Income Tax Assessment Scheme for Traders

January 5, 2016 | By More

In the Finance Act 2015, the Government had introduced a withholding income tax at the rate of 0.6% on all financial transactions for non-tax filers. In response to the appeal of the traders’ community, the tax rate was reduced to 0.3%. The Government had been holding discussions with the traders to facilitate their smooth entry into the tax-net. The fears, apprehensions and misgivings widely shared by this class were addressed during these discussions that had continued since the introduction of the tax in July 2015.

tax amnestyThese discussions have finally borne fruits and a scheme has been designed that would meet the needs of traders while simultaneously protecting the integrity of the tax regime. The scheme is based on introducing a new Schedule of simplified assessment under the Income Tax Ordinance 2001, which would fully take into account the complexities and peculiarities associated with the business of traders. Such special procedures for assessment had been a feature of the tax law from the inception and some prominent sectors such as banking, insurance, stock exchange and exploration and production in the mineral sector including oil and gas have been assessed under such procedures.

The new procedure would enhance tax compliance, induce truthful declaration of income, expand the tax-base, discourage tax evasion, raise tax revenues, reduce cost of collection and minimize contact between tax officials and taxpayers, which had been a significant obstacle in tax compliance.

The salient features of the scheme are as follows:

Scheme for Non-Filers

Eligibility & Salient Features

  • Traders including individuals and AoPs selling goods who have never filed an income tax return in the last 10 years

Vendors or persons rendering after sales services

  • Traders shall file simplified income tax returns for Tax Years 2015-2018
  • Working capital up to 50 Million can be declared under the scheme

For Tax Year 2015 Income tax @ 1% of the working capital shall be paid

  • For the tax year 2016:
    • The trader shall declare minimum turnover at three times the working capital declared;
    • shall pay turnover tax as under:
S.No Turnover Rate of Tax
i Where turnover does not exceed Rs.50 M 0.20%
ii Where turnover exceeds Rs.50M but does not exceed Rs.250 M Rs.100,000 + 0.15%of amount exceeding Rs. 50M
iii Where turnover exceeds Rs.250 M Rs.400,000 + 0.10%of amount exceeding Rs.250 M

 

  • For tax years 2017 and 2018, traders shall pay tax that is higher by 25% over the preceding year’s tax paid

To get complete details, click here.

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Category: Taxation and Budget

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