Guidelines for Online Session

Rules for NETIQUETTE for Online Discussions

 In order to experience smooth journey please sit in a group of 5 – 8 people

 You can join the session while sitting at your seat
 To have seamless e- learning experience try to avoid joining the session as a single user (sit in a group)
 If you are facing any issue please try to connect the meeting through your mobile by following the steps given in the email
 Join the meeting by clicking on link given in the email at 10:30 am
 Joining 30 minutes earlier will help you to settle down for the session
 Mute your speaker and stop sharing your video
 We’ll start the presentation at 11:00 am
 If you have any question during the presentation, please write your name e.g (Hassan, Head Office, I have a question) in
the chat box and representative sitting at the Head Office will address you to ask question
 Un-mute your speaker while asking question
 Wait for your turn
 Don’t speak during the presentation

If for any reason you experience difficulty participating, please call, email, or otherwise inform me of the issue.
Hassan.muhammad@fatima-group.com
0333-4005363
Extension - 488
 TAXATION
Finance Act, 2019

Facilitator:
Omer Khan Ghaznavi
Head of Corporate Taxation
July 04, 2019
TAXATION
AWARENESS
 Tax Rates for Salaried Individuals
Tax Liability
Slab No. Salary Slab Range
Fixed Portion Variable portion
1 - 600,000 Not taxable
2 600,001 1,200,000 - 5% Amount Exceeding 600,000
3 1,200,001 1,800,000 30,000 10% Amount Exceeding 1,200,000
4 1,800,001 2,500,000 90,000 15% Amount Exceeding 1,800,000
5 2,500,001 3,500,000 195,000 17.5% Amount Exceeding 2,500,000
6 3,500,001 5,000,000 370,000 20% Amount Exceeding 3,500,000
7 5,000,001 8,000,000 670,000 22.5% Amount Exceeding 5,000,000
8 8,000,001 12,000,000 1,345,000 25% Amount Exceeding 8,000,000
9 12,000,001 30,000,000 2,345,000 27.5% Amount Exceeding 12,000,000
10 30,000,001 50,000,000 7,295,000 30% Amount Exceeding 30,000,000
11 50,000,001 75,000,000 13,295,000 32.5% Amount Exceeding 50,000,000
12 75,000,001 21,420,000 35% Amount Exceeding 75,000,000
 Tax Comparison –
Tax year 2017- 18 vs. Tax year 2019-20
Amount in PKR
Income Tax per Month
Per Month Salary
2017-18 2018-19 2019-20
50,000 583 0 0
100,000 4,958 167 2,500
150,000 11,417 2,500 7,500
200,000 20,167 5,000 15,000
250,000 29,958 11,667 23,542
300,000 41,417 19,167 24,167
400,000 68,083 37,500 52,500
500,000 95,583 57,500 74,583
600,000 123,500 77,500 97,083
700,000 153,500 99,167 120,417
800,000 183,500 124,167 145,417
900,000 213,500 149,167 170,417
1,000,000 243,500 174,167 195,417
 Tax Rates for AOPs And Non-Salaried
Individuals
Business Income (Rs)
Up to 400,000
400,001 to 600,000
600,001 to 1,200,000
1,200,001 to 2,400,000
2,400,001 to 3,000,000
3,000,001 to 4,000,000
4,000,001 to 6,000,000
Above 6,000,000
Tax Rates
Nil
5% exceeding 400,000
10,000 + 10% exceeding 600,000
70,000 + 15% exceeding 1,200,000
250,000 + 20% exceeding 2,400,000
370,000 + 25% exceeding 3,000,000
620,000 + 30% exceeding 4,000,000
1,220,000 + 35% exceeding 6,000,000
 Tax Rates for rent of immovable property

Business Income (Rs) Tax Rates- Individual

Up to 200,000 Nil
200,001 to 600,000 5% exceeding 200,000
600,001 to 1,000,000 20,000+ 10% exceeding 600,000
1,000,001 to 2,000,000 60,000 + 15% exceeding 1,000,000
2,000,001 to 4,000,000 210,000+ 20% exceeding 2,000,000
4,000,001 to 6,000,000 610,000+ 25% exceeding 4,000,000
6,000,001 to 8,000,000 1,110,000+ 30% exceeding 6,000,000
Above 8,000,000 1,710,000+ 35% exceeding 8,000,000
Tax Rates for rent of immovable property-Companies
15% of gross rent
 Corporate & Other Income Tax Rates
Companies- general Tax Rates
Small Company 25%
Banking Company 35%
All other Companies 29%
Alternate Corporate Tax (ACT) 17%
Minimum Turnover Tax 1.50%
Super Tax Tax Rates
Banking Company 3%
Persons other than BC where income > Rs 500 M 0%
Tax on undistributed profits (for public companies if distribution <20%) charged on a/c profit 5%

Tax on sale- specified sector Filer Non- filer

Sale to distributors, dealers and wholesalers 0.1% 0.2%
Tax on sale to retailers- Electronics 1% 2%
Tax on sale to retailers- Others 0.5% 1%
(Electronics, sugar, cement, iron, steel products,
 Gain on immovable property disposal

Gain on immovable property

Constructe d properties
Sold after 1 year but not exceeding 4 years of purchase 75% taxable

Sold after 4 years of purchase 0%

O pe n Plots
Sold after 1 year but not exceeding 8 years of purchase 75% taxable

Sold after 8 years of purchase 0%

 WHT on Sale of Goods

Sale of goods Filer Non- filer

By company 4% 8%
By Individual and AOP 4.5% 9%

Fast moving consumer goods

By company 2% 4%
By Individual and AOP 2.5% 5%
Minimum limit on tax deduction for payments against goods Rs. 75,000 and on services Rs. 30,000
 WHT on Rendering of Services
Services Filer Non- filer
By company 8% 16%
By Individual and AOP 10% 20%
By export houses for services rendered 1% 2%
Advertisement Services (Electronic/print media) 1.5% 3%
Advertisement Services Other than (Electronic/print media) 3% 6%

Transport services
Freight forwarding services
Air cargo services
Courier services
Manpower outsourcing services
Hotel services
Security guard services
Software development services
IT services and IT enabled services
Tracking services
Share registered services
Engineering services
Car rental services
Building maintenance services
Inspection services
Certification services
Testing services
Training services
 WHT on Various Services
Contracts Filer Non- filer
By Company 7% 14%
By Individual and AOP 7.5% 15%
Brokerage and Commission Filer Non- filer
Advertisement agents 10% 20%
Life insurance agents (Less than 0.5 M) 8% 16%
Other cases 12% 24%
Tax at Import stage Filer Non- filer
Coal Import by manufacturer & comm. importer 4% 8%
Companies / Industrial Undertaking 5.5% 11%
Other tax payers 6% 12%
Ship breaker on import of ships 4.5% 9%
Profit on debt Filer Non- filer
Up to 5 M [except 10% WHT for profit upto Rs 500,000] 15% 30%
From 5 M TO 25 M 17.5% 35%
From 25 M TO 36 M 20% 40%
Above 36 M Normal tax regime
 WHT on Dividend

Dividend Filer Non- filer

Received by Company 15% 30%
Inter-corporate dividend within the group companies 0%
covered under group taxation
Received by an individual or an AOP, if the profit is more than 13% 25%
Rs. 1 Million
Received by an individual or an AOP, if the profit is less than Rs. 10% 20%
1 Million
 WHT on Various other items
Immovable Property Filer Non- filer
On buyer 1% 2%

Non-filer not permitted to purchase new motor vehicles and immovable

property having declared value above 5 M

On seller holding period within 5 years 1% 2%

On seller holding period after 5 years 0%
On sale by auctions 10% 20%
On function and gatherings- major cities Higher of 5% or 20,000
On function and gatherings- remaining cities Higher of 5% or 10,000
Charge by local educational institutions 5% 5%
Charge by foreign educational institutions 5% 5%
Royalty and technical services (resident) 15% 30%
Royalty and technical services (non-resident) 15% 30%
On prize bonds 15% 30%

Mineral extraction 0% 5%
 Various other amendments

• Tax credit u/s 65B on BMR is reduced from 10% to 5% for tax year
2019 and subsequently abolished.

• Initial Allowance on Building is abolished.

• The aforesaid clause (94) is being omitted and the tax rate for
services therein having reduced rate of 2% of turnover, is being
increased to 4% of the gross amount of turnover. Further the present
rate of 2% for various services is also being increased to 3%.

• Tax profiling can also be checked on below link:

http://taxnet.nadra.gov.pk/itax/
 WHAT IS MEANT BY SALARY INCOME?

The following incomes are chargeable

to tax under the head “SALARY”

• Any salary received during the year [Section-12(1)]

[current salary + Arrears + Advance salary]

• Valuation of Perquisites, allowances and

benefits [Section-13 & 14]
 DEDUCTION OF TAX ON
SALARY INCOME

Every employer shall, at the time of payment, deduct

tax from the amount paid at the employee’s average
rate of tax computed at the rates specified in
Division I of Part I of the First Schedule
TAX CREDIT
ON SALARY
INCOME
 TAX CREDIT
[CHARITABLE DONATION] – Sec 61

Employee shall be entitled to a tax credit in respect of any sum paid,

or any property given by the person in the tax year as a donation to —
 
a. Any board of education or any university in Pakistan
established by, or under, a Federal or a Provincial law;
b. Any educational institution, hospital or relief fund established
or run in Pakistan by Federal Government or a Provincial
Government or a Local Government; or
c. Any non-profit organization.
 TAX CREDIT
[CHARITABLE DONATION]

The amount of a tax credit allowed for a tax year shall be computed
according to the following formula, namely

(A/B) x C
where —
 
Ais the amount of tax assessed to the person for the tax year before
allowance of any tax credit under this Part;
 B is the person’s taxable income for the tax year; and
 C is the lesser of —
a. the total amount of the person’s donations in the year,
including the fair market value of any property given; or
b. thirty per cent of the taxable income of the person for the year
An amount paid by a person as a donation shall be taken into account only if it is paid by a
crossed cheque drawn on a bank.
 TAX CREDIT
[CHARITABLE DONATION] – Clause 61
Part I of 2nd Schedule

Donations to institutions under clause 61 part I of the 2nd schedule

Amount paid as donation to the institutions mentioned in clause 61 Part I of 2nd

schedule of the Income Tax Ordinance, 2001 are straight deduction from the total
income of the donor (treated like deductible allowances).

The amount donated shall not exceed 30% of the taxable income.

The condition of payment through banking channel is not applicable for donations to
be permissible deductions.

• Some famous institutions include Shaukat Khanum Cancer Hospital, National Trust Fund
for the Disabled, The Citizens Foundation, Fatimid Foundation, Al-Shifa Trust, Fund for
Retarded and Handicapped Children, Fund for Promotion of Science and Technology in
Pakistan, Fund for Development of Mazaar of Hazarat Burri Imam, Christian memorial
hospital, Sialkot, Indus Hospital Karachi, Mohatta palace trust, etc
 TAX CREDIT
[INVESTMENT IN SHARES & INSURANCE] – Sec 62

Employee shall be entitled to a tax credit in either—

 
a. in respect of the cost of acquiring in the year new shares
offered to the public by a public company listed on a stock
exchange in Pakistan, provided the resident person is the
original allottee of the shares or the shares are acquired
from the Privatization Commission of Pakistan; or

b. in respect of any life insurance premium paid on a policy to

a life insurance company
 TAX CREDIT
[INVESTMENT IN SHARES & INSURANCE]
The amount of a tax credit allowed for a tax year shall be
computed according to the following formula, namely

(A/B) x C
where —
  A is the amount of tax assessed to the person for the tax year
before allowance of any tax credit under this Part;
 B is the person’s taxable income for the tax year; and
 C is the lesser of —
a. the total cost of acquiring the shares, or the total
contribution or premium paid by the employee in the
year
b. twenty per cent of the person’s taxable income for the
year; or
c. 2.0 million rupees
 TAX CREDIT
[HEALTH INSURANCE] – Sec 62A
Employee shall be entitled to a tax credit on health insurance
premium
 

Tax Credit = (A/B) x C

where –
 A is the amount of tax assessed to the person for the tax year
 
B is the person’s taxable income for the tax year; and
 
C is the lesser of —
 
•Total contribution or premium paid by the person
 
•five per cent of the person’s taxable income for the year; and
 
• one hundred thousand rupees.
 TAX CREDIT
[Contribution to an Approved Pension Fund]

An eligible person as defined in sub-section (19A) of section 2

deriving income chargeable to tax under the head “Salary” or
the head “Income from Business” shall be entitled to a tax
credit for a tax year in respect of any contribution or premium
paid in the year by the person in approved pension fund
under the Voluntary Pension System Rules, 2005.
 TAX CREDIT
[Contribution to an Approved Pension Fund]
The amount of a person’s tax credit allowed for a tax year shall be
computed according to the following formula, namely: -
 
Tax Credit = (A/B) x C
 
Where.-
 
A is the amount of tax assessed to the person for the tax year, before
allowance of any tax credit
 
B is the person’s taxable income for the tax year; and
 
C is the lesser of -
 
the total contribution or premium paid by the person in the year; or
 TAX CREDIT
[Contribution to an Approved Pension Fund]
twenty per cent of the eligible person’s taxable income for the relevant
tax year;

Provided that an eligible person joining the pension fund at the age
of forty-one years or above, during the first ten years starting from
July 01,2006, shall be allowed additional contribution of 2% per annum
for each year of age exceeding forty years. Provided further that the total
contribution allowed to such person shall not exceed 50% of the total
taxable income of the preceding year.
 
provided also that the additional contribution of two percent per
annum for each year of age exceeding forty years shall be allowed upto
the
30th June, 2019 subject to the condition that the total contribution
allowed to such person shall not exceed thirty percent of the total
taxable income of the preceding year.
 Deductible Allowance
[Zakat] – Sec 60

A person is entitled to a deductible allowance for the amount of any

Zakat paid by the person in a tax year under the Zakat and Ushr
Ordinance, 1980.

• Where the Zakat has been deducted out of the profit on

debt (which is chargeable under the head “income from other
sources”), such Zakat shall not be deducted out of the total
income, rather, it shall be allowed as a deduction while computing
income from other sources.

• Where the amount of Zakat is more than total income, the excess
amount shall not be refunded or carried forward or carried back.
 Deductible Allowance
[Profit on debt] – Sec 64A
Every individual shall be entitled to a deductible allowance for the amount of
any profit or share in rent and share in appreciation for value of house paid
by the individual in a tax year on a loan by a scheduled bank or non-
banking finance institution regulated by the Securities and Exchange
Commission of Pakistan or advanced by Government or the Local
Government, Provincial Government or a statutory body or a public
company listed on a registered stock exchange in Pakistan where the
individual utilizes the loan for the construction of a new house or the
acquisition of a house.

• The amount of deductible allowance allowed shall not exceed fifty

percent of taxable income or two million rupees, whichever is lower.
• Any allowance or part of an allowance that is not able to be deducted for
the tax year shall not be carried forward to a subsequent tax year.
 Deductible Allowance
[Educational Expenses]
Every individual shall be entitled to a deductible allowance in respect of tuition fee paid by
the individual in a tax year provided that the taxable income of the individual is less than
one and half million rupees.
The amount of an individual‘s deductible allowance allowed for a tax year
• shall not exceed the lesser of —
• a) five per cent of the total tuition fee paid by the individual in the year;
• b) twenty-five per cent of the person’s taxable income for the year; and
• c) an amount computed by multiplying sixty thousand with number of children of the
individual.
• Any allowance or part of an allowance for a tax year that is not able to be deducted for
the year shall not be carried forward to a subsequent tax year.
• Allowance shall be allowed against the tax liability of either of the parents making
payment of the fee on furnishing national tax number (NTN) or name of the educational
institution.
• Allowance shall not be taken into account for computation of tax deduction under
Salary.
TAX EXEMPTION
& CONCESSIONS
ON SALARY INCOME
 EXEMPTIONS FROM TOTAL INCOME

PENSION RECEIVED BY PAKISTANI

Any amount received as pension by a Pakistani is exempt. This exemption shall be
withdrawn if the retired person is re-employed by the same employer or an associate
of the employer.

Where a person receives more than one pension, then only one pension having higher
amount will be exempted and remaining other will be taxable.

Pension received by the following persons is exempt from tax;

• Any citizen of Pakistan
• Member of Armed Forces of Pakistan
• Employee of the Federal Government or a Provincial Government
• Family and dependents of public servants or member of Armed Forces of Pakistan died
during services
• Commutation of pension received from Government or under any pension scheme
approved by the Board
• Pension received by dependents of Shuhuda and public servant
 EXEMPTIONS FROM TOTAL INCOME

GRATUITY OR COMMUTATION OF PENSION

Any amount of gratuity or commutation of pension received by an employee on his
retirement or his hire upon his death is exempted from tax subject to following limit:

S.No. Received From Exemption Limit

1. Government (Federal, Provincial or Full Amount
Local), Statutory body or Corporation.
2. Gratuity Fund approved by Full Amount
Commissioner Inland Revenue.
3. Any other employer (other than specified Rs. 300,000/-
above) under a scheme approve by
Board
4. Any Other Case Leaser of Rs. 75,000/-
or 50% of the amount
received.
 EXEMPTIONS FROM TOTAL INCOME

PROVIDENT FUND
Event Government Recognized PF Unrecognized PF
PF
Employee’s No Treatment No Treatment No Treatment
Contribution
Employer’s Exempt Exempt lesser of No Treatment at This Stage
Contribution 1/10th of the salary
or Rs. 150,000/-.
Any excess
amount is taxable.

Interest Exempt Exempt up to No Treatment at This Stage

Credited during higher of 1/3rd of
the year salary or amount
of interest
calculated at the
rate of 16%
Payment of Exempt Exempt Total exempt if the fund is formed under
Accumulated the Provident Fund Act, 1925. Otherwise,
Balance only the employer’s contribution and
interest thereon is taxable in the year of
receipt.
 REDUCTION IN TAX LIABILITY

MEDICAL BENEFIT
 

• The benefit represented by free provision to the employee of

medical treatment or hospitalization or both by an employer or
the reimbursement received by the employee of the medical
charges or hospital charges or both paid by him, where such
provision or reimbursement is in accordance with the terms of
employment:
Provided that National Tax Number of the hospital or clinic, as the case may be, is given and
the employer also certifies and attests the medical or hospital bills to which this clause applies;
• any medical allowance received by an employee not exceeding ten per cent of the basic salary
of the employee if free medical treatment or hospitalization or reimbursement of medical or
hospitalization charges is not provided for in the terms of employment
 TAX ADJUSTMENTS

 Tax deducted on cash withdrawal – Sec 231A

 Advance tax on purchase of private Motor vehicle – Sec 234
 Tax paid on renewal of annual Car token – Sec 231B
 WHT tax paid on usage of PTCL, cellular phone networks – Sec 236
 Advance tax on sale or transfer of immovable property – Sec 236C
 Advance Tax collected by educational institutions – Sec 236I
 Advance tax on purchase or transfer of immovable property Sec 236K
 Advance tax on purchase of international air tickets – Sec 236L
 Advance tax on educational expenses remitted abroad – Sec 236R
 Advance tax on banking transaction – Sec 236P
 Advance Tax on insurance premium – Sec 236U