Saturday, March 7, 2009

Tax Laws

Income Tax Laws
S.R.O. 600(I)/91, dated 02-07-1991. In exercise of the powers conferred by clause (c) of subsection
(4) of section 50 of the Income Tax Ordinance, 1979 (XXXI of 1979), and in suppression
of its Notification No. 707(I)/80, dated 26th June, 1980, the Central Board of Revenue is pleased
to specify the special rate specified in the table below for deduction of advance tax under the said
sub-section in respect of the payments specified in the table.
Table
Payment Rate
(i) Payments on account of supply of raw hides and skins One per cent.
(ii) Payments on account of supply of cotton lint. One per cent.
(iii) Payments on account of supply of raw wool. Two per cent.
(iv) Payments on account of transportation of goods through
goods transport vehicles.
One per cent.
(v) Payments on account of supply of rice. One per cent.
(vi) ----------------------- ------------
(vii) Payments on account of supply of motor vehicles to
Government Department and Corporations.
0.75 per cent.
(viii) Payments on account of supply of iron and steel items like
M.S. bars, angle iron, tee iron and girgers, received by
suppliers of these items which are not manufactured by them.
1.25 per cent.
(ix) Payments on account of Modaraba transactions made by a
Modaraba or an Investment Bank.
One per cent.
2. This notification shall have effect from the first day of July, 1991.
{C. No. ITJI-1 (7)/84 Vol-II.}
{Note: In the Table, after entry (vi), a new entry (vii) was added vide SRO 551(I)/92, dated 02-06-
1992 and shall have effect for the assessment year 1991-92 only. Netry (viii) was added vide
SRO 895(I)/92, dated 15-09-1992 and shall be deemed to have effect from the 9th August, 1992,
and shall remain valid till 30th June, 1993.}
{Note : In the Table, after entry at serial number (viii), a new entry (ix) was added vide SRO
181(I)/93, dated 02-03-1993 and that entry (ix) was substituted vide SRO 413(I)/94 dated 29-05-
1994}
{Note : In the table, entry (vi) was omitted vide SRO 629(I)/94 dated 27-06-1994 and shall have
effect from the first day of July, 1994.}
Deduction of tax at source:
(1) Any reason responsible for paying any income chargeable under the head “Salary” shall,
at average rate of tax computed at the rates specified in the First Schedule on the
estimated income of the assessor under this head for the financial year in which the
payment is made after making such adjustment, as may be necessary, for any excess
deduction or deficiency arising out of any previous deduction or failure to make such
deduction during the said financial year.
Deduction of tax at source (On supply of Cotton Lint etc.)
Notwithstanding anything contained in this Ordinance:
(a)Any person responsible for making any payment in full or in part (including a payment by way
of an advance) to any person being resident (hereinafter referred to respectively as “payer” and
recipient”), on account of supply of goods or for service rendered to, or the execution of a contract
with the Government, or a local authority, or a company, or a registered firm, or any foreign
contractor or consultant or consortium shall deduct advance tax, at the time of making such
payment, at the rate specified in the First Schedule, and credit for the tax so deducted in any
financial year shall, subject to the provisions of section 53, be given in computing the tax payable
by the recipient for the assessment year commencing on the first day of July next following the
said Financial year, or in the case of an assessor to whom section 72 ort section 81 applies; the
assessment year, if any, in which the “said date”, as referred to therein, falls whichever is the
later:
Provided that the provisions of this clause shall apply, mutates mutinies, to any payment made on
or after the first day of July, 1998, to a non-resident person on account of execution of a turnkey
contract, a contract of sub-contract for designing, supply of a plant and equipment and
construction, assembly or like project in Pakistan or any other contract for construction or for
service rendered other than that to which the provisions of sub-sections (3A) and (4A) apply.
Explanation.
For the purpose of clause (a) the expression “supply of goods” includes both cash and credit
purchases of goods by the payer, whether under a contract or not, on credit or in cash.
(b) The Commissioner may, on an application made by any such recipient and after making such
enquiry as he thinks fit, allow, by an order in writing, any person responsible for making such
payment not to deduct any tax from any payment or payments made to such recpient in any
financial year; and where such order is made, the person responsible for making any payment
shall thereafter, and until such order is cancelled, make such payment without deduction of tax
under clause (a): and
Provided that.
(i) Nothing contained in clause (a) or clause (b) shall apply any payment on account of
securitization of receivables or to any payment made on account of the refund of any
security deposit to the purchase of an asset under a lease and buy back agreement
by a modaraba or leasing company or a banking company or a financial institution.
(ii) Nothing contained in sub-section (10) shall apply to companies as payers and
(iii) Where tax is withheld by any person responsible for making any payment to the
Special Purpose Vehicle, on behalf of the originator, it shall be deposited to the credit
of the originator.
{Note : The following amendments were made vide Finance Ordinance, 2001.
In the proviso:
(i) in clause (i)
(a) after the word “apply” the words “any payment on account of securitization of
receivables by a special purpose vehicle to the originator or “ were inserted; and
(b) the word “and”, at the end, was omitted;
(ii) in clause (ii), for the full stop, at the end, the semi colon and word “; and” were
substituted and thereafter a new clause (iii) was added }
Deduction of tax at source (on payment of Brokerage and Commission)
Any person responsible for making any payment in full or in part (including a payment by way of
advance) to any person, on account of brokerage or commission on behalf of the Government, a
local authority, a company, a registered firm or foreign contractor or consortium shall deduct tax,
at the time of making such payment, at the rate specified in the First Schedule:
Provided that where any person receives payment on behalf of his principal and remits it after
deducting his commission such commission shall be deemed to have been paid to him and such
principal shall collect the tax.
{Note: This sub-section was substituted vide Finance Act, 1999}

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