Curtailing the Tax (Part II) - Tax Credits

By -




The prime interest and aim of any prudent and rational tax payer would always be to reduce the impact of taxes on his Income, turnover and in some cases his expenses (Tax on electricity bills, tax on vehicle registration e.t.c.) as the case maybe. 

To achieve this objective while remaining within the parameters of law it is important to have an understanding of the following provisions under the Income Tax Ordinance, 2001: 


2) Tax Credits; 

3) Reduction in Tax Liability; (Will be discussed in part 3 of this series) 


The above concepts are the prime areas which allows taxpayers to take benefit of and reduce their tax liability besides exemptions and concessions and immunities provided elsewhere in the Income tax Ordinance, 2001. 

This blog is continuation to the series "Curtailing the Tax" and is part 2 of the same.

We are going to review in detail various provisions of tax credits scattered all over the Income Tax Ordinance, 2001 in detail. 

TAX CREDITS


These are the benefit which are allowed to be deducted indirectly from the tax liability as compared to deductible allowances which were direct in nature. 

Following are the various deductible allowance prescribed under the Income Tax Ordinance, 2001: 


























Due to lengthy individual topics all the above tax credits are discussed in detail on separately on there relevant blogs. Click the links above for respective details.

Miscellaneous Provision of Tax Credit (Section 65);


Without prejudice to the various credits under section 65 of the Income Tax Ordinance, 2001 which are separately discussed. Following are the extracts of the general rule of thumb applicable for every tax credit under the ambit of section 61 to section 65 of the Income Tax Ordinance, 2001.

"(1) Where the person entitled to a tax credit under this part is a member of an association of persons to which sub-section (1) of section 92 applies, the following shall apply—
(a) component A of the formula in sub-section (2) of section 61, sub-section (2) of section 62, sub-section (2) of section 63 and sub-section (2) of section 64 shall be the amount of tax that would be assessed to the individual if any amount derived in the year that is exempt from tax under sub-section (1) of section 92 were chargeable to tax; and
(b) component B of the formula in sub-section (2) of section 61, sub-section (2) of section 62, sub-section (2) of section 63 and sub-section (2) of section 64 shall be the taxable income of the individual for the year if any amount derived in the year that is exempt from tax under sub-section (1) of section 92 were chargeable to tax.
(2) Any tax credit allowed under this Part shall be applied in accordance with sub-section (3) of section 4.
(3) Subject to sub-section (4), any tax credit or part of a tax credit allowed to a person under this Part for a tax year that is not able to be credited under sub-section (3) of section 4 for the year shall not be refunded, carried forward to a subsequent tax year, or carried back to a preceding tax year.
(4) Where the person to whom sub-section (3) applies is a member of an association of persons to which sub-section (1) of section 92 applies, the amount of any excess credit under sub-section (3) for a tax year may be claimed as a tax credit by the association for that year.
(5) Sub-section (4) applies only where the member and the association agree in writing for the sub-section to apply and such agreement in writing must be furnished with the association’s return of income for that year.
(6) Where the person is entitled to a tax credit under section 65B, 65D or 65E, provisions of clause (d) of sub-section (2) of section 169 and clause (d) of sub-section (1) of section 113 shall not apply.”

Comments

Post a Comment

Live Stream

Legal Advise

Legal Advise

Taxation Training

Taxation Training

Popular posts from this blog

Procedure for registering mobile phones of persons returning to/visiting Pakistan

By -
Image
MOBILE TAX CALCULATOR NOTE: Please bear in mind that these figures are very close to,  but  NOT  the exact amount  you will be required to pay in tax. For simplicity's sake, the calculator also assumes that you are a tax non-filer. The exchange rate is assumed to be $1=Rs140. CLICK HERE   HOW TO REGISTER MOBILE PHONES BY FORIEGN TRAVELERS - DAWN NEWS The Federal Board of Revenue (FBR) has allowed sixty days period for international travelers to get duty-free registration of mobile    THE NEWS APPLICABLE DUTY/TAX STRUCTURE ON IMPORT OF MOBILE HANDSETS PCT (Pakistan Customs Tariff Code for Classification): 8517.1219  PCT Duty & Taxes 8517.1219 Customs/ Regulatory Duty  (i) Rs.250/set upto C&F Value of US $ 60;  (ii) @10% Adval of C&F value above US $ 60 & upto US $ 130;  (iii)@20% Adval of C&F value above US $ 130.  Sales Tax (S.No.2of the Ninth Schedule to ...
Read more

Taxation of Gratuity in Pakistan

By -
Image
Following are the procedures of taxation of gratuity laid down in the Income Tax Ordinance,  2001. We have summarized all the provisions of Income Tax Ordinance, 2001 relating to Gratuity in one place for the ease of our readers. Taxation of gratuity under the head Income From Business In the head “Income from Business” if contribution is made to an unapproved Gratuity than no deduction will be allowed for the same- Section 21(e) of the Income Tax Ordinance, 2001 Taxation of gratuity for Salaried Individuals Gratuity is part of salary as specified under section 12(2)(a) and Six Schedule Part III Clause 4 of the Income Tax Ordinance, 2001.  Exemption criteria under Second Schedule Part I Clause 13 Any Gratuity received on retirement of employee by employee himself or by his legal heirs after death of employee shall be exempt from levy of income tax subject to the following limits not exceeding:  1)     ...
Read more

How to obtain exemptions under various provsions of Income Tax Ordinance, 2001 - Sample Letters included

By -
Image
1. INTRODUCTION 1.1 The exemptions provided under the Income Ordinance, 2001 are spread all over the said statute under various provisions and in order to have an in depth understanding of the same it is very important to analyse all the relevant provisions and to arrange them in a single meaningful way. 1.2 In this blog all efforts have been made to arrange the provisions regarding the exemptions under the Income Tax Ordinance in one place for an easy understanding of its valuable readers. 2. OVERVIEW OF EXEMPTIONS PROVIDED UNDER INCOME TAX ORDINANCE, 2001 2.1 The provisions of exemptions provided under the Income Tax Ordinance, 2001 can be divided into following three broad categories which will be discussed in detail later in this blog: Exemptions and Tax Concessions provided under Part VII of Chapter III of the Income Tax Ordinance, 2001; Exemptions under the ambit of Section 159 of the Income Tax Ordinance, 2001; and  Exemptions and Reduction ...
Read more