- BY: MUHAMMAD UMAIR ZEB (FINANCE AND TAX ANALYST)
- Govt unveils Rs9.5 trillion federal budget for 2022-23
- Salaries of govt officers increased by 15%; pensions 5%; Rs740b new taxes proposed
With one eye on the International Monetary Fund and the other on voters, Finance Minister Miftah Ismail on Friday proposed a Rs9.5 trillion inflationary budget amid a daunting challenge to meet ambitious targets.
Key Highlights of the direct and indirect taxes as well as tax breaks to different sectors can be view below.
- Increase in tax rate for banks for tax year 2023onwards from effective 39% to 45%.
- Increase in tax rate of banking companies on adverse ADR ratio.
- Tax on higher earning persons for poverty alleviation for tax year 2022 and onwards.
- Tax on deemed income from utilized property above Rs. 25 Million including luxury farmhouses and exclusive of one self-occupied house.
- Increase in rate 1% to 2% on sale and purchase of property for filers.
- Increase in rate from 100% to 250% in case of purchase of property by persons who are not active tax payers.
- Increase in rate of 200 from 100% in case of purchase of motor vehicles by a person who is not active taxpayers.
- Increase in advance tax rate on private vehicles of 1600cc and above.
- Level playing field for all classes of assets. Capital Gain on disposal of securities and real estate synchronized along with incentives for vertical growth of cities.
- Increase in yearly advance tax rate on tax on passenger vehicles.
- Omission of deductible allowance for profit on debt and tax credit for investments in shares, health insurance and pension funds.
- Restriction on carry forward of minimum tax in subsequent years.
- Omission of exemption on flying allowances and submarine allowance.
- Omission of reduced rate of taxation for investment in Government securities.
- Withdrawal of Income Tax (Amendment) Ordinance, 2022.
- Fixed Tax regime for retailers and specified service providers.
- Restriction on frequency of audits to once in four years.
- Adjustment of Tax collected on all materials at import stage for industrial undertaking for own use.
- Relief on taxation for salaried and business individuals by increase threshold for taxation.
- Admissibility of 100% depreciation in first year.
- Reduction in tax rate from 10% to 5% on Behbood Certificates.
- Withdrawal of withholding tax on educational expenses payments.
- Exemption from tax on income of certain non-profit entities.
- Reduced rate of 3% on provision of services by REIT management company and NCCIDL.
- Withdrawal of withholding tax on rent of machinery.
- Exemption from advance taxes to exempt entities.
- The scope of further tax has been enhanced to include non-active taxpayers as well.
- Regime of other then Tiesr-1 retailer has been streamlined.
- Vat has been imposed on compressor scrap, motor scrap and copper cutting scrap even when imported by manufacturers.
- The condition of CNIC/NTN in case of supply to unregistered person have been removed.
- Sales Tax exemption has been granted on import and supply of all types of seeds.
- Sales Tax on tractor is withdrawn.
- Exemption has been granted on imports by UN diplomats/diplomatic missions and privileged persons.
- Import and supply of solar panels (PV module) has been exempted from sales tax.
- Good imported by or donated to non-profit charitable hospitals has been exempted. Furthermore, good supplied to charitable hospitals of fifty beds or more have also been exempted from sales tax.
- Temporary Imports have been exempted from the levy of the sales tax.
- Made-up jewelry has been made chargeable to 3% fix tax on local supply and 4% fix tax on imports.
- Plant and machinery imported by power generation projects that entered into implementation agreement with GOP has been exempted from sales tax.
- Rs. 90 per KG is reduced to Rs. 60 per KG on potassium chlorate.
- Import by EP Z has been exempted from sales tax.
FEDERAL EXCISE DUTY
- Rate of FED is enhanced on locally manufacture cigarettes.
- Rate of FED is enhanced on club, business and first-class travel by air is enhanced from Rs. 10,000 to Rs. 50,0000.
- Rate of FED is enhanced on telecommunication services is enhanced from 16% to 19.5%.