The general public would not be able to claim income tax refunds paid as withholding tax on electricity bills from tax year 2008. Sources told Business Recorder on Monday that people were claiming refunds on small amounts of withholding tax deducted from electricity bills.
Adjustment of withholding tax on such small amounts resulted in laborious paperwork by the department. Now, the government will treat tax collected from electricity consumers, along with electricity bill, as ''minimum tax'' on the income of an individual and AOP from tax year 2008.
The explanatory circular of income tax highlighted the treatment of withholding tax on electricity bills as minimum tax: Previously, tax collected from electricity consumers along with the electricity bill was adjustable against the final tax liability of the taxpayer.
A new sub-section (4) has been inserted to treat tax collected along with electricity bill as minimum tax on the income of an individual and AOP. The provision of this sub-section shall be applicable with effect from tax year 2008.
Explaining another big relief for insurance sector, the circular specified that capital gains exemption would also be applicable for insurance companies.
The existing exemption under clause (110) on capital gain tax was available up to June 30 2007. The period of exemption has been extended up to tax year ending on June 30 2008. Likewise, this exemption is also extended for insurance companies and amendment to this effect has also been made in clause (6A) of the Fourth Schedule to the Income Tax Ordinance, 2001.
The circular said that the demutualisation is a process through which stock exchanges will convert into profit-making public limited companies. As a result, capital assets of present stock exchanges will be transferred to new corporatised stock exchanges and members of an existing stock exchange for acquisition of shares and trading and clearing rights acquired in the new corporatised stock exchanges.
To facilitate the process of demutualisation and corporatisation of stock exchanges, any gain on transfer of capital assets of the existing stock exchanges to new corporatised stock exchange has been exempted under newly inserted clause (110A).
Similarly, any gain on transfer of a capital asset, being a membership right held by a member of an existing stock exchange for acquisition of shares or trading rights by such member in a newly corporatised stock exchange, has also been exempted under clause (110B) of Part I of Second Schedule to the Income Tax Ordinance, 2001, circular added.
The maximum limit of investment in Initial Pubic Offerings (IPOs) for the purpose of tax credit under section 62, for a person (other than a company) has been enhanced from Rs 200,000 to Rs 300,000.