The FBR has agreed to SECP proposals relating to amendment in section 62 of Income Tax Ordinance, 2001-Tax Credit on Investment in new shares; reduction in withholding tax rate on gold at import stage, if imported through Pakistan Mercantile Exchange Limited; removal of capital value tax (CVT) on purchase of Instruments of Redeemable Capital; amendment in the definition of "Mutual Fund" to include "Collective Investment Scheme" and National Investment (Unit) Trust; amendment in section 156B (1) (b) of Income Tax Ordinance, 2001 to synchronise provisions of section 156B and clause 23A f Part I of Second schedule and to define the private equity and venture capital fund, insertion of new subsection 45A in section 2 of the Income Tax Ordinance 2001.
The FBR has not agreed to other nine proposals of the SECP including reduction in the corporate income tax rate for companies and listed companies; exemption of capital gain tax on gain on sale of any instrument of redeemable capital; amendment in Part I, Division VII of First Schedule of Income Tax Ordinance, 2001; Deletion of Section 39 clause (1)(l) of Income Tax Ordinance, 2001 to bring parity in tax treatment of employers' sponsored pension schemes and VPS; insertion of new clause 57 (3) (x) in Part I, Second Schedule of Income Tax Ordinance, 2001; insertion of a new section 29B in Income Tax Ordinance, 2001 to allow tax deductible provisioning for NPL expense to NBFCs as allowed to banking companies under clause 1(c) of 7th Schedule of I.T. ordinance and amendment in clause 8(1) of Seventh schedule of Income Tax Ordinance 2001 to bring uniformity in tax treatment across all persons on sale of immovable property to a REIT Scheme.
The FBR has also rejected SECP proposals of tax rate for charging capital gains as compared to other sectors of the economy should be similar to the insurance industry. As per SECP, the capital gain tax on listed securities of insurance companies is currently charged at a higher rate which needs to be brought at par with companies in other sectors of the economy to remove the discrepancy.
The FBR has also not agreed with the proposal of the SECP on the introduction of tax credit for life insurance premiums/takaful contributions paid by individuals.
Sources said that five proposals of the SECP are under consideration of the FBR. These include amendment in section 63(2) of Income Tax Ordinance, 2001- Tax credit for contribution in VPS ; insertion of a new clause 13A in Part 1, Second Schedule of Income Tax Ordinance, 2001 to allow transferability of funds in retirement schemes; insertion of new clause 23B in Part I, Second Schedule of Income Tax Ordinance, 2001; amendment in clause 11(A) (i) of Part IV of Second Schedule to exempt VPS from minimum tax and amendments in provisions of the Fourth Schedule of the Income Tax Ordinance 2001, to clarify provision as a result of proposed changes in the Accounting Regulations contained in the Securities and Exchange Commission [Insurance] Rules 2002.
Sources said that one proposal is not related to FBR, but the Ministry of Finance will decide about the SECP proposal. The SECP proposal said that a Federal Insurance Fee @ 1 percent of the Gross Premium payable on all types of insurance was levied in the Finance Act 1989 under the head Economic Regulation Fees realised under the Insurance Act 1938. However, the said fee was withdrawn on life insurance from 1 July 1991 by the Finance Division. Health insurance is carried out by both life and non-life companies. While the fee was withdrawn entirely for life insurance, it continues to be applicable on the health insurance business transacted by general insurance companies. The removal of the anomaly in FIF will support the growth of health insurance business being carried out by non-life insurance companies by making it affordable to individuals, SECP added.