Budget 2022/2023: Salient features of income tax

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ISLAMABAD: The following are the main features of the amendment to the Income Tax Ordinance 2001 through the Finance Bill 2022.

REVENUE MEASUREMENT:

1. Increase in the tax rate for banks from the 2023 tax year from an effective 39% to 45%.

2. Increase in corporate banking tax rate on unfavorable ADR ratio.

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3. High Income Tax for Poverty Reduction for the 2022 tax year and beyond.

4. Presumed income tax from unused property in excess of Rs. 25 million including luxury farmhouses and excluding detached house.

5. Increase in the rate from 1% to 2% on the sale and purchase of property for filers.

6. Increase in the rate from 100% to 250% in the event of the purchase of real estate by persons who are not active taxpayers.

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7. Increase of the rate from 200% to 100% in case of purchase of motor vehicles by persons who are not active taxpayers.

8. Level playing field for all asset classes. Capital gains tax on disposal of securities and real estate synchronized with vertical growth incentives for cities.

9. Increase in the advance tax rate on private vehicles of 1600 cc and over.

10. Increase in the annual advance tax rate on passenger vehicle tax.

11. Omission of deductible allowance for profit on debt and tax credit for equity investment, health insurance and pension funds.

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12. Limitation of minimum tax deferral to subsequent years.

13. Failure to waive flight allowances and submarine allowance.

14. Omission of reduced tax rate for investment in government securities.

15. Income Tax Withdrawal (Amendment) Order 2022.

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RESCUE MEASURES:

1. Fixed tax regime for specified retailers and service providers.

2. Limiting the frequency of audits to once every four years.

3. Adjustment of the tax charged on all materials at the import stage for the industrial enterprise for its own use.

4. Tax relief for employees and entrepreneurs by increasing the tax threshold.

5. Eligibility of 100% amortization in the first year.

6. Reduction of tax rate from 10 percent to 5 percent on Bahbood certificates.

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7. Withdrawal of withholding tax on payment of study fees.

8. Income Tax Exemption for Certain Not-for-Profit Entities.

9. Reduced rate of 3% on the provision of services by the REIT management company and NCCPL.

10. Abolition of the withholding tax on the rental of machinery.

11. Exemption from anticipated taxes for exempt entities.

RATIONALIZATION MEASURES:

1. Requirement to adopt digital payment method for businesses.

2. Clarification concerning the exempt income of partners if the income of AOP is exempt.

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3. Introduction of synchronized deduction administration payment system.

4. Rationalization of audit procedures.

5. Increased time limit for Best Judgment from 5 to 6 years.

6. Improved the restriction for placing the order from 120 to 180 days.

7. Clarification regarding remittance through money transfer transactions.

DOCUMENTATION OF SAVING MEASURES:

1. Inclusion of the notion of beneficial owner.

2. Alignment of point-of-sale regime with sales tax provisions and introduction of a pricing system.

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3. Increase in the scope of the tax on payments to non-residents and improvement of the rate from 5% to 10% on offshore digital services.

4. Expanding the scope of the criteria to become tax resident individuals.

5. Introduction of an advance adjustable fee on credit/debit card payments.

6. Sharing information between NADRA and FBR for broadening the tax base.


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