral order bu t h as now fil e d tax retur n o r satisfies t he Board or Commis s ioner t h at he wa s not requi re d to fil e t h e return . T his ap p e a r s to be an i n adve rten t o m ission b u t likely to lead to se v e r e c onseq u ence s in g e n u ine c as e s .

58. Pleas e a ls o s e e comme n ta r y under sect i o n 2 3 6 C a nd 2 3 6 K f or r a tes of tax on n o n -filer s a n d l a t er file r s . Gener a lly, r a te of tax on n o n -file r is 100% increas e d as c om p a r e d to f i l e r however f o llow i ng s pec ifi c r a tes have b e e n provi d e d f or n o n -file r s i n T e n t h S c h e d ule beca u se o f ame n dm e n t s by Fi n a nce A ct 2024: 4. Penalt y, Se c tion 182 Secti o n 1 82 h a s be e n modifi e d to e n h a n c e p enaltie s as f o ll o w s : Sr. No Section Description Rate of tax 1 151 Profit on debt 35% 2 236G Sale to distributors, wholesalers etc. 2% 3 236H Sale to retailers 2.5%

59. Sr. No Default Penalty Section 1B Where any person fails to furnish a return of income as required under sub-section (3) of section 117 within the time specified in the notice Such person shall pay a penalty equal to higher of – 0.1% of the tax payable in respect of that tax year for each day of default; or Rs. 1,000 per day of default: Provided that minimum penalty shall be Rs.10,000 in case of an individual and Rs.50,000 in all other cases.     117(3) 3A Where any person being a trader or a shopkeeper who is required to apply for registration under this Ordinance but fails to register or fails to pay advance tax as specified in a scheme of special procedure prescribed under section 99B The shop of such person shall be sealed for seven days for first default and for twenty-one days for each subsequent default.   99B 10A Any person who fails to comply with income tax general order issued by the Board within fifteen days of issue of such order. Such person shall pay penalty of fifty million rupees for first default and one hundred million for each subsequent default: Provided that said penalty shall be imposed effective from such date as the Board may notify.       114B 12A Where any person fails to pay tax at the time of making payment as consideration of shares or at the time of registration of shares by the Securities and Exchange Commission of Pakistan or the State Bank of Pakistan, whichever is earlier. Such person shall pay a penalty equal to fifty percent of the amount of tax involved.   182

60. Sr. No Default Penalty Section 35 Any company and an association of persons who – fails to fully state all the relevant particulars or information as specified in the form of return, including a declaration of the records kept by the taxpayer. furnishes any annexure, statement or document specified in the return of income as blank or with incomplete or irrelevant particulars; or attaches blank or incomplete annexures, statements or documents where such annexures, statements or records were required to be filed. Such company, including a banking company and an association of persons shall pay a penalty of Rs.500,000 or 10% of the tax chargeable on the taxable income, whichever is higher.           114(2) 5. Prosecution for non-compliance, Section 191 Section 191 has been modified to provide for prosecution of a person who fails to comply with notice under section 117(3).

61. 6. Penalty f or f ailure t o fu r ni s h in f orma t i on in tax r et u r n, Se c tion 1 9 1 A A c o m p a n y i n cl ud i n g a b a n ki n g c o m p a n y o r a n A O P m a y b e pun i s h e d with fine and/or impri s o n men t of ye a r or mo r e if it fail s t o full y s t ate a ll the rel e van t particul a r s or i nfo r mat i on as spec i fie d in t he for m of return, includ i ng a d e cla r at i on o f t h e recor d s k e pt by t he t a x p a y er. f u rn i s h e s any anne x ure, sta t eme nt or doc u me nt spec i fi e d in t he re t urn of i nc o m e as b l a nk or wit h i nc o m pl e te or irrelev a n t p a r ti c ula r s; o r att a c h e s b l an k or in c o m pl e te ann e x u r e s, stat e ment s o r d o cumen t s wher e s uch a n n e x u r e s, statem e n t s or record s wer e requir e d t o be f iled. Ho w ever , t he s e ctio n do e s n ot a p pear t o be s uitably wo r d e d a s c om p a ny or A O P ca n not be im p r i son e d .

62. 7.Penalt y f or no n - r egistration , S ectio n 1 91 B N o n -re g istra t ion u n d e r se c t i on 9 9B ca n lead t o fin e and/ or i mprisonme nt of six m o n t hs of mor e u n d e r s e ction 1 91B. 8. Defaul t surcharge, Se c tion 205 The d e faul t su rcharg e has b e e n c hang e d f r om 12% t o hi g her of “ 12% or Kibor p l us 3% ”

63. ADMINISTRATIVE CHANGES & CORRECTIONS

64. 10. ADMNISTRATIVE CHANGES & CORRECTIONS: 1. Definit i on o f Board, Se c ti o n 2 ( 8 ) T h e F i nance A c t h a s i nc re a s e d t he sc o pe of def i niti o n of B oa r d to i n clu d e a d e signat e d me m ber o f the F BR, wh o has been d e l eg a ted powe r s of the B oa r d under sect i on 8 of F ede r al Board o f Reve n ue Act 20 7. 2. Chie f Inv e stigator, Se c tion 2(11B ) 3. Ta x F r aud I nvestigation W i ng Se c tion, 2 30 K Definiti on of Chie f Co m miss i oner has be e n mo d i fie d to i n clud e “ C hief I n ve s tig a t o r ” . Secti o n 230K h as b ee n i n s er t e d to e stabl is h “ Ta x Fra u d Investig a ti o n W i ng I nla n d Rev e nu e ” .

65. The functions of the Tax Fraud Investigation Wing Inland Revenue shall be to detect, analyze, investigate, combat and prevent tax evasion and fraud, The Wing shall consist of Chief Investigator and other support officers, Detailed rules in this respect shall be issued by FBR. 4. Definit i on o f Board, Se c tion 2 ( 8 ) FBR has be e n em powe r e d t o di s c l ose in fo rm a tion to N A DR A f or the p urpose of bro a de n i ng of t a x b a s e .

66. OTHERS

67. 11. OTHERS: 1. L o ss carr i e s f orward f or P I A, Se c tion 57 P IA h a s be e n a l lowed to ca r r y forw a r d its losses f or a period of ten y ea r s in resp e c t of l o s s e s rel a ting to a t a x ye a r c o mm e ncing o n or a ft e r J a n u a r y 1, 2 17. 2. 100% tax cr e dit f or c o a l mini n g p r oject, Se c tion 65F Secti o n 65F(1 ) ( a ) prov i des 1 00% tax cred i t fo r per s o n s e ngaged i n coa l m i n ing pr o ject s i n S i nd h supply i ng coa l ex cl u sively t o power gen e r a tion pr o je c t s. An e x plan a tion has be e n added t o cla r ify that the said tax credi t i s only av a il ab le i n resp e c t o f income deriv e d fro m t he o p er a tio n s of c oal m i ning projec t s in S i ndh su p p ly i ng coa l t o pow e r gener a tion p rojects . Th e e x p l a nat i o n s u gg e sts that the t a x cr e dit is n ot av a il a b l e in r e s p e c t o f in c ome der i ve d f r om sources oth e r than “ o perati o ns of coa l mini ng p r oj e c ts”.

68. C V T

69. Property CVT payable with tax return Farm house 2000 sq yards to 4000 sq yards Rs.500,000 Farm house – more than 4000 square years Rs.1,000,0000 Residential house 1000 sq yards to 2000 sq yards Rs.1,000,000 Residential house more than 2000 sq yards Rs.1,500,000

70. THAN K Y O U