The Federal Board of Revenue has extended the limit of availing tax credit up to five years for making investment by industrial undertakings already set up before July 1, 2011 with 100 percent equity investment during the period July 1, 2011 to June 30, 2016 to meet the global market standards. The major facility to industrial undertakings has been explained in the income tax circular issued here on Saturday.
According to the income tax circular, to facilitate industrialisation in the country and to encourage modernisation of the already existing manufacturing concerns, tax credit under this section has also been extended for extension and expansion of an industrial undertaking. Furthermore, the ambit of tax credit has been extended to include minimum tax and final taxes payable under any provision of the Income Tax Ordinance 2001.
The substituted sub-section (4) incentiveizes Industrial Undertakings already set up before July 1, 2011 to make 100 percent equity investment through issuance of new shares for cash consideration in balancing, modernisation and replacement of their plant & machinery by providing a tax credit of 20% of the amount invested in the tax year in which the machinery is installed.
The limitation of availing tax credit for investments by Industrial Undertakings already set up before July 1, 2011 and making 100 percent equity investments during the period July 1, 2011 to June 30, 2016 has been extended to five years. However, the tax credit allowable under this section shall not exceed the limits as specified in subsections (1) & (4) of this section, the FBR added.
The FBR said that certain substitutions have been made that clarify the mode of 100 percent equity to be raised through issuance of new shares for cash consideration. Corporate Dairy farming has also been included in the ambit of this section to encourage this important sector of our economy. The domain of tax credit to be availed by this section has been extended to minimum tax and final taxes payable under any provision of the Income Tax Ordinance, 2001. It has also been clarified that short term financing obtained from banking companies or non banking financial institutions for meeting the working capital requirements shall not disqualify the taxpayer from claiming tax credit under this section.
It has further been elaborated that an industrial undertaking shall be considered to have been set up when it starts its production whether on trial or commercial basis. The ambit of Section 65E has been expanded to facilitate existing industrial undertakings to undertake new projects for claiming tax credit under this section. The period of tax credit has been enhanced to five years instead of the previous four years.
To ensure proper documentation, taxpayers have been encouraged to maintain separate books of accounts for an expansion project or a new project. An incentive of 100% tax credit equal to hundred percent tax payable including minimum & final taxes payable under any provisions of the Income Tax Ordinance, 2001 has been offered, the FBR added.