Presently the amounts remitted abroad by banks on behalf of its customers who made any transaction through debit, credit or prepaid cards are not subject to withholding of tax. However, the Finance Bill 2018-19 prescribes adjustable advance tax at 1 percent and 3 percent for filers and non-filers respectively of the gross amount remitted abroad through debit, credit or prepaid cards.
Prior to the income tax (amendment) Ordinance, 2018, any amount of foreign exchange, which was remitted from outside Pakistan through proper banking channel and is en-cashed into rupees by a schedule bank was outside the ambit of unexplained income and tax authorities could not question sources thereof.
However, the government wants to remove blanket exemption by restricting the amount of such remittances to Rs 10 million in a tax year. The taxpayers may be questioned by the tax authorities to disclose the source of remittances, if the same exceeds the prescribed limit.
Moreover, finance bill also introduces a fundamental change to prescribe that unexplained foreign assets and foreign source income shall be chargeable to tax in the tax year, immediately with no time limitation. Now, every resident individual taxpayers having foreign income of US$10000 or more or having foreign assets with a value of US$100,000 or more shall be required to file a separate statement of foreign income and foreign assets under finance bill 2018-19.
Presently as per section 37 where a capital asset becomes the property of a person under a gift, the fair market value of the asset, on the date of its transfer or acquisition by the person shall be treated to be the cost of the asset.
Similarly, section 79(1)(c) provides that no gain or loss shall be taken to arise on disposal of an asset by reason of a gift of the asset. The Finance Bill seeks to amend the above provisions to prescribe that gift of capital asset received from a relative shall only qualify for exemption from tax. However, the capital gain arising as a difference of fair market value to a person who has received gift from other than a relative shall be subject to tax.