IT deduction in accordance with Rs 0.3 million basic exemption limit: returns, annual statements for 2011

The income tax return and annual statement of deduction of income tax from salary for the tax year 2011 will be filed in accordance with the basic exemption limit of Rs 300,000. Explaining the salient features of the amendments made to the Income Tax Ordinance, 2001 through Finance Act 2011, the FBR said on Tuesday that the basic income tax exemption limit has been raised from Rs 300,000 to Rs 350,000.
This will have effect from July 1, 2011 for individual business taxpayers as well as salaried taxpayers. However, income tax return and annual statement of deduction of income tax from salary for the tax year 2011 shall be filed in accordance with the basic exemption limit of Rs 300,000. Accordingly, changes have been made under section 114 and under the First Schedule to the Income Tax Ordinance, 2001.
The circular said that the provisiona1 assessment has been included in the definition of assessment for abundant clarification of the legal coverage available to a provisional assessment. Since the term Collective Investment Scheme has been used in the Income Tax Ordinance, 2001 there was a need to define this term collective investment scheme therefore has been defined to mean a closed-end fund and an open-end scheme as defined under the Non-Banking Finance Companies (Establishment and Regulation Rules, 2003.
It said that although under section 18 of the Income Tax Ordinance, 2001, the fair market value of any benefit or perquisite whether convertible into money or not, is chargeable to tax. In order to clarify the situation regarding taxability of such benefit or perquisite the word benefit has been elaborated through an explanation to include explicitly any benefit derived by way of waiver of profit on debt on the debt itself under the State Bank of Pakistan Banking Policy.
Limit of 'five hundred thousand rupees' under sub section (2) of section 63 of the Income Tax Ordinance, 2001, imposed for calculation of person's tax credit for contribution to an Approved Pension Fund has been withdrawn to provide a level playing field to Voluntary Pension Schemes.
In section 65C, limit for the amount of tax credit of the tax payable allowed for the tax year in which the said company is enlisted has been increased to fifteen per cent through Finance Act 2011 to encourage companies opting for enlistment in any registered Stock Exchange in Pakistan.
In order to clarify further the application of provisions of section 111 of the income Tax Ordinance, 2001, suppression of any production sale or any amount chargeable to tax and suppression of any item of receipt liable to tax in whole or in part has also to be treated as "concealed income" if the sources of these items cannot be explained satisfactorily.
The clause (c) of sub-section (2) of section 113 of the Income Tax Ordinance, 2001 allows adjustment of minimum tax paid under this section for the year in which such tax is paid and subsequent three years period, where minimum tax paid under section 113 exceeds the actual tax payable in the case (worked out on the basis of applicable of rate of tax). In order to facilitate the taxpayers this period of adjustment is extended from three years to five years
Through Finance Act 2011, the following changes have been made in section 114 of the Income Tax Ordinance, 2001: The scope for filing of return has been extended and now a person who is the holder of commercial or industrial connection of electricity where the amount of annual bill exceeds rupees one million is also required to furnish a return of income for a tax year. The evidence of payment of due tax, as per return of income, and wealth statement as required under section 116 of the Income Tax Ordinance. 2001 has to be accompanied with the return.
The circular said that the existing provisions of section 127 of the Income Tax Ordinance 2001 do not specify the eligibility of a taxpayer to file an appeal before the Commissioner (Appeals) against a provisional assessment framed under section 122C. However, after the receipt of assessment order of a provisional assessment, taxpayers tend to abate provisional assessment by filing an appeal. Therefore, to strengthen the return filing requirement, through this express amendment, "provisional assessment" has been excluded from the purview of appellate jurisdiction of the Commissioner (Appeals).
It said that the under the existing provisions of section 130 of the Income Tax Ordinance, 2001, a member of the inland Revenue Appellate Tribunal, sitting singly is empowered to hear the cases where the amount of tax or' penalty involved does not exceeds rupees five million, In order to ensure that cases involving high revenues get better attention by a division bench, this limit of rupees five million is changed to rupees one million.
Disposal of Appeals by the Appellate Tribunal under section 132 of the Ordinance 2001:This amendment is aimed at rationalising the powers available to the Appellate Tribunal, Powers to dismiss an appeal in default has been withdrawn and now the Appellate Tribunal, after affording an opportunity of being heard to the parties to the appeal, in case of default by any of the party on the date of hearing, may proceed ex-parte to decide the appeal on the basis of the available record.
In order to liberalise taxation regime on pension fund, existing limit of twenty-five per cent for tax free withdrawal from the balance under a pension fund has been increased to fifty percent of the accumulated balance to be withdrawn at or after the retirement age. In order to clarify the term "tax payable" for a clear understanding and compliance, it has been defined that "tax payable" means "tax chargeable" on the taxable income on the basis of assessment made or treated to have been made under sections 120, 121, 122 or 122C of the Income Tax Ordinance, 2001
Secondly, an incentive of fifty per cent reduction in penalty payable has been provided to a taxpayer where tax due is paid on the basis of an order u/s 129, on or before the due date given in the notice under sub-section (2) of section 137, issued in consequence of the said order and no appeal under section 131 is filed by the taxpayer, the FBR added.