Finance Act 2016

Riaz Ahmad & Company
Chartered Accountants
FINANCE ACT 2016
Celebrating 60 years of adding value to our clients
RIAZ AHMAD & COMPANY

INDEX
DESCRIPTION
PAGE NO.
INTRODUCTION
EXECUTIVE SUMMARY
25
INCOME TAX
6 52
SALES TAX
53 61
FEDERAL EXCISE DUTY
62 64
OTHER LAWS
65 67
CONTACT PARTNERS
FINANCE ACT 2016
68

INTRODUCTION
This Memorandum has been prepared to facilitate our clients in better understanding of the changes
made in income tax, sales tax, federal excise duty and other laws through the Finance Act, 2016. The
changes have been explained in a concise manner and insignificant changes of consequential,
administrative, procedural or editorial nature have been ignored for the sake of brevity.
Included under the heading of Income Tax Ordinance, 2001 is a dedicated portion, titled General,
which covers complete rates of income tax, schedule of filing of various periodical statements, rates for
deduction of income tax at source, filing date of income tax return, computation of advance tax, etc. for
convenience and ready reference of our clients.
The Finance Act, 2016, unless otherwise stated, has come into force on 01 July 2016.
This Memorandum may be accessed on our web-site: www.racopk.com
It is recommended that the text of the Finance Act, 2016 as published in the Official Gazette and the
relevant laws and notifications, wherever applicable should be referred to in considering the
interpretation of any provision. This Memorandum contains only general comments. Final decision on any
issue should not be taken without detailed consideration and professional advice.
This Memorandum should not be published in any manner without the consent of the firm. For
professional advice, you may contact our following tax experts:
Sarfraz Mahmood
Muhammad Arshad
Lahore Office
Muhammad Hamid Jan

Muhammad Waqas
Liaqat Ali Panwar

Pirzada M. Khurram
Karachi Office
Faisalabad Office
LAHORE: 15 July 2016
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Inaam Ellahi Sheikh

Atif Bin Arshad
Islamabad Office

EXECUTIVE SUMMARY
Income Tax
Super tax for rehabilitation of temporarily displaced persons will also be paid for tax year 2016 on
income before adjustment of brought forward depreciation and business losses.
Final tax on builders has been imposed on profits and gains from construction and sale of residential,
commercial and other buildings at the rates depending upon location and constructed area.
Similarly, final tax on developers has been imposed on profits and gains from the business of
development and sale of residential, commercial or other plots at location-wise slab rates.
Resultantly, minimum tax on land developers will not be applicable.
Income from property will be exempt upto Rupees 200,000 in a tax year in case of an individual or
AOP having no other taxable income.
Available deductions from property income shall now be allowed in case of company only.
Disallowance on account of purchases of raw materials and finished goods due to non-deduction or
non-payment of tax shall not exceed 20% of purchases of raw materials and finished goods. Further,
recovery of tax from withholding agent or recipient under sections 161 or 162 shall be considered as
tax paid.
Pharmaceutical manufactures shall not be allowed sales promotion, advertisement and publicity
expenses in excess of 5% of turnover.
Tax depreciation on any building, furniture, plant or machinery including initial allowance shall be
treated as allowed during the tax exemption period for the purposes of opening written down value
in the tax year after expiry of exemption period.
For the purpose of group relief, assessed loss can now be surrendered to the extent of percentage of
share capital held by the holding company in its subsidiary company and exemption from tax on inter
corporate dividend income of group companies with reference to section 59B Group relief has been
withdrawn.
Tax credit in respect of health insurance premium or contribution shall also be allowed as in the case
of life insurance premium to a resident filer other than a company, having income from salary or
business.
Individual having taxable income less than one million rupees shall be entitled to a deductible
allowance in respect of tuition fee. The allowance will be subject to certain conditions and limitations.
Tax credit for employment generation by manufactures shall now be given @ 2% (earlier 1%) of tax
payable income and period for set up of a new manufacturing unit has been extended upto 30 June
2019.
Manufacturers registered under Sales Tax Act, 1990 having 90% of sales to registered person shall
be entitled to tax credit of 3% (earlier 2.5%) of tax payable.
Time period for purchase and installation of plant and machinery for the purpose of tax credit in
respect of balancing, modernization and replacement of plant and machinery has been extended to
30 June 2019 from 30 June 2016.
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EXECUTIVE SUMMARY
Tax credit for enlistment equal to 20% of tax payable, shall now be available for two tax years i.e.
year of enlistment and the following tax year.
Tax credit equal to 100% of the tax payable, previously available to newly established industrial
undertakings, shall now be given in proportion to equity raised through issuance of new shares for
cash consideration. Period of set up of industrial undertaking has been extended upto 30 June 2019
and condition of 100% equity raised through issuance of new shares has been reduced to at least
70%.
For the purposes of Income Tax Ordinance, 2001, fair market value of immovable property shall now
be determined on the basis of valuation made by panel of approved v aluers of the State Bank of
Pakistan.
Record in respect of transactions with associates shall be maintained in shape of master file and local
file containing documents and information as may be prescribed and be furnished to the
Commissioner if required in the course of any proceedings.
Minimum tax will be applicable in case of individuals and AOPs having turnover of ten million rupees
or above (earlier 50 million rupees) in tax year 2017 or any subsequent year.
Exemption from minimum tax available to companies in case of gross loss has been withdrawn.
For revision of return of income, written approval of the Commissioner will no more be required if
revised taxable income is more than the income, or revised loss declared is less than the loss,
determined on the day the original return was furnished.
Every individual, AOP or company will now be required to present accounts and documents for
conducting audit of income tax affairs on filing of return of income in consequence of provisional
assessment u/s 120C.
Commissioner shall not issue notice for recovery of tax to persons holding money on behalf of the
taxpayer, if the said taxpayer has filed first appeal which has not been decided by the Commissioner
(Appeals), subject to the condition that twenty five percent of the amount of the tax due has been
paid by the taxpayer.
Provincial sales tax registered person, if non-filer on 30 June of previous tax year, shall also pay
advance tax at the rate of three percent of the turnover declared before the provinci al revenue
authority.
Tax will not be withheld on payment to a permanent establishment in Pakistan of a non -resident
person where the sale is made by the importer of the goods and the tax at the time of import of such
goods has been paid and the goods are sold in the same condition as they were when imported.
Final tax will be withheld by every person responsible for payment to a non-resident in respect of
foreign produced commercial for advertisement @ 20% of the gross amount paid.
Tax withheld on payments to electronic and print media for advertising services shall be final tax with
effect from 01 July 2016.
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EXECUTIVE SUMMARY
Conditional exemption from withholding tax, available to cotton ginners has been withdrawn.
Under final tax regime, excess tax collected or deducted on account of higher rate of non-filer shall
be adjustable in the return filed for the relevant tax year.
Period for filing of application for refund has been extended from 2 years to 3 years.
It has been clarified that cash withdrawn amounting to fifty thousand rupees or less, not attracting
the provisions of withholding tax, shall be aggregate withdrawals from all the bank accounts in a
single day.
Advance tax from non-filer will be collected at the time of leasing of motor vehicle at 3% of the value
of the leased motor vehicle.
Tax collected on a lease of the right to collect tolls shall be final tax.
Advance tax on sale or transfer of immovable property shall not be collected from seller or transferor
if the property is held for a period exceeding five years.
No tax will be collected by Pakistan Mercantile Exchange Limited from its members on purchase and
sale of future commodity contracts.
Adjustable advance tax shall be collected from non-filers @ 4% of general insurance premium and @
1% of life insurance premium if it exceeds Rupees 0.2 million per annum.
Adjustable advance tax on extraction of minerals shall be collected @ 5% from non -filers on value of
the minerals extracted, produced, dispatched and carried away from the licensed or lea sed areas of
the mines.
Capital gains on disposal of immovable property shall be charged to tax @ 10% where holding period
of the property is not more than five years.
Tax rate on dividend for non -filers has been enhanced from 17.5% to 20 %.
Tax will be withheld in case of the supplies made by the distributors of fast moving consumers goods
@ 3% of the gross amount if the supplier is a company and 3.5% if the supplier is other than a
company.
Withholding tax rate on payments to electronic and print media for advertising services in case of a
filer has been enhanced from 1% to 1.5%.
Tax @ 20% of gross amount will be withheld from non -filer on prizes on a prize bond or cross-word
puzzle.
Rate of advance tax, collected by stock exchange, on sale and purchase of shares has been
enhanced from 0.01% to 0.02%.
Advance tax on sale or transfer of immovable property s hall be collected @ 1% from filer and @ 2%
from non-filer of consideration received.
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EXECUTIVE SUMMARY
Advance tax on purchase of immovable property shall be collec ted @ 2% from filer and @ 4% from
non-filer, if the value of immovable property is more than Rupees 3 million.
Exemption available to income from exports of computer software or IT services has been extended
from 2016 to 2019 with the condition that eighty percent of export proceeds will be remitted in
Pakistan in foreign exchange through normal banking channel.
Minimum tax u/s 113 shall be charged to companies operating Trading Houses @ 0.5% upto tax year
2019 and @ 1% thereafter.
In case of insurance business, capital gains on disposal of shares and dividend from listed companies,
vouchers of Pakistan Telecommunication Corporation, Modaraba certificates or instruments of
redeemable capital and derivative products shall now be charged to tax at standard tax rates
applicable to companies instead of separate tax rates provided for insurance business.
SALES TAX
The definition of input tax has been amended to exclude Provincial sales tax levied on services
rendered or provided to the person.
Input tax adjustment will not be available, if the supplier has not declared such supply in his return or
has not paid tax due as per his return.
Supply of mineral / bottled water by manufacturer shall be taxed at retail price, under the Third
Schedule to the Sales Tax Act, 1990.
Certain pesticides and their active ingredients have now been exempted from sales tax.
The ad valorem federal excise duty on white crystalline sugar has been withdrawn and replaced by
the sales tax regime at a reduced rate of 8%.
Five export oriented sectors (textile, leather, carpet, surgical and sports goods) will be subject to zero
rated regime.
Specified retailers shall, in lieu of the net tax payable at the applicable rate, have now an option to
pay sales tax under the turnover regime at the rate of two percent of their total turnover, including
turnover relating to exempt supplies, without adjustment of any input tax whatsoever.
A zero-rated invoice shall be issued by the transferor to the transferee on sale of taxable activity or
transfer of ownership of such activity as an ongoing concern to another registered person.
FEDERAL EXCISE DUTY
FED on certain services which are now subject to provincial sales tax has been withdrawn.
FED on aerated beverages and locally produced cigarettes has been enhanced.
Rate of duty on various types of cement has been changed from 5% of retail price to One rupee per
kilogram.
Exemption from duty has been withdrawn on White Cement.
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INCOME TAX ORDINANCE, 2001

Super tax for rehabilitation of temporarily displaced persons
Section 4B
Super tax has now been levied for one more tax year i.e. 2016. Moreover, the law has also been
amended to impose super tax on income before adjustment of brought forward depreciatio n and
business losses. Through Finance Act, 2015, super tax was imposed only for tax year 2015 on the income
of banking companies (irrespective of quantum of income) @ 4% and on other taxpayers earning income
of Rupees 500 million or above @ 3%.
Tax on builders
Section 7C & 8
Final tax shall be imposed on profits and gains of a person deriving income from business of construction
and sale of residential, commercial and other buildings at prescribed rates on the basis of location and
constructed area. This tax will be applicable on business or projects initiated and approved after the 01
July 2016.
Tax on developers
Section 7D & 8
Profits and gains of a person deriving income from the business of development and sale of residential,
commercial or other plots shall now be subject to final tax instead of minimum tax at the rates prescribed
on the basis of location and size / area of the plot. Further, tax payable by builder or developer shall not
be reduced by any tax credits under the Income Tax Ordinance , 2001.
The FBR may prescribe mode and manner for payment and collection of tax from builders and
developers, authorities granting approval for computation and payment plan of tax and responsibilities
and powers of authorities approving, suspending and cancelling no objection certificate to sell and the
matters connected thereto. The tax shall be imposed on business or projects initiated and approved after
01 July 2016.
Tax payable by builders and developers shall not be reduced by any tax credits allowed under the Income
Tax Ordinance, 2001.
Income from property
Section 15
Income from property shall now be charged to tax at separate slab rates ranging from 5% to 20% based
on quantum of gross amount of rent without adjustment of any expenditure in case of individual and
association of persons (AOPs). No such tax shall be charged if gross income does not exceed two
hundred thousand rupees in a tax year if the individual or AOP does not derive taxable income under any
other head.
However, income from property in case of company will remain chargeable to tax on net income basis i.e.
after deductions admissible under section 15A.
Deductions not allowed
Section 21
Clause (c) of section 21 has been substituted and thereby scope of provisions in respect of disallowance
of expenses due to non deduction of tax has been extended to all expenditure from which the person is
required to deduct or collect tax. However, now, disallowance on account of purchases of raw materials
and finished goods should not exceed 20% of purchases of raw material and finished goods. It is also
provided that tax recovered from withholding agent or recipient under sections 161 and 162 shall be
considered as tax paid.
Any expenditure on account of sale promotion, advertisement and publicity in excess of five percent of
turnover, shall not be allowed as deduction in computing income of pharmaceutical manufacturers.
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Depreciation
Section 22
Tax depreciation on building, furniture, plant or machinery including any initial allowance shall b e deemed
/ treated to have been allowed during the tax year for which the income from such business was exempt
from tax. For this purpose, explanation has been inserted after sub-section (5) of this section, as under:
Explanation,For the removal of doubt, it is clarified that where any building, furniture, plant or
machinery is used for the purposes of business during any tax year for which the income from
such business is exempt, depreciation admissible under sub-section (1) shall be treated to have
been allowed in respect of the said tax year and after expiration of the exemption period, written
down value of such assets shall be determined after reducing total depreciation deductions
(including any initial allowance under section 23) in accordance with clauses (a) and (b) of this
sub-section.
Capital gain on sale of securities
Section 37A
Explanation has been inserted after clause (b) of sub-section (3A) of section 37A to clarify that derivative
products include future commodity contracts entered into by the members of Pakistan Mercantile
Exchange whether or not settled by physical delivery. By virtue of this amendment National Clearing
Company of Pakistan will compute gain or loss arising through trading of future commodity contracts
under Eighth Schedule and tax thereon shall be collected and deposited on behalf of the taxpayer.
Exemptions and tax concessions in the Seconds Schedule
Section 53
Sub-section (2) of this section has been amended to enhance the scope of granting an exemption from
any tax including a reduction in the rate of tax or a reduction in tax liability or an exemption from the
operation of any provision of the Ordinance to any international financial institution or foreign
Government owned financial institution operating under an agreement, memorandum of understanding
or any other arrangement with the Government of Pakistan.
Group relief
Section 59B and Clause 103A, Part I, Second Schedule
For the purpose of group relief, the assessed loss to be surrendered by any company bein g a subsidiary
of a holding company, in favor of its holding company has been restricted to the percentage of share
capital held by the holding company of its subsidiary company. Now, the loss to be surrendered shall be
allowed as per following formula:
(A/100) x B
Where A is the percentage share capital held by the holding company of its subsidiary company; and B
is the assessed loss of the subsidiary company.
Moreover, exemption from tax in respect of income derived from inter -corporate dividend by companies
entitled to group relief under this section has been withdrawn by amending the clause 103A of Part I of
the Second Schedule.
Tax credit for investment in health insurance
Section 62A
Tax credit for resident filers, other than a company, deriving income from salary or business has been
introduced in respect of health insurance by inserting new section as under:
62A.
Tax credit for investment in health insurance.(1) A resident person being a filer other
than a company shall be entitled to a tax credit for a tax year in respect of any health insurance
premium or contribution paid to any insurance company registered by the Securities and
Exchange Commission of Pakistan under the Insurance Ordinance, 2000 (XXXIX of 2000),
provided the resident person being a filer is deriving income chargeable to tax under the head
salary or income from business.
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(2)
The amount of a persons tax credit allowed under sub- section (1) for a tax year
shall be computed according to the following formula, namely:
(A/B) x C
where
A
is the amount of tax assessed to the person for the tax year before allowance of tax
credit under this section;
B
is the persons taxable Income for the tax year; and
is the lesser of
(a)
the total contribution or premium paid by the person referred to in sub-section (1)
in the year;
(b)
five per cent of the persons taxable income for the year; and
(c)
one hundred thousand rupees.
Contribution to an Approved Pension Fund
Section 63
New proviso has been inserted in this section to allow additional contribution of 2% per annum upto 30
June 2019 for computation of tax credit, for each year of age exceeding forty years subject to the
condition that total contribution allowed to such person shall not exceed thirty percent of total taxable
income of the preceding year.
Deductible allowance for profit on debt
Section 64A
The entitlement of an individual to deductible allowance in respect of loan obtained for construction or
acquisition of a new house has been increased from one million rupees to two million rupees or fifty
percent of taxable income, whichever is lower.
Deductible allowance for education expenses
Section 64AB
Individual having taxable income less than one million rupees shall be entitled to a deductible allowance
in respect of tuition fee. For this purpose following new section has been inserted in the Ordinance:
64AB. Deductible allowance for education expenses.(1) Every individual shall be entitled to
a deductible allowance in respect of tuition fee paid by the individual in a tax year provided
that the taxable income of the individual is less than one million rupees.
(2)
The amount of an individuals deductible allowance allowed under sub-section (1) for a
tax year shall not exceed the lesser of
(a)
five per cent of the total tuition fee paid by the individual referred to in
sub-section (1) in the year;
(b)
twenty-five per cent of the persons taxable income for the year; and an amount
computed by multiplying sixty thousand with number of children of the individual.
(3)
Any allowance or part of an allowance under this section for a tax year that is not able
to be deducted for the year shall not be carried forward to a subsequent tax year.
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(4)
Allowance under this section shall be allowed against the tax liability of either of the
parents making payment of the fee on furnishing national tax number (NTN) or name of the
educational institution.
(5)
Allowance under this section shall not be taken into account for computation of tax
deduction under section 149.
Tax credit for employment generation by manufacturers
Section 64B
The tax credit for employment generation by manufacturers has been increased from on e percent to two
percent of the tax payable and period for set up of a new manufacturing unit has been extended from 30
June 2018 to 30 June 2019.
Tax credit to a person registered under Sales Tax Act, 1990
Sections 65A
Tax credit available to every manufacturer registered under the Sales Tax Act, 1990, and having ninety
percent of sales to registered person has been increased from two and a half percent to three percent of
tax payable for a tax year.
Tax credit for investment
Section 65B
Time period for purchase and installation of plant and machinery for the purpose of tax credit in respect
of balancing, modernization and replacement of plant and machinery has been extended to 30 June 2019
from 30 June 2016.
Tax credit for enlistment
Section 65C
Tax credit equal to twenty percent of the tax payable shall now be allowed for the year of enlistment and
for the following tax year when a company opts for enlistment in any registered stock exchange in
Pakistan.
Tax credit for newly established industrial undertakings
Section 65D
Tax credit equal to hundred percent of the t ax payable, previously available to newly established
undertakings, shall now be given in proportion to equity raised through issuance of new shares for cash
consideration. For this purpose, sub-section (1A) has been inserted in this section as under:
(1A) The amount of a persons tax credit allowed under sub-section (1) for a tax year shall be
computed according to the following formula, namely:
A x (B/C)
where
A
is the amount of tax assessed to the person for the tax year before allowance of
any tax credit for the tax year;
is the equity raised through issuance of new shares for cash consideration; and
is the total amount invested in setting up the new industrial undertaking.
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Moreover, period of set up of industrial undertaking has been extended upto 30 June 2019 from 30 June
2016 and condition of hundred percent equity raised through issuance of new shares has been reduced
to at least seventy percent. Further, tax credit allowed under this section shall be deemed to have been
wrongly allowed if the business has been discontinued in subsequent five years after the credit has been
allowed.
Tax credit for industrial undertakings established before the first day
of July 2011
Section 65E
Condition of investment of amount with hundred percent new equity raised through issuance of new
shares has been reduced to at least seventy percent. Tax credit, previously allowed equal to on e hundred
percent, shall now be allowed in proportion to equity raised through issuance of new shares for cash
consideration. New sub-section (3A), similar to new sub-section (1A) of section 65D, has been inserted in
this section for computation of tax credit. Period of installation of plant and machinery has been extended
upto 30 June 2019 from 30 June 2016. Moreover, tax credit allowed under this section shall also be
deemed to have been wrongly allowed if the business has been discontinued in subsequent five years
after the credit has been allowed.
Apportionment of deductions
Section 67
By virtue of amendment in this section, now alongwith deductions, the expenditures and allowances will
also be apportioned on any reasonable basis taking account of the relative nature and size of the
activities to which the amount relates.
Fair market value
Section 68
For the purposes of Income Tax Ordinance, fair market value of immovable property shall now be
determined on the basis of valuation made by panel of approved valuers of the State Bank of Pakistan.
Agreement for the avoidance of double taxation and
prevention of fiscal evasion
Section 107 & 198
Sub-section (1) of this section has been substituted and thereby the Federal Government may enter into
a tax treaty, a tax information exchange agreement, a multilateral convention, an inter-governmental
agreement or similar agreement or mechanism for the avoidance of double taxation or for the exchange
of information for the prevention of fiscal evasion or avoidance of taxes including automatic exchange
of information with respect to taxes on income imposed under this Ordinance or any other
law for the time being in force and under the corresponding laws in force in that country and may,
by notification in the official Gazette, make such provisions as may be necessary for implementing the
said instruments.
Moreover, the information obtained through such agreements or tax treaties shall be strictly confidential
and if a person discloses any particulars in contravention, shall be punishable on conviction with a fine
not less than five hundred thousand rupees or imprisonment for a term not exceeding one year, or both.
Transactions between associates
Section 108
By inserting the following new sub-sections (3), (4) and (5) in this section, every taxpayer has been
required to maintain records of transactions with its associates and furnish to the Commissioner, if
required in the course of any proceedings.
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(3)
Every taxpayer who has entered into a transaction with its associate shall:
(a) maintain a master file and a local file containing documents and information as may
be prescribed;
(b) keep and maintain prescribed country-by-country report, where applicable;
(c)
keep and maintain any other information and document in respect of transaction
with its associate as may be prescribed; and
(d) keep the files, documents, information and reports specified in clauses (a) to (c) for
the period as may be prescribed.
(4)
A taxpayer who has entered into a transaction with its associate shall furnish, within
thirty days the documents and information to be kept and maintained under sub-section (3) if
required by the Commissioner in the course of any proceedings under this Ordinance.
(5)
The Commissioner may, by an order in writing, grant the taxpayer an extension of
time for furnishing the documents and information under sub-section (4), if the taxpayer
applies in writing to the Commissioner for an extension of time to furnish the said documents
or information:
Provided that the Commissioner shall not grant an extension of more than forty-five days,
when such information or documents were required to be furnished under sub-section (4),
unless there are exceptional circumstances justifying a longer extension of time.
Minimum tax on income of certain persons
Section 113
Minimum tax will now be paid by an individual and association of person having turnover of ten million
rupees or above in the tax year 2017 or in any subsequent year previously, this threshold was fifty million
rupees. Exemption from minimum tax previously available to companies in case of gross loss has been
withdrawn. Moreover, minimum tax shall be imposed in addition to super tax for rehabilitation of
temporarily displaced persons under section 4B.
Return of income
Section 114
New proviso has been added in sub-section (5) of this section whereby in case of person who has not
filed return for any of the last five completed tax years, the Commissioner may issue notice for filling of
return in respect of one or more of the last ten completed tax years.
For revision of return, written approval of the Commissioner shall not be required if taxable income
declared in the revised return is more than or the loss declared is less than the income or loss , as the
case may be, declared in the original return or return to be revised.
Provisional assessment
Section 122C
Now, provisional assessment shall not be treated as final assessment, if return of income alongwith
wealth statement, wealth reconciliation statement and explanation of source of acquisition of assets, in
case of an individual or an association of person and return of income tax alongwith audited accounts or
final accounts, in case of a company, for the relevant tax year are filed within forty five days from the
date of service of order of provisional assessment and accounts and documents are presented for
conducting audit of income tax affairs for that tax year.
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Alternative dispute resolution
Sections 134A
By virtue of amendments in sub-sections (2) and (4) of this section, the committee for resolution of any
hardship or dispute appointed by FBR shall not consist of an officer of Inland Revenue below the rank of
Commissioner.
Moreover, period of forty five days to pass order , on recommendation of the committee, has been
enhanced to ninety days and if such order is not passed within ninety days, recommendations of the
committee shall be treated to be an order passed by FBR.
Recovery of tax from persons holding money on behalf of the
taxpayer
Section 140
New proviso has been inserted in sub-section (1) of this section and thereby the Commissioner shall not
issue notice for recovery of tax to persons holding money on behalf of the taxpayer, if the said taxpayer
has filed first appeal which has not been decided by the Commissioner (Appeals), subject to the condition
that twenty five percent of the amount of the tax due has been paid by the taxpayer.
Advance tax paid by the taxpayer
Section 147
Amendments have been made in this section to clarify that alternative corporate tax under section 113C
will also be considered at the time of computation of advance tax liability.
Advance tax from provincial sale tax registered person
Section 147A
Provincial sales tax registered person shall also pay advance tax at the rate of three percent of the
turnover declared before the provincial revenue authority. New section 147A inserted in the Ordinance, is
as under:
147A. Advance tax from provincial sales tax registered person.(1) Every provincial
sales tax registered person shall be liable to pay adjustable advance tax at the rate of three
per cent of the turnover declared before the provincial revenue authority.
(2)
The advance tax under sub-section (1) shall be paid monthly at the time when sales tax
return is to be filed with the provincial revenue authority.
(3) Advance tax paid under this section may be taken into account while working out advance tax
payable under section 147.
(4) The provisions of this Ordinance shall apply to any advance tax due under this section as if
the amount due were tax due under an assessment order.
(5)
A taxpayer who has paid advance tax under this section for a tax year shall be allowed a
tax credit for that tax in computing the tax due by the taxpayer on the taxable income of the
taxpayer for that year.
(6) A tax credit allowed for advance tax paid under this section shall be applied in accordance with
sub-section (3) of section 4.
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(7) A tax credit or part of a tax credit allowed under this section for a tax year that is not able
to be credited under sub-section (3) of section 4 for the year shall be refunded to the taxpayer
in accordance with section 170.
(8)
This section shall not apply to a person who was filer on the thirtieth day of June of the
previous tax year.
Payments to non-residents
Section 152
Tax will not be withheld on payment to a permanent establishment in Pakistan of a non-resident person
where the sale is made by the importer of the goods and the tax at the time of import of such goods has
been paid and the goods are sold in the same condition as they were when imported.
Payment for foreign produced commercials
Section 152A
Final tax will be withheld by every person responsible for making payments directly or through an agent
or intermediary to a non-resident person for foreign produced commercial for advertisement on any
television channel or any other media at the rate of twenty percent of gross amount paid.
Payments for goods, services and contracts
Section 153
Tax deducted from payments, on accounts of rendering or providing services, to electronic and print
media for advertising services shall be final tax with effect from 01 July 2016.
By omitting clause (e) of sub-section (5) of this section, conditional exemption from deduction of tax at
source, available to cotton ginners has been withdrawn.
Furnishing of information by financial institutions including banks
Section 165B
By amendment in sub-section (2) of this section, all information regarding non-resident persons, received
from banks / financial institutions shall only be used for tax and related purposes and kept strictly
confidential.
Tax collected or deducted as final tax
Section 169
New sub-section (4) has been added in this section and thereby the excess tax deducted or collected on
account of higher rate of non-filer shall be adjustable in the return filed for the relevant tax year in cases
where the tax collected or deducted is final tax under any provision of the Ordinance.
Refunds
Section 170
Period of filling refund application for a refund in respect of tax paid in excess of the amount which is
properly chargeable to tax has been enhanced to three years from two years.
Offences and penalties
Section 182
If any financial institution fails to furnish information, regarding non -resident persons to the FBR for the
purpose of automatic exchange of information under bilateral agreement or multilateral convention, shall
pay a penalty of Rupees 2,500 for each day of default subject to minimum penalty of ten thousand
rupees.
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Cash withdrawn from a bank
Section 231A
It is clarified that cash withdrawn amounting to fifty thousand rupees or less, not attracting the
provisions of withholding tax, shall be aggregate withdrawals from all the bank accounts in a single day.
Advance tax on private motor vehicles
Section 231B
No advance tax shall be collected at the time of registration of a motor vehicle after five years from the
date of first registration in case the vehicle is acquired from the Armed Forces of Pakistan or from a
foreign diplomat or a diplomatic mission in Pakistan or from the Federal or Provincial Government.
Now, every leasing company or a scheduled bank or an investment bank or a development finance
institution or a modaraba shall, at the time of leasing of a motor vehicle to a non-filer, collect advance
tax at the rate of three per cent of the value of the motor vehicle.
Advance tax at the time of sale by auction
Section 236A
Tax collected on a lease of the right to collect toll s shall be final tax. For this purpose sub-section (3) has
been inserted in this section.
Advance tax on sale or transfer of immovable property
Section 236C
Advance tax on sale or transfer of immovable property shall not be collected from the seller or transferor
if the immovable property is held for a period exceeding five years.
Advance tax on foreign-produced TV plays and serials
Section 236E
By omission of this section, no advance tax shall be collected on foreign-produced TV plays and serials,
for screening and viewing on any landing rights channel.
Advance tax on banking transactions otherwise than through cash
Section 236P
It is clarified that transactions by non-filers exceeding fifty thousand rupees, attracting the provisions of
withholding tax, shall be aggregate transfers from all the bank accounts in a single day.
Collections of tax by Pakistan Mercantile Exchange Limited (PMEX)
Section 236T
By omission of this section, no advance tax shall be collected by PMEX from its members on purchase
and sale of futures commodity contracts.
Advance tax on insurance premium
Section 236U
Adjustable advance tax shall be collected by every insurance company at the time of collection of
premium from non-filers at the rate of four percent of general insurance premium and at the rate of one
percent of life insurance premium if it exceeds two hundred thousand rupees per annum.
Advance tax on extraction of minerals
Section 236V
Adjustable advance tax shall be collected at the rate of five percent from non -filers on the value of
minerals extracted, produced, dispatched and carried away from the licensed or leased area of the
mines. The tax shall be collected by the provincial authority collecting royalty per metric ton from the
lease-holder of mines or any person extracting minerals.
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INCOME TAX ORDINANCE, 2001 THE FIRST SCHEDULE

THE FIRST SCHEDULE
Part I RATES OF TAX
Division VIA Income from Property
The rate of tax to be paid under section 15, in the case of individual and association of persons, shall be
as follows:
S.No.
Gross amount of rent
Rate of tax
1.
Where the gross amount of rent does not exceed Rs. 200,000
Nil
2.
Where the gross amount of rent exceeds Rs. 200,000 but does
not exceed Rs. 600,000
5% of the gross amount exceeding

Rs. 200,000
3.
Where the gross amount of rent exceeds Rs. 600,000 but does
not exceed Rs. 1,000,000
Rs. 20,000 + 10% of the gross

amount exceeding Rs. 600,000
4.
Where the gross amount of rent exceeds Rs. 1,000,000 but does
not exceed Rs. 2,000,000

amount exceeding Rs. 1,000,000
5.
Where the gross amount of rent exceeds Rs. 2,000,000

Division VII Capital Gains on Disposal of Securities

The rate of tax under section 37A for the tax years 2015, 2016 and 2017 are as under:
Tax Year
2015
S.No.
Holding Period
1.
Where holding period of a security is less than

twelve months
Where holding period of a security is twelve
months or more but less than twenty-four months
Where holding period of a security is twenty-four
months or more but the security was acquired on
or after 1st July, 2012
Where the security was acquired before 1st July,
2012
Future commodity contracts entered into by the
members of Pakistan Mercantile Exchange
2.
3.
4.
5.
Rate of tax
Tax Year 2017
Tax Year
2016
Filer
Non-Filer
12.5%
15%
15%
18%
10%
12.5%
12.5%
16%
0%
7.5%
7.5%
11%
0%
0%
0%
0%
0%
0%
5%
5%
Division VIII Capital Gains on Disposal of Immovable Property

The rate of tax to be paid under sub-section (1A) of section 37 shall be as follows:
S.No.
1.
2.
Period
Where holding period of immovable property is up to five years
Where holding period of immovable property is more than five years
Rate of tax
10%
0%
Provided that gain arising on the disposal of immovable property by a person in a tax year to a Rental
REIT Scheme shall be taxed at the rate of five percent upto thirtieth day of June, 2019, irrespective of
the holding period.
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Division VIIIA Tax on Builders
The rate of tax under section 7C shall be as follows:
(A)
Karachi, Lahore and

Islamabad
(B)
(C)
Hyderabad, Sukkur, Multan,

Faisalabad, Rawalpindi,
Gujranwala, Sahiwal, Peshawar,
Mardan, Abbottabad, Quetta
Urban Areas not specified in (A)

and (B)
For commercial buildings

Rs. 210/ Sq. Ft.
Rs. 210/ Sq. Ft.
Rs. 210/ Sq. Ft.
For residential buildings

Area in Sq. ft.
Rate/ Sq. Ft.
Area in Sq. Ft.
Rate/ Sq. Ft.
Area in Sq. Ft.
Rate/ Sq. Ft.
Up to 750
Rs. 20
Up to 750
Rs. 15
Up to 750
Rs. 10
751 to 1500
Rs. 40
Rs. 35
751 to 1500
Rs. 25
1501 & more
Rs. 70
751 to 1500
1501 and more
Rs. 55
1501 and more
Rs. 35
Division VIIIB Tax on Developers

The rate of tax under section 7D shall be as follows:
(A)
(B)
Karachi, Lahore and

Islamabad
(C)
Hyderabad, Sukkur, Multan,

Faisalabad, Rawalpindi,
Gujranwala, Sahiwal,
Peshawar, Mardan,
Abbottabad, Quetta
For commercial Plots
Rs. 210/ Sq. Yd.
Rs. 210/ Sq. Yd.
Urban Areas not specified in (A)

and (B)
Rs. 210/ Sq. Yd.
Area in Sq. Yd.
For residential Plots

Rate/ Sq. Yd. Area in Sq. Yd.
Rate/ Sq. Yd.
Area in Sq. Yd.
Rate/ Sq. Yd.
Up to 120
Rs. 20
Up to 120
Rs. 15
Up to 120
Rs. 10
121 to 200
Rs. 40
121 to 200
Rs. 35
121 to 200
Rs. 25
201 & more
Rs. 70
201 & more
Rs. 55
201 & more
Rs. 35
Part III DEDUCTION OF TAX AT SOURCE

Division I Advance Tax on Dividend
The rate of tax to be deducted on gross amount of dividend or dividend in specie paid under section 150
and 236S respectively, from non-filers other than dividends declared or distributed by purchaser of a
power project privatized by WAPDA or on shares of a company set up for power ge neration or on shares
of a company, supplying coal exclusive ly to power generation projects, has been enhanced from 17.5%
to 20%.
FINANCE ACT 2016

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New rate of tax required to be deducted in case of non-filer by a collective investment scheme, REIT
scheme or a mutual fund shall be as under:
Individual
Company
AOP
Money Market Fund, Income Fund

or REIT Scheme or any other fund
Non-filer
15%
25%
15%
Division II Payment to Non-Residents

The rate of tax to be deducted from a payment to non-resident on execution of contract under subsection (1A) of section 152 shall be 7% of the gross amount payable in case of filer and 12% in case of
non-filer.
The tax rate to be deducted from a payment to permanent establishment in Pakistan of a non -resident
person, on the execution of a contract under section 152(2A) shall be 7% of the gross amount payable
for filer and 12% for non-filer.
Division III Payments for Goods or Services
The rate of tax to be deducted from payment in respect of fast moving consumer goods supplied by the
distributors [Section 153(1)(ab)] shall be 3% of the gross amount payable in case of company and 3.5%
in case of other than a company.
Withholding tax rate in respect of person making payment to electronic and print media for advertising
services in case of a filer has been increased from 1% to 1.5% of the gross amount payable.
Division V Income from Property
The rate of tax to be deducted under section 155, in case of individual and association of persons, shall
be as under:
S.No.
1.
2.
3.
4.
5.
Gross amount of rent

Where the gross amount of rent does not exceed
Rs. 200,000
Where the gross amount of rent exceeds
Rs. 200,000 but does not exceed Rs. 600,000
Rs. 600,000 but does not exceed Rs. 1,000,000
Rs. 1,000,000 but does not exceed Rs. 2,000,000
Rs. 2,000,000
Rate of tax
Nil
5% of the gross amount exceeding
Rs. 200,000
amount exceeding Rs. 600,000
Division VI Prizes and Winnings

The rate of tax to be deducted under section 156 on prize on a prize bond or cross-word puzzle shall be
15% in case of filers and 20% in case of non-filers.
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Part IV DEDUCTION OR COLLECTION OF ADVANCE TAX
Division II Brokerage and Commission
The rate of collection of tax on brokerage and commission under section 233(1) shall be as under:
1.
2.
3.
Rate applicable on the

amount of payment
Person
S. No.
Advertising agents
Life insurance agents where commission
received is less than Rs. 0.5 million per annum
Persons not covered in 1 and 2 above
Filer
Non-filer
10%
15%
8%
12%
16%
15%
Division IIA
Rate of Collection of Tax by a Stock Exchange Registered in Pakistan shall now be as under:
Description
Rate
in case of purchase of shares as per clause (a) of sub-section

(1) of section 233A
0.02% of purchase value
in case of sale of shares as per clause (b) of sub-section (1) of

section 233A
0.02% of sale value
Division IV Electricity Consumption

Rate of collection of tax from commercial consumers has been increased from 10% to 12% where the
amount of electricity bill exceeds Rupees twenty thousand.
Division X Advance Tax on Sale or Transfer of Immovable Property
Rate of tax to be collected under section 236C has been increased from 0.5% to 1% in case of filers and
1% to 2% in case of non-filers.
Division XIII
By amendment in this Division, rate of tax u/s 236F for license or for renewal of license for category R, B1, B-2 has been reduced to Rupees 12,000, Rupees 35,000 and Rupees 45,000 from Rupees 30,000,
Rupees 50,000 and Rupees 60,000 respectively.
Moreover, in addition to tax collected by PEMRA at the rate of 20% of permission fee or renewal fee in
case of IPTV, FM Radio, MMDS, Mobile TV, Mobile Audio, Satellite Channel and landing rights, tax will
also be collected by PEMRA at the rate of fifty percent of the permission fee or renewal fee, as the case
may be, from every TV channel on which foreign TV drama serial or play in any language, other than
English is screened or viewed.
Division XVIII Advance Tax on Purchase of Immovable Property
Rates of tax to be collected under section 236K have been increased from 1% to 2% in case of filer and
from 2% to 4% in case of non-filers where purchase value of immovable property is more than Rupees 3
million.
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INCOME TAX ORDINANCE, 2001 THE SECOND SCHEDULE

Division XXV Advance Tax on Issuance Premium
The rate of tax to be collected from non-filers under section 236U shall be as under:
Type of Premium
Rate
General insurance premium

Life insurance premium if exceeding Rupees 0.2 million per annum
Others
4%
1%
0%
Division XXVI Advance Tax on Extraction of Minerals

The rate of tax to be collected under section 236V shall be 5% of the value of the minerals in case of
non-filers and 0% for filers.
THE SECOND SCHEDULE
Part I Exemptions from Total Income
Exemption for gratuity
Clause (13)(iii)
Exemption in respect of any income representing any payment received by way of gratuity or
commutation of pension by an employee under any scheme applicable to all employees of the employer
and approved by the FBR has been enhanced from Rupees 200,000 to Rupees 300,000.
Exemption to Micro Finance Banks (MFBs)
Clause (66)(xviii)
Exemption previously available for five years to Micro Finance Banks starting from 1st day of July 2007 to
30th day of June 2012 had already expired on 30 June 2012. Now, this sub-clause, being redundant has
been omitted.
Condition in allowing exemption to sports activities
managed by sports boards
Clause (98)
By amendment in clause 98, the exemption available to any Board or other organization established in
Pakistan for the purpose of controlling, regulating or encouraging major games and sports, has now been
restricted only to the Board or organization established by the Government. Earlier this condition was
removed by the Finance Act, 2003.
Exemption from Gawadar Port operations
Clauses (126A), (126AA), (126AB),

(126AC) and (126AD)
Exemption already available to China Overseas Ports Holding Company Limited from Gawadar Port
operations has been extended to other companies specified in the substituted clause (126A) as under:
(126A) Income derived by China Overseas Ports Holding Company Limited, China Overseas Ports
Holding Company Pakistan (Private) Limited, Gawadar International Terminal Limited, Gawadar Marine
Services Limited and Gawadar Free Zone Company Limited from Gawadar Port operations for a period of
twenty-three years, with effect from the sixth day of February, 2007.
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Moreover, f ollowing new clauses from (126AA) to (126AD) have been inserted and thereby profit and
gains derived by a taxpayer from business set up in Gawadar Free Zone Area, profit on debt, income of
contractors and sub-contractors and dividend shall be exempt from tax for certain periods mentioned
therein with effect from the 1 st day of July 2016. The new clauses prescribe as under:
(126AA) Profit and gains derived by a taxpayer from businesses set up in the Gawadar Free Zone Area
for a period of twenty three years with effect from the first day of July, 2016.
(126AB) Profit on debt derived by
(a)
any foreign lender; or
(b)
any local bank having more than 75 per cent shareholding of the Government or the State Bank
of Pakistan, under a Financing Agreement with the China Overseas Ports Holding Company Limited, for a
period of twenty three years with effect from the first day of July, 2016.
(126AC) Income derived by contractors and sub-contractors of China Overseas Ports Holding Company
Limited, China Overseas Ports Holding Company Pakistan (Private) Limited, Gawadar International
Terminal Limited, Gawadar Marine Services Limited and Gawadar Free Zone Company Limited from
Gawadar Port operations for a period of twenty - years, with effect from the first day of July, 2016.
(126AD) (1) Any income derived by China Overseas Ports Holding Company Limited being dividend
received from China Overseas Ports Holding Company Pakistan (Private) Limited, Gwadar International
Terminal Limited Gwadar Marine Services Limited and Gwadar Free Zone Company Limited for a period of
twenty-three years with effect from the first day of July, 2016.
(2) Any income derived by China Overseas Ports Holding Company Pakistan (Private)
Limited being
dividend received from, Gwadar International Terminal Limited Gwadar Marine Services Limited and
Gwadar Free Zone Company Limited for a period of twenty-three years with effect from the first day of
July, 2016.
Extension in period of exemption from exports of computer software, etc.
Clause (133)
Exemption available to income from exports of computer software or IT services or IT enabled services
has been extended from 30th day of June 2016 to 30th day of June 2019 with the condition that eighty
percent of the export proceeds is brought into Pakistan in foreign exchange remitted from outside
Pakistan through normal banking channels.
Part II Reduction in Tax Rates
Income from services rendered outside Pakistan and
construction contracts executed outside Pakistan
Clause (3)
Now, the tax in respect of income from services rendered outside Pakistan and construction contracts
executed outside Pakistan shall be charged at 50% of the prevailing withholding tax rates on services and
contracts subject to the condition that receipts from services and income from contracts are brought into
Pakistan in foreign exchange through normal banking channel.
Rate of tax on receipts of Pakistan Cricket Board
Clause (3B)
Pakistan Cricket Board shall be charged to tax on its gross foreign receipts @ 4% from tax year 2010 and
onwards with certain conditions specified in following clause (3B):
FINANCE ACT 2016

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(3B) The income of Pakistan Cricket Board derived from sources outside Pakistan including media
rights, gate money, sponsorship fee, in-stadium rights, out-stadium rights, payments made by
International Cricket Council, Asian Cricket Council or any other Cricket Board shall be taxed at a rate of
four per cent of the gross receipts from such sources:
Provided that Pakistan Cricket Board may opt to pay tax at the rate of four per cent of the gross receipts
from tax year 2010 and onwards:
Provided further that this option shall be available subject to withdrawal of appeals, references and
petitions on the issue of tax rate pending before any appellate forum or tax authority:
Provided further that the outstanding tax liability payable under this clause up to tax year 2015 is paid
by 30th June, 2016.
Rate of tax for listed companies
Clause (18B)
Rate of tax imposed on taxable income of a listed company shall be reduced by 2%, subject to:
(a)
it fulfils prescribed shariah compliant criteria approved by State Bank of Pakistan, Securities and
Exchange Commission of Pakistan and the Board;
(b)
derives income from manufacturing activities only;
(c)
has declared taxable income for the last three consecutive tax years; and
(d)
has issued dividend for the last five consecutive tax years.
Part IV Exemption from Specific Provisions
Exemption from minimum tax under section 113
Clause (11A)
Following new sub-clauses have been inserted in this clause to provide exemption from levy of minimum
tax under section 113:
(xxvi) China Overseas Ports Holding Company Limited, China Overseas Ports Holding Company
Pakistan (Private) Limited, Gwadar International Terminal Limited, Gwadar Marine Services Limited and
Gwadar Free Zone Company Limited for a period of twenty three years, with effect from the sixth day
of February, 2007.
(xxvii) companies, qualifying for exemption under clause (126M) of Part-I of this Schedule, in respect of
profits and gains derived from a transmission line project.
Withholding tax on dividend income
Clause (38AA)
Exemption from provisions of withholding tax on dividend has been provided to certain companies by
adding new clause (38AA) as under:
(38AA) The provisions of section 150 shall not apply to China Overseas Ports Holding Company
Limited, China Overseas Ports Holding Company Pakistan (Private) Limited, Gwadar International
Terminal Limited, Gwadar Marine Services Limited and Gwadar Free Zone Company Limited for a period
of twenty-three years.
FINANCE ACT 2016

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Trading Houses
Clause (57)
Exemption from payment of minimum tax under Section 113 previously available to Trading House s has
been withdrawn and such tax shall now be charged at the rate of 0.5% up to tax year 2019 and 1%
thereafter.
Term Finance Certificates
Clause (59)(i)
Exemption from application of withholding tax provisions on profit or interest paid on Term Finance
Certificates held by companies on or after the first day of July 1999, has been withdrawn.
Hajj group operators
Clause (72A)
Exemption provided to Hajj group operators in respect of Hajj operations from the applicability of
provisions relating to banking transaction u/s 21(l), minimum tax u/s 113 and withholding tax on
payment to non-residents u/s 152 subject to payment of tax @ Rupees 5,000 per Hajji, has been
extended to tax year 2016.
Imports
Clause (72B)
By adding following new provisos to clause (72B), further conditions have been imposed to obtain
exemption certificate in respect of advance tax collection on imports:
Provided further that the quantity of raw material to be imported which is sought to be exempted from
tax under section 148 shall not exceed 110 per cent of the quantity of raw material imported and
consumed during the previous tax year:
Provided also that the Commissioner shall conduct audit of taxpayers accounts during the financial year
in which the certificate is issued in respect of consumption, production and sales of the latest tax year for
which return has been filed and the taxpayer shall be treated to have been selected for audit under
section 214C:
Provided also if the taxpayer fails to present accounts or documents to the Commissioner or the officer
authorized by the Commissioner, the Commissioner shall, by an order in writing, cancel the certificate
issued and shall proceed to recover the tax not collected under section 148 for the period prior to such
cancellation and all the provisions of the Ordinance shall apply accordingly.
Wealth statement
Clause (82)
Exemption from filing of wealth statement u/s 116 to a resident individual or a member of an association
of persons whose last declared or assessed income, or the declared income for the year was less than
one million rupees was available till tax year 2014. Hence, this clause has been omitted being redundant.
Exemption from invocation of section 111
Clause (86)
Investment made by an individual, association of persons or company in a Greenfield industrial

undertaking is exempt from probe of source of investment under Section 111 of the Ordinance subject to
certain conditions. One of the conditions is that the commercial production of the industrial undertaking
commences on or before 30 June 2017. Now, this dead line of commencement of commercial production
has been extended upto 30 June 2019.
FINANCE ACT 2016

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Exemption from provisions of section 153(3)(b)
Clause (94)
This clause was inserted through Income Tax (Second Amendment) Act, 2016 dated 29 January 2016 to
allow exemption from application of the provisions of clause (b) of the proviso to sub-section (3) of
section 153 in respect of tax deductible being minimum tax on rendering or providing of services for the
period beginning from the first day of July, 2015 and ending on the thirtieth day of June, 2016 to a
company being a filer and engaged in providing or rendering freight forwarding services, a ir cargo
services, courier services, manpower outsourcing services, hotel services, security guard services,
software development services, tracking services, advertising services (other than by print or electronic
media), share registrar services, engineering services or car rental services with the condition that the tax
payable or paid on the income from providing or rendering of aforesaid services shall not be less than
two percent of the gross amount of turnover from all sources and that the company fu rnishes in writing
an irrevocable undertaking by the fifteenth day of November, 2015 to present its accounts to the
Commissioner within thirty days of filing of return, for audit of its income tax affairs for tax year 2016 or
2017, as the case may be.
Now, the above mentioned exemption has been extended from 30th day of June 2016 to 30th day of June
2017. Moreover, IT services and IT enabled services as defined in clause (133) of Part I of this Schedule,
have also been included to avail the aforesaid exemp tion. It has been further provided that for tax year
2017, the company shall furnish irrevocable undertaking by November, 2016, to present it s accounts to
the Commissioner.
Exemptions for The Second Pakistan International
Sukuk Company Limited
Clauses (95) and (96)
Under the new clauses (94) and (95), the provisions regarding payment of advance tax u/s 147,
withholding tax on profit on debt u/s 151, payments to non-residents u/s 152, cash withdrawals u/s 231A
and 231AA, collection of tax on sale by auction u/s 236A and on purchase or transfer of immovable
property u/s 236K shall not apply to The Second PakIstan International Sukuk Company Limited, as a
payer and the provisions of sections 147, 151 and 155 regarding income from property shall not apply as
a recipient.
Exemption for Pakistan International Sukuk
Company Limited
Clause (97)
The provisions of advance tax on sale or transfer of immovable property u/s 236C shall not apply to
Pakistan International Sukuk Company Limited.
Exemption from provision of section 148
Clause (98)
Provisions regarding withholding tax on imports shall not apply to import of ships and other floating crafts
including tugs, survey vessels and other specialized crafts purchased or bare-boat chartered by a
Pakistani entity and flying Pakistani flag up to the year 2020, subject to the condition that the ships and
crafts are used for the purpose for which they were procured. However, exemption shall not be available
in case ships and crafts are purchased for demolition purposes.
Exemption from provision of section 148
Clause (99)
Provisions regarding withholding tax on imports shall not apply to import or acquisition of aircraft on wet
or dry lease by M/s Pakistan International Airlines Corporation with effect from 19 th March 2015.
FINANCE ACT 2016

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INCOME TAX ORDINANCE, 2001 THE FOURTH, SIXTH AND EIGHTH SCHEDULES
THE FOURTH SCHEDULE
RULES FOR THE COMPUTATION OF THE PROFITS AND GAINS OF INSURANCE BUSINESS
Capital gains on disposal of shares
Rule (6B)
By substituting Rule (6B), capital gains on disposal of shares and dividend of listed companies, vouchers
of Pakistan Telecommunication Corporation, modaraba certificates or ins truments of redeemable capital
and derivative products, shall now be taxed at the prevailing normal rates applicable to companies as
specified in Division II of Part I of First Schedule.
THE SIXTH SCHEDULE
PART I
RECOGNIZED PROVIDENT FUNDS
By amendment in Rule (3)(a), annual contribution made by the employer in excess of one-tenth of the
salary or Rupees 150,000 (previously Rupees 100,000) whichever is low, would be deemed as income
received by the employee.
THE EIGHTH SCHEDULE
RULES FOR COMPUTATION OF CAPITAL GAINS ON LISTED SECURITIES
Units of open ended mutual funds
Rule (1)(1A)
By adding new sub-rule (1A), capital gains on disposal of units of open ended mutual funds and to which
special provisions relating to capital gain tax under section 100B applies, shall now be computed and
determined under this schedule and tax thereon shall be collected and deposited by NCCPL.
Trading of future commodity contracts on Pakistan Mercantile
Exchange
Rule (1)(1B)
Gain or loss arising to persons through trading of future commodity contracts on Pakistan Mercantile
Exchange shall now be computed and determined under this schedule and tax thereon shall be collected
and deposited by NCCPL.
Penalty provisions
Rule 1(3)
If the information as per sub-rule (3) or newly added sub-rule (3A) is not furnished, NCCPL shall forward
the detail to the Commissioner who shall exercise powers under the Ordinance to enforce furnishing of
the said information including all penalty provisions.
Information to NCCPL
Rule 1(3A)
The Asset Management Companies, Pakistan Mercantile Exchange and any other person shall furnish
information when required by NCCPL for discharging obligation under this schedule.
FINANCE ACT 2016

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INCOME TAX ORDINANCE, 2001 GENERAL

Important provisions regarding income tax rates, advance tax, withholding tax rates, filing dates of
various periodical statements and return of income, etc. are given in this part for convenience of our
clients.
INCOME TAX RATES TAX YEAR 2017
RATES OF TAX FOR COMPANIES
The rates of tax imposed on taxable income of companies falling under various categories are as under:
S.
No.
Description
Rate of
Tax
1
2
3
4
Modaraba Company [Clause (18), Part II, 2nd Sch.]

Company other than a banking company [Clause (I), Division II, Part I, 1st Sch.]
Banking Company (Division II, Part I, 1st Sch.)
Small Company [Paragraph (iii), Division II, Part I, 1st Sch.]
25%
31%
35%
25%
The rate of tax as specified in Division II of Part I of the First Schedule shall be reduced by 2% in case
of a company whose shares are traded on stock exchange if:
it fulfils prescribed shariah compliant criteria approved by State Bank of Pakistan, Securities and
Exchange Commission of Pakistan and the Board;
derives income from manufacturing activities only;
has declared taxable income for the last three consecutive tax years; and
has issued dividend for the last five consecutive tax years.
(a)
(b)
(c)
(d)
The rate of tax imposed on taxable income of a company, other than banking company , shall be 30% for
the tax year 2018 and onwards.
MINIMUM TAX ON INCOME OF CERTAIN PERSONS
Rates of minimum tax u/s 113 for companies of various categories are as under: [Division IX, Part 1, 1 st
Sch.]
S.No.
1.
Person(s)
(a)
(b)
(c)
(d)
2.
(a)
(b)
(c)
(d)
Minimum Tax as
percentage of the
persons turnover
for the year
Oil marketing companies, Oil refineries, Sui Southern Gas Company

Limited and Sui Northern Gas Pipelines Limited ( for the cases where
annual turnover exceeds rupees one billion);
Pakistani Airlines; and
Poultry industry including poultry breeding, broiler production, egg
production and poultry feed production;
Dealers or distributors of fertilizers.
0.5%
Distributors of pharmaceutical products, fast moving consumer goods

and cigarettes;
Petroleum agents and distributors who are registered under the Sales
Tax Act, 1990;
Rice mills and dealers; and
Flour mills.
0.2%
3.
Motorcycle dealers registered under the Sales Tax Act, 1990.
4.
In all other cases.
0.25%
1%
FINANCE ACT 2016

- 25 -


INCOME TAX RATES ON DIVIDEND
The rate of tax imposed under section 5 on dividend received from a company shall be: [Division III, Part
I, 1st Sch.]
(a) 7.5% in the case of dividends declared or distributed by purchaser of a power project privatized by
WAPDA or on shares of a company set up for power genera tion or on shares of a company,
Supplying coal exclusively to power generation projects; and
(b) 10% in case of dividend received by a person from a mutual fund
(c) 12.5% in cases other than mentioned in clauses (a) and (b).
The dividend received by a person from a stock fund shall be taxed at the rate of 12.5% for the tax year
2015 and onwards, if dividend receipts are less than capital gains.
The dividend received by a company from a collective investment scheme, Real Estate Investment Trust
Scheme (REIT) or a mutual fund, other than a stock fund, shall be taxed at the rate of 25% for tax year
2015 and onwards.
If a developmental REIT scheme with the object of development and construction of residential buildings
is set up by 30th day of June, 2018, tax imposed on dividend received by a person from such
developmental REIT scheme shall be reduced by 50% for three years from 30 th day of June, 2018.
From tax year 2015 and onwards, income from dividend received by a ba nking company shall be taxed @
35%. [Rule 7B, 7th Sch.]
TAX RATES FOR INDIVIDUALS AND ASSOCIATION OF PERSONS
The rates of tax chargeable for the Tax Year 201 7 are as under:
Non-Salaried Individuals and association of persons (AOP)
S. No.
1.
2.
3.
4.
5.
6.
7.
8.
Taxable Income
Rate of tax
Where the taxable income does not exceed Rs.

400,000
Where the taxable income exceeds Rs. 400,000
but does not exceed Rs. 500,000
but does not exceed Rs. 750,000
but does not exceed Rs. 1,500,000
Where the taxable income exceeds Rs. 1,500,000 but
does not exceed Rs. 2,500,000
Where the taxable income exceeds Rs. 2,500,000 but
does not exceed Rs. 4,000,000
Where the taxable income exceeds Rs. 4,000,000
but does not exceed Rs. 6,000,000
Where the taxable income exceeds Rs. 6,000,000
0%
FINANCE ACT 2016

- 26 -
7% of the amount exceeding Rs.

400,000
Rs.
7,000 + 10% of the amount
exceeding Rs. 500,000
Rs. 32,000 + 15% of the amount
Rs. 144,500
exceeding Rs.
Rs. 344,500
exceeding Rs.
Rs. 719,500
exceeding Rs.
+ 20% of the amount

1,500,000
+ 25% of the amount
2,500,000
+ 30% of the amount
4,000,000
Rs. 1,319,500 + 35% of the amount

exceeding Rs. 6,000,000


In the case of an association of persons that is a professional firm prohibited from incorporation by any
law or the rules of the body regulating their profession, the 35% rate of tax mentioned against serial No.
8 of the table shall be 32% for tax year 2016 and onwards.
Salaried Individuals, where income from salary exceeds 50% of taxable income:
S. No.
Taxable Income
Rate of tax
1.
Where the taxable income does not

exceed Rs. 400,000
0%
2.
Where the taxable income exceeds Rs.

400,000 but does not exceed Rs. 500,000
2% of the amount exceeding Rs. 400,000
3.

500,000 but does not exceed Rs. 750,000
Rs. 2,000 + 5% of the amount exceeding

Rs. 500,000
4.

750,000 but does not exceed Rs. 1,400,000

5.

1,400,000 but does not exceed Rs.1,500,000
Rs. 79,500 + 12.5% of the amount

6.

1,500,000 but does not exceed Rs.1,800,000

7.

1,800,000 but does not exceed Rs. 2,500,000
Rs. 137,000 + 17.5% of the amount

8.


9.

Rs. 359,500 + 22.5% of the amount

10


11

Rs. 597,000 + 27.5% of the amount

12

7,000,000
Rs. 1,422,000 + 30% of the amount

REDUCTION IN TAX LIABILITY OF SENIOR CITIZENS, DISABLED PERSONS AND TEACHERS

OR RESEARCHERS
Clause (IB), Part I, First Schedule
Where taxable income other than income on which the deduction of tax is final discharge of tax liability,
does not exceed Rupees 1,000,000, in a tax year of a taxpayer holding NADRAs CNIC for disabled person
or a taxpayer aged 60 years or more on the first day of that tax year, his tax liability on such income shall
be reduced by 50%.
FINANCE ACT 2016

- 27 -


Clause (2), Part III, Second Schedule
The provision to reduce the income tax liability of a full time teacher or a researcher employed in a non
profit educational or research institution duly recognized by Higher Education Commission, a Board of
Education or a University recognized by the Higher Education Commission including government training
and research institution, continues to be available. The tax liability in such cases shall be reduced by an
amount equal to 40% of the tax payable.
ADJUSTMENT OF TAX CREDIT BY EMPLOYER
Every responsible person, while deducting tax on the income chargeable under the head salary of
employees, shall allow tax credit on donations to approved NPOs (section 61), investment in shares and
insurance (section 62); and contribution to approved pension funds (section 63) and make adjustments
of tax withheld from employee under other heads during the tax year after obtaining evidences as may
be necessary, for :
i)
ii)
iii)
tax withheld from the employee under this Ordinance during tax year;
any excess deduction or deficiency arising out of any previous deductions; or
failure to make deduction during the year.
The employers will, however, be responsible to obtain documentary evidences alongwith declaration from
employees on prescribed form IT-3, for correct application of relevant provisions of law.
The said declaration and evidences are required to be retained by the employer for at least 6 years. [Sec.
174(3)]
VALUATION OF PERQUISITES, ALLOWANCES AND BENEFITS
In case of salaried taxpayers special allowance and medical allowance are exempt from tax under Clause
(39) and Clause (139) respectively of Part I of Second Schedule. However, value of other perquisites,
allowances and benefits provided by the employer shall be included in income of the employee in
accordance with the rules 4 to 6 of Part I of Chapter II of Income Tax Rules, 2002 as reproduced below:
4.
Valuation of Accommodation - The value of accommodation provided by an employer to the

employee shall be taken equal to the amount that would have been paid by the employer in case
such accommodation was not provided.
Provided that the value taken for this purpose shall, in any case, not be less than forty five
percent of the minimum of the time scale of the basic salary or the basic salary where there is no
time scale.
Provided further that where House Rent Allowance is admissible @ thirty per cent, the value
taken for the purpose of this rule shall be an amount not less than thirty per cent of minimum of
the time scale of basic salary or the basic salary where there is no time scale.
5.
Valuation of conveyance.- The value of conveyance provided by the employer to the

employee shall be taken equal to an amount as below: (i)
Partly for personal and

partly for official use
5% of:
(a) the cost to the employer for acquiring the motor vehicle; or
(b) the fair market value of the motor vehicle at the commencement of
the lease, if the motor vehicle is taken on lease by the employer;
FINANCE ACT 2016

- 28 -


(ii)
For personal use only
10% of:
(a) the cost to the employer for acquiring the motor vehicle; or,
(b) the fair market value of the motor vehicle at the commencement of
the lease, if the motor vehicle is taken on lease by the employer;
and
6.
For the purpose of this part, employee includes a director of a company.
RATE OF TAX ON CAPITAL GAIN ON SALE OF SECURITIES

The rates of tax to be paid under section 37A, are as under: [Division VII, Part I, 1st Sch.]
Holding period
Rate of tax
Where holding period of a security is less than

twelve months
Where holding period of a security is twelve
months or more but less than twenty-four months
Where holding period of a security is twenty-four
months or more but security was acquired on or
after 1st July 2012
Where the security was acquired before 1 st July
2012
Future commodity contracts entered into by the
member of Pakistan Mercantile Exchange
Tax year
2015
Tax year
2016
Tax year 2017
12.5%
15%
Filer
15%
Non-filer
18%
10%
12.5%
12.5%
16%
0%
7.5%
7.5%
11%
0%
0%
0%
0%
0%
0%
5%
5%
From tax year 2015 and onwards, income from capital gains in case of banking company shall be taxed
@ 35%. [Rule 7B, 7th Sch.]
RATE OF TAX ON CAPITAL GAIN ON DISPOSAL OF IMMOVABLE PROPERTY
S.
No.
1.
2.
Period
Where holding period of immovable property is up to five years
Where holding period of immovable property is more than five years
Rate of tax
10%
0%
Gain arising on the disposal of immovable property by a person in a tax year to a Rental REIT Scheme
shall be taxed at the rate of five percent upto thirtieth day of June 2019, irrespective of the holding
period.
ADVANCE TAX UNDER SECTION 147
Every taxpayer whose income was charged to tax for the latest tax year under this Ordinance ex cluding
the followings shall pay advance tax for the year under section 147 of Income Tax Ordinance, 2001 as
reduced by the tax already paid/deducted at source in the year:
i)
Dividend received from a company (Section 5)
FINANCE ACT 2016

- 29 -


ii)
iii)
iv)
Income of a non resident from Pakistan-source royalty or fee for technical services, shipping and
transport (Sections 6 & 7)
Salary income subject to deduction of tax (Section 149)
All income where the tax collected or deducted is considered as final tax (Section 168)
Advance tax in case of an individual, will be calculated in accordance with the following formula:
(A/4)-B
Where
A
is the tax assessed to the taxpayer for the latest tax year under the Ordinance; and
is the tax paid in the quarter for which a tax credit is allowed under section 168, other than tax
deducted on dividend income, salary income or income from property.
Individual whose latest assessed income excluding incomes referred to in items (i) to (iv) above is less
than Rupees 500,000 is not required to pay advance income tax under section 147 of Income Tax
Ordinance, 2001.
Where the taxpayer is an association of persons or a company, advance tax will be computed according
to the following formula:
(AxB/C)D
Where
A
is the taxpayers turnover for the quarter
is the tax assessed of the taxpayer company for the latest tax year
is turnover of the taxpayer for the latest tax year
is the total amount of tax paid/deducted in the quarter other than tax collected/deducted which
is considered as final tax.
The provision of minimum tax u/s 113 and Alternative Corporate Tax u/s 113C will also be taken into
account while computing advance tax liability.
Adjustable advance tax on capital gain from sale of securities will be computed at following rates:
[Section 147(5B)]
Where holding period of a security is less
than 6 months
Where holding period of a security is 6
months or more but less than 12 months
2% of the capital gains derived during the quarter

1.5% of the capital gains derived during the
quarter
However, provisions regarding advance tax on capital gain from sale of securities are not applicable to
individual investors.
FINANCE ACT 2016

- 30 -


In case the taxpayer is an association of persons or a company, it shall estimate the tax payable by it for
the relevant tax year at any time before the 2nd installment is due. In case the tax payable is likely to be
more than the amount that the taxpayer is required to pay under sub-section (4), the taxpayer shall
furnish to the Commissioner on or before the due date of the 2nd quarter an estimate of the amount of
tax payable by the taxpayer and pay 50% of such amount by the due date of the 2 nd quarter of the tax
year after making adjustment for the amount, if any, already paid in terms of sub -section (4). The
remaining 50% of the estimate shall be paid in two equal installments payable by the due date of the 3 rd
and 4th quarter of the tax year. Similarly, according to the provisions of sub -section (6), if the tax payable
is less than the tax due on the said basis, every taxpayer who is required to pay advance tax, after
furnishing the estimates to Commissioner, will pay such estimated amount after adjustment of tax
already paid.
New company or an association of persons, are required to pay advance income tax even in the first year
of their operation. The taxpayer will estimate the amount of advance tax payable on quarterly income
basis and thereafter pay such amount after taking into account minimum tax payable under section 113
and Alternate Corporate Tax u/s 113C . If minimum tax payable comes more than the advance tax
calculated on the basis of quarterly income, then advance tax will be paid equal to minimum tax
calculated @ 1% on aggregated turnover of the quarter after adjustment of the amount already paid
during the quarter, if any.
Where the advance tax paid on the basis of estimation under sub-section (4A) or (6) of section 147 is
less than 90% of the tax chargeable for the relevant tax year, the taxpayer shall be liable to pay default
surcharge under section 205(IB) at the rate of 12% per annum on the amount by which the tax paid by
him falls short of the 90%. Such default surcharge shall be calculated from 1 st day of April in that year to
the date on which the assessment is made or the 30 th day of June of the financial year next following
whichever is the earlier. [Sub -section (1B) of Section 205]
As required u/s 147A, provincial sales tax registered person, if non-filer on 30 June of previous tax year,
shall also pay advance tax at the rate of three percent of the turnover declared before the provincial
revenue authority.
DATE OF PAYMENT OF ADVANCE TAX
Tax Payable For
Individuals
On or Before
Companies and AOPs
(excluding Banking
Company)
September quarter
15 September
25 September
December quarter
15 December
25 December
15 March
25 March
15 June
15 June
March quarter
June quarter
FINANCE ACT 2016

- 31 -


Advance tax on capital gain from sale of securities is payable within 21 days from the close of each
quarter. [Section 147(5b)]
Banking company will be required to pay advance tax under section 147 in 12 equal installments on or
before 15th of every month. [Rule 5(1), 7th, Sch.]
PAYMENT OF TAX COLLECTED / DEDUCTED (RULE 43 OF INCOME TAX RULES, 2002)
Tax collected / deducted by
Deposit into Government treasury
Federal / Provincial Government
On the same day
Other persons
Within 7 days from the end of each week ending on

Sunday
DATE OF FILING OF STATEMENTS UNDER SECTION 165 (Rule 44 of Income Tax Rules, 2002)
Every prescribed person shall furnish or e-file statement under sub-section (1) of section 165 by 15th day
of the month following the month to which the withholding tax pertains.
ANNUAL STATEMENT
Annual statements will be furnished on or before 31 August of each year by the person deductin g tax
from salary under section 149. [Section 165(6)]
DATE OF FILING OF RETURN OF INCOME / STATEMENT UNDER SECTION 115(4)
Category of Taxpayer
Date of Filing
Companies: (For return under section 114, statements under sections 115(4) and 165):
Having tax year ending between 01 January to 30 June
31 December
Other cases
30 September
Annual Statement of deduction of Income tax from salary
31 August
Other than Companies

Annual Statement of deduction of income tax from salary
31 August
Return of income through e-portal in the case of salaried person
31 August
Statement of final tax under section 115(4)
31 August
Return of income
30 September
FINANCE ACT 2016

- 32 -
1.(i) Industrial undertaking importing

remeltable steel (PCT Heading 72.04) and
directly reduced iron for its own use [Sr.
No. 1(i) of Table, Part II, 1st Sch.]
(ii) Import of potassic fertilizers in
pursuance of Economic Coordination
Committee of the Cabinets decision No.
ECC-155/12/2004 dated the 09 December
2004 [Sr. No. 1(ii) of Table, Part II, 1 st
Sch.]
(iii) Import of Urea [Sr. No. 1(iii) of
Table, Part II, 1st Sch.]
(iv) Manufacturers covered under
Notification No. S.R.O. 1125(I)/2011
dated 31 December 2011 and importing
items covered under S.R.O. 1125(I).2011
dated 31 December, 2011[Sr. No. 1(iv)
of Table, Part II, 1st Sch.]
(v) Person importing gold [Sr. No. 1(v) of
Table, Part II, 1st Sch.]
(vi) Person importing cotton [Sr. No.
1(vi) of Table, Part II, 1st Sch.]
(vii) Designated buyer of LNG on behalf
of Government of Pakistan, to import
LNG. [Sr. No. 1(vii) of Table, Part II, 1 st
Sch.]
2. Import of pulses [Sr. No. 2 of Table,
Part II, 1st Sch.]
148
FINANCE ACT 2016
Nature of Payment / Transactions
Section
2% of
import
value as
increased
by customs
duty,
- 33 -
3% of import
value as
increased by
customs
duty, sales
tax and
Withholding /
Collection Rate
% / Rupees
Filer
Non-filer
1% of
1.5% of
import
import
value as
value as
increased
increased
by
by customscustoms
duty, sales
duty, sales
tax and
tax and
federal
federal
excise duty
excise
duty
Collector of customs
-do-
-do-
-do-
-do-
-do-
-do-
Responsibility for
Deduction / Deposit
INCOME TAX ORDINANCE, 2001 GENERAL - SUMMARY OF WITHHOLDING TAX REGIME
Final - except the followings

(Sec.148(7)):
(a) raw material, plant, machinery,
equipment and parts by an industrial
undertaking for its own use.
(b) fertilizer by manufacturer of fertilizer.
(c) Motor vehicles in CBU condition by
manufacturer of motor vehicles.
(d) Large import houses.
(e) Foreign produced film imported for the
purpose of screening and viewing.
(f) Edible oil and packing material (will be
treated as minimum tax) [Sec.
148(8)].
Remarks
Purchase of locally produced edible oil by

manufacturers of cooking oil and
vegetable ghee.
4. Ship breakers on import of ships [Sr.

No. 4 of Table, Part II, 1st Sch.]
5. Industrial undertakings not covered
under S. Nos. 1 to 4 [Sr. No. 5 of Table,
Part II, 1st Sch.]
6. Companies not covered under S. Nos.
1 to 5 [Sr. No. 6 of Table, Part II, 1 st
Sch.]
7. Persons not covered under S. Nos. 1
to 6 [Sr. No. 7 of Table, Part II, 1 st Sch.]
3. Commercial importers covered under

Notification No. S.R.O. 1125(I)/2011
dated 31 December 2011 and importing
items covered under S.R.O. 1125(I)/2011
dated the 31 December, 2011[Sr. No. 3
of Table, Part II, 1st Sch.]
FINANCE ACT 2016
149(1) Basic salary and taxable allowances
148A
Section
9%
6%
Average rate
- 34 -
8%
5.5%
2%
8%
5.5%
2%
6.5%
4.5% of
import
value as
increased
by customs
duty,
sales tax
and federal
excise duty
federal
excise duty
3% of
import
value as
increased
by
customs
duty, sales
tax and
federal
excise
duty
4.5%
sales tax
and federal
excise duty
Withholding /
Collection Rate
% / Rupees
Filer
Non-filer
Employer
Person making the

payment
Responsibility for
Deduction / Deposit
Adjustable. Exempt where the taxable

income does not exceed Rupees 400,000. [Cl
(IA), Division I, Part I, 1st Sch.]
Final
Remarks
Directorship fee or fee for attending

board meeting or such fee by whatever
name called
i Dividend declared or distributed by

purchaser of power project privatized by
WAPDA. or on shares of a company set
up for power generation or on shares of
a company, supplying coal exclusively to
power generation projects.[Division I,
Part III, 1st Sch.]
ii other than mentioned in (i) above
(3)
150
FINANCE ACT 2016
Dividend received by:Stock fund:

- Individual
- Company
- AOP
Money market fund, Income fund or
REIT Scheme or any other fund:
- Individual
- Company
- AOP
Section
10%
10%
10%
15%
25%
15%
10%
25%
10%
20%
12.5%
10%
10%
10%
7.5%
20%
7.5%
20%
- 35 -
Withholding /
Collection Rate
% / Rupees
Filer
Non-filer
-do-
Every person paying

dividend
Employer / responsible
person
for
making
payment
Responsibility for
Deduction / Deposit
Final - Following are exempt:

- any income derived from inter-corporate
dividend within the group companies entitled
to group taxation under section 59AA subject
to condition that return of the group has been
filed for the tax year. [Cl . (103A), Part I, 2nd
Sch.]
- Payment to approved Pension fund,
recognized
provident
fund,
approved
superannuation fund or approved gratuity
fund etc. [Cl. (47B), Part IV, 2nd Sch.]
- Rate of tax to be deducted shall be 12.5%,
if dividend received of the stock fund is less
than capital gains.
- Rate of tax shall be reduced by 50% for
three years from 30 June 2018, if a
Development REIT Scheme with the object of
development and construction of residential
buildings is set up by 30 June 2018.
Adjustable
Tax deducted at source of the employee, short

/ excess tax deducted from salary, tax cre dits
under sections 61, 62, 63 etc. can be adjusted
by the employer. [Sec. 149(1)].
Payment of salary more than Rupees 15,000
should be through crossed cheques or direct
transfer of funds to the employees bank
account. [Sec. 21(m)]
Remarks
Payment to non-resident persons on

account of certain contracts
Royalty or fee for technical services to

non-resident
Yield on an account, deposit or a

certificate under the National Saving
Scheme or post office saving account
Profit on a debt, being an account or
deposit maintained with the Banking
company or financial institution
Profit on any security other than that
referred in Clause (a), issued by Federal
Government, Provincial Government or
local Government.
Profit on bond, certificate, debenture,
security or instrument of any kind to any
person other than financial institution
FINANCE ACT 2016
(1A)
152
(1)
(d)
(c)
(b)
(a)
151(1):
Section
7%
15%
10%
10%
10%
10%
12%
15%
17.5%
17.5%
17.5%
17.5%
- 36 -
Withholding /
Collection Rate
% / Rupees
Filer
Non-filer
Every person making

payment
Every person making

payment
Banking company,
financial institution, etc.
Federal Government,
Provincial Government
or local Government
Banking company or
financial institution
Every person making

payment
Responsibility for
Deduction / Deposit
Final
Final
If the yield or profit paid is Rupees 500,000 or

less, the rate of tax for non-filer shall be 10%
No tax will be deducted in following
cases:
- Yield or profit on investment in Bahbood
Saving Certificates or Pensioners Benefit
Account. [Cl. (36A), Part IV, 2nd Sch]
- If monthly installment in monthly income
saving scheme does not exceed Rupees 1,000
- [Cl. (59)(iv)(b), Part IV, 2nd Sch.].
- Any yield from National Saving Schemes of
Directorate of National Savings where
investment was made on or before 30 June
2001 and any income derived from Mahana
Amdani Account where monthly installment
does not exceed Rupees 1,000 shall continue
to remain exempt and any person paying such
yield or income shall not deduct tax u/s 151.
The recipient of such receipt or income is not
required to produce exemption certificate in
this regard [S. 239(14)]
Adjustable where taxpayer is a company or

profit on debt is taxable under section 7B and for
non-filer, equal to tax deductible in case of filer.
Remarks
20%
Payment for foreign produced commercials
152A
FINANCE ACT 2016
10%
7%
8%
10%
Payment to PE in any other case

- In case of sportsperson
- In case of company
In case of company
In other case
2%
4%
4.5%
10%
20%
10%
20%
10%
12%
12%
15%
2%
- 37 -
6%
6.5%
10%
20%
10%
Withholding /
Collection Rate
% / Rupees
Filer
Non-filer
5%
5%
(2A)(c)
ii) Payment to PE for other services
I) Payment to PE for transport services
Payment to non-resident having no PE in

Pakistan, in respect of profit on debt [Cl.
(5A), Part II, 2nd Sch.]
(2)
(2A)(b)
Payment to non-resident other than

amount to which sub-section (1), (IA),
(IAA) or (IAAA) above applies
(2)
Payment to PE for sale of goods

- In case of company
- In other cases
Payment for advertisement services to

non-resident media person relaying from
outside Pakistan [Cl. (3) Div II, Part III,
Ist Sch.]
(1AAA)
(2A)(a)
Payments to non-resident on account of

insurance or re-insurance premium
(1AA)
Section
Every prescribed person

making payment
Every person making

payment
Every person making

payment
Every person making
payment
Every person making

payment
Every person making

payment
Every person making

payment
Every person making

payment
Every person making

payment
Responsibility for
Deduction / Deposit
Final
Adjustable
Adjustable
Adjustable No tax shall be deducted in case

where the sale of goods is made by importer
of the goods and tax u/s 148 in respect of
such goods has been paid and the goods are
sold in same condition as they were when
imported.
Adjustable
Final - Subject to proviso of clause (5A) of

Part II of 2nd Schedule
Adjustable
Final
Final
Remarks
1%
Local sales, supplies to taxpayers as per

clause (45A) of Part IV of 2nd Schedule.
1%
1%
3%
3.5%
3%
3.5%
1%
6%
6.5%
1.5%
4%
4.5%
1.5%
- 38 -
Withholding /
Collection Rate
% / Rupees
Filer
Non-filer
-Sale of cigarettes and pharmaceutical

products by distributors of such products
and by large distribution houses subject
to the fulfillment of conditions u/s
148(7). [Cl. (24A), Part II, 2nd Sch.]
-Sale of other goods (except fast moving

consumer goods sold by distributors)
[Div III, Part III, 1st Sch.]
--in case of companies
--in case of other taxpayers
-Sale of fast moving consumer goods by
distributors
--in case of companies
--in case of other taxpayers
-Sale of rice, cotton seed or edible oil

[Div III, Part III, 1st Sch.]
FINANCE ACT 2016
153
(1)(a)
Section
Every person making

payment

making payment

making payment

making payment
Responsibility for
Deduction / Deposit
Final
Final
(Adjustable for
manufacturing
company and listed
company)
Final
(Adjustable for
manufacturing
company and listed
company)
Final
(Adjustable for
manufacturing
company and listed
company)
Services
and
execution
of
contracts
not
in a financial year.
Provided that where
the total payments in
a
financial
year,
exceed Rs. 25,000 /
10,000 as stated
above, the taxpayer
will deduct tax from
the
payments
including
the
payments
made
earlier
without
Gross
amount
payable for sale of
goods shall include
the
sales
tax.
[S.153(1)]
Tax will not be
deducted
on
account
of
payments
made
for:
Sale of goods not
exceeding
Rs.
25,000 in a financial
year
Remarks
Services provided to taxpayers as per

clause (45A) of Part IV of 2nd Schedule
Execution of a contract (Residents)
[Cl. (3), Div III, Part III, 1st Sch.]
- in case of companies
- in case of other taxpayers
- in case of sportsperson
Payments made by every exporter or an
export house to a resident person or
permanent establishment in Pakistan, on
account of rendering of services of
stitching, dying etc. [Cl. (3), Division IV,
Part III, 1st Sch.]
7%
7.5%
10%
1%
1%
8%
10%
- other services:
- in case of companies
2%
1.5%
1.5%
for
10%
10%
10%
1%
1%
12%
15%
12%
15%
2%
- 39 -
Withholding /
Collection Rate
% / Rupees
Filer
Non-filer
Rendering or providing of services:

[Cl. (2), Div III, Part III, 1st Sch.]
- transportation
- electronic and print media
advertising services:
-in case of companies
FINANCE ACT 2016
(2)
(1)(c)
(1)(b)
Section
Every
exporter
export house
or
Every person making

payment
making payment

making payment
Responsibility for
Deduction / Deposit
Advertisement
services by owners
Final - (Adjustable for of newspaper and
listed companies)
magazines.
[Sec153(3)]
Rendering
or
providing
of
Final
services
Final
Minimum
Minimum
Minimum
Final
Final
Minimum
Tax deducted on
account of the
followings will not
be
final
tax:
[Sec.153(3)]
Sale of goods and
execution
of
contracts by a public
company listed on a
registered
stock
exchange
in
Pakistan.
deduction of tax
during the same
financial year [SRO
586(1)/91
dated
30.06.1991]
Remarks
Clearing of goods
Payment in full or part (including

advance) on account of rent of
immovable property (including rent of
furniture and fixture and services relating
to such property)
(3C)
155
FINANCE ACT 2016
Rs. 1,000,001 Rs. 2,000,000
Rs. 600,001 Rs. 1,000,000
Rs. 200,001 Rs. 600,000
Individuals and Association of

Persons where the gross amount of
rent is:
Up to Rs. 200,000
Indirect exporter
Commission due to an indenting

commission agent.
Sale of goods to an exporter under in
land back to back L/C.
Export of goods Export Processing
Zone
(3B)
(3A)
(3)
(2)
154(1) Realization of foreign exchange on

account of export of goods by exporter.
Section
Nil
1%
1%
1%
1%
5%
- 40 -
5% of the amount
Rs. 20,000 + 10% of the
amount exceeding Rs.
600,000
Rs. 60,000 + 15% of the
amount exceeding Rs.
1,000,000
1%
1%
1%
1%
5%
Withholding /
Collection Rate
% / Rupees
Filer
Non-filer
1%
1%
Prescribed persons as
mentioned
in
subsection (3) of section
155
Direct exporter, export

house
Export Processing Zone

Authority
Every authorized dealer

in Foreign Exchange
Every banking company
Every authorized dealer

in foreign exchange
Responsibility for
Deduction / Deposit
Adjustable
-do-
-do-
-do-
-do-
Final. Minimum tax, if the taxpayer opts not

to be subject to final tax at the time of filling
of return.
-do-
Remarks
Commission paid or discount allowed to

petrol pump operator
Withdrawal of balance under pension

fund:
156A
156B
FINANCE ACT 2016
(b) Withdrawn if in excess of 50% of

accumulated balance at or after the age
of retirement
(a) Withdrawn before the retirement age
- Payment of prize on a prize bond or

cross word puzzle.
- Payment on winning from a raffle,
lottery, prize on winning a quiz, prize
offered by companies for promotion of
sales.
Company
Over Rs. 2,000,000
156
Section
- do -
- 41 -
Average rate [Sec.

12(6)] of tax for the last
3 years or tax rate for
the year whichever is
less
15%
20%
20%
12%
20%
15%
15%
15%
Withholding /
Collection Rate
% / Rupees
Filer
Non-filer
Rs. 210,000 + 20% of
the amount exceeding
Rs. 2,000,000
Pension fund manager
Every person selling

petroleum products
Every person making

payment
Every person making
payment
Responsibility for
Deduction / Deposit
Where the prize is

not in cash, the
person while giving
the prize shall collect
tax on the fair
market value of the
prize. [Sec.156(2)]
Adjustable - Tax will not be deducted:

i) in case of disability
ii) on share of the nominated survivor of the
deceased person
iii) invested in an approved income payment
plan
iv) paid to life insurance company for
purchase of approved annuity plan
[Provisos to sec. 156B(a) and 156B(b)]
Final
Final
Final
Adjustable
Remarks
Sale of various banking instruments

against cash, receipt of cash on
cancellation of any of these instruments
and transfer of any sum against cash
through online transfer, telegraphic
transfer, mail transfer or any other mode
of electronic transfer.
Registration of a new locally
manufactured motor vehicle:
upto 850 cc
851 cc to 1000 cc
1001 cc to 1300 cc
1301 cc to 1600 cc
1601 cc to 1800 cc
1801 cc to 2000 cc
2001 cc to 2500 cc
2501 cc to 3000 cc
Above 3000 cc
231AA
FINANCE ACT 2016
231B (1)
Cash withdrawal from a bank
TRANSITIONAL ADVANCE TAX
231A
Section
(Rupees)
10,000
20,000
30,000
50,000
75,000
100,000
150,000
200,000
250,000
0.3%
0.3%
- 42 -
(Rupees)
10,000
25,000
40,000
100,000
150,000
200,000
300,000
400,000
450,000
0.6%
0.6%
Withholding /
Collection Rate
% / Rupees
Filer
Non-filer
Motor
vehicle
registration authority of
Excise and Taxation
Department
Banking company, non banking

financial
institution,
exchange
company,
authorized
dealer
of
foreign
exchange.
Banking company
Responsibility for
Deduction / Deposit
Adjustable - No advance tax shall be collected at

the time of registration of a motor vehicle after five
years from the date of first registration in case the
vehicle is acquired from the Armed Forces of
Pakistan or from a foreign diplomats or a diplomatic
mission in Pakistan or from the Federal or Provincial
Government.
Withholding tax rate of 0.6% has been reduced to

0.4% up till 31-07-2016 [S.R.O 494(I)/2016 dated
30-06-2016.
Adjustable No tax will be collected where sum

total of the transaction does not exceed Rupees
25,000 in a day.
Adjustable tax Tax will not be collected , if cash

withdrawal does not exceed Rs. 50,000 in
aggregate from all bank accounts in a single day.
However, if cash amount withdrawn exceeds Rs.
50,000 in a day, tax will be deducted on the whole
amount withdrawn. [Circular No. 9 of 2008 dated
15-08-2008].
Advance tax under this chapter shall not be

collected or deducted from the Federal
Government, Provisional Government, foreign
diplomat or a diplomatic mission in Pakistan or a
person who produces a certificate from the
Commissioner that his income during the tax year is
exempt.
Remarks
Transfer of registration or ownership of a

motor vehicle:
upto 850 cc
851 cc to 1000 cc
1001 cc to 1300 cc
1301 cc to 1600 cc
1601 cc to 1800 cc
1801 cc to 2000 cc
2001 cc to 2500 cc
2501 cc to 3000 cc
Above 3000 cc
Sale of motor vehicle:

Engine Capacity
upto 850 cc
851 cc to 1000 cc
1001 cc to 1300 cc
1301 cc to 1600 cc
1601 cc to 1800 cc
1801 cc to 2000 cc
2001 cc to 2500 cc
2501 cc to 3000 cc
Above 3000 cc
Payment on account of brokerage or
commission made to a person:
(2)
(3)
FINANCE ACT 2016
233
Leasing of motor vehicle
(1A)
Section
(Rupees)
10,000
20,000
30,000
50,000
75,000
100,000
150,000
200,000
250,000
(Rupees)
5,000
7,500
12,500
18,750
25,000
37,500
50,000
62,500
- 43 -
(Rupees)
10,000
25,000
40,000
100,000
150,000
200,000
300,000
400,000
450,000
(Rupees)
5,000
15,000
25,000
65,000
100,000
135,000
200,000
270,000
300,000
Withholding /
Collection Rate
% / Rupees
Filer
Non-filer
3%
Taxation
Federal
Government,
Provincial Government,
Manufacturer of motor
vehicle
Excise and
Department
Leasing
company,
scheduled
bank,
investment
bank,
development
finance
institution
and
modarba.
Responsibility for
Deduction / Deposit
Final
- Tax will not be collected if vehicle is

transferred after five years from the date of
registration in Pakistan.
- Rate of tax to be collected shall be reduced
by 10% each year from the date of first
registration in Pakistan.
- Tax will not be deducted if a person
produces evidence that tax while transfer of
registration or ownership in case of locally
manufactured or tax u/s 148 in the case of
imported vehicle was collected from the same
person in respect of the same vehicle.
Adjustable
Remarks
(i) Advertising agents

(ii) Life insurance agents where
commission received is less than Rs.
0.5 million per annum
(iii) Commission agents (other than (i)
and (ii) above and export indenting
commission agents)
(2) In the case of passenger transport

vehicles plying for hire with registered
seating capacity of:
a) Four or more persons but less than
ten persons
b) Ten or more persons but less than
twenty persons
c) Twenty persons or more
(1) In the case of goods transport

vehicles
Advance tax will be collected at the time

of collecting motor vehicle tax:
FINANCE ACT 2016
234
233A(I) - Purchase of shares as per clause (a)

- Sale of shares as per clause (b)
233(AA) - Profit or mark-up or interest earned by
member, margin financer, or security
lender
Section
Rs. 4 per
kg. of the
laden
weight
0.02%
0.02%
10%
15%
500
300
- 44 -
200
100
Rupees
per seat per annum
50
100
Rs. 2.50
per kg. of
the laden
weight
0.02%
0.02%
10%
12%
Withholding /
Collection Rate
% / Rupees
Filer
Non-filer
10%
15%
8%
16%
a
Motor
vehicle
tax
Collecting Authority
Stock Exchange
Stock Exchange
NCCPL
Local Government,
Company or an AOP
(termed as principal)
Responsibility for
Deduction / Deposit
No advance tax after 10 years from the date

of first registration in Pakistan on vehicle with
registered laden weight less than 8120 Kgs. [
S. 234(4)]. In case of laden weight 8120 Kgs.
or more, Rupees 1,200 per annum will be
collected.[Cl. (1A), Div. III, Pt. IV, 1ST Sch.]
Advance tax on passenger transport vehicles
with registered seating capacity of ten or more
persons, shall not be collected after a period
of 10 years from 1st day of July of the year of
make of the vehicle. [S. 234(3)].
In case of motor cars used for more than 10
years in Pakistan, no advance tax shall be
collected after a period of 10 years. [S.
234(2A)]
Adjustable
Adjustable
Adjustable
Adjustable
Remarks
(4) Where the motor vehicle tax is

collected in lump sum:
a) up to 1000 cc
b) 1001 - 1199 cc
c) 1200 - 1299 cc
d) 1300 - 1499 cc
e) 1500 - 1599 cc
f) 1600 1999 cc
g) 2000 cc and above
Advance tax shall be collected on the
amount of gas bill of a Compressed
Natural Gas (CNG) station.
Rate of collection of advance tax on
electricity bill of commercial or industrial
consumers, where the amount of bill:
(a) does not exceed Rs. 400
(b) Rs. 401 600
(c) Rs. 601 800
(d) Rs. 801 - 1,000
(e) Rs. 1,001 - 1,500
(f) Rs. 1,501 - 3,000
(3) Other private motor cars with engine

capacity of:
a) up to 1000 cc
b) 1001 - 1199 cc
c) 1200 - 1299 cc
d) 1300 - 1499 cc
e) 1500 - 1599 cc
f) 1600 1999 cc
g) 2000 cc and above
FINANCE ACT 2016
235
234A
Section
(Rupees)
80
100
160
300
350
(Rupees)
10,000
18,000
20,000
30,000
45,000
60,000
120,000
4%
800
1,500
1,750
2,500
3,750
4,500
10,000
- 45 -
80
100
160
300
350
(Rupees)
(Rupees)
10,000
36,000
40,000
60,000
90,000
120,000
240,000
4%
1,200
4,000
5,000
7,500
12,000
15,000
30,000
Withholding /
Collection Rate
% / Rupees
Filer
Non-filer
(Rupees) (Rupees)
The person preparing

electricity bills

gas consumption bill
Responsibility for
Deduction / Deposit
No advance tax shall be collected from a

person who produces a certificate from
Commissioner that his income during the tax
No tax shall be collected from the taxpayers

who are registered as exporter or
manufacturers of carpets, leather and articles
thereof, surgical goods, sports goods and
textile and articles thereof. [Cl (66) Part IV,
2nd Sch].
Final
Remarks
Advance tax shall be

account of the following:
236
FINANCE ACT 2016
a) in case of telephone subscriber (other

than mobile phone subscriber) where the
amount of monthly bill exceeds Rs. 1,000
on
Rate of advance tax to be collected from

steel melters, steel re-rollers, composite
steel units, registered for the purpose of
chapter XI of Sales Tax Special
Procedure Rules, 2007 for electricity
consumed for the production of steel
billets, ingots and mildsteel (MS
Products) excluding stainless steel
235B
collected
Rate of collection of advance tax on the

amount of electricity bill of domestic
consumer where the amount of bill is:
(i) Rupees 75,000 or more
(ii) Less than Rupees 75,000
(g) Rs. 3,001 - 4,500

(h) Rs. 4,501 - 6,000
(i) Rs. 6,001 - 10,000
(j) Rs. 10,001 - 15,000
(k) Rs. 15,001 - 20,000
(l) Exceeding Rs. 20,000:
- Commercial consumers
- Industrial consumers
235A
Section
7.5%
0%
12%
5%
- 46 -
10% of the exceeding

amount of bill.
Rs. 1 per unit of

electricity consumed for
such production
7.5%
0%
12%
5%
Withholding /
Collection Rate
% / Rupees
Filer
Non-filer
450
450
500
500
650
650
1,000
1,000
1,500
1,500

telephone bills / issuing
prepaid card
-do-

electricity bill
Responsibility for
Deduction / Deposit
Adjustable
Non-adjustable Tax collected shall be

deemed to be deducted under sub-section (1)
of section 153 on the payment for local
purchase of scrap.
- Credit of tax shall not be allowed to any
person
Adjustable
- minimum tax up to monthly bill of Rs.

30,000
- adjustable if monthly bill exceeds Rupees
30,000
As per section 235(4), tax collected will be:

- In case of company, adjustable.
- In case of other than Company:
year is exempt from tax. [S. 235(3)]
Remarks
Collection of advance tax on purchase of

domestic air ticket.
Advance tax on sale or transfer of

immovable property
Advance tax on functions and gatherings
In case where food, service or any other

facility is provided by any other person
Advance tax on cable operators and

other electronic media shall be as
follows:
236B
236C
236D(1)
(2)
236F(1)
FINANCE ACT 2016
Collection of advance tax at the time of

sale by public auction or auction by a
tender
b) in case of subscriber of internet,

mobile telephone and prepaid internet or
telephone card
236A
Section
5%
5%
1%
5%
5%
2%
- 47 -
5% of the gross amount

of air ticket.
10% of the gross sale

price of any property or
goods sold by auction.
Withholding /
Collection Rate
% / Rupees
Filer
Non-filer
14% of the amount of bill
or sales price of internet
prepaid card or prepaid
telephone card or sale of
units
through
any
electronic medium or
whatever form.
Pakistan Electronic
Media Regulatory
Authority (PEMRA)
-do-
Prescribed person as
mentioned in clause (b)
of sub-section (4) of
section 236D
The person responsible

for
registering
or
attesting the transfer
The airline issuing air

ticket
Any person making sale

by public auction or
auction by a tender
Responsibility for
Deduction / Deposit
Adjustable
Adjustable
Adjustable
Adjustable No tax shall be collected if

immovable property is held for a period
exceeding five years. [Sec. 236C(3)]
Adjustable - No tax shall be collected from

routes of Balochistan coastal belt, Azad
Jammu and Kashmir, Federally Administrated
Tribal Areas, Gilgit Ba ltistan and Chitral
Adjustable Tax collected on lease of the

right to collect tolls shall be final. [236A(3)]
Remarks
7,500
10,000
25,000
5,000
5,000
30,000
40,000
50,000
75,000
87,500
175,000
262,500
437,500
700,000
875,500
20%
50%
(2) Advance tax in case of IPTV, FM

Radio, MMDS, Mobile TV, Mobile Audio,
Satellite TV Channel and Landing Rights
(3) Advance tax from TV channel on

which foreign TV drama serial or a play
in any language, other than English, is
screened or viewed.
- 48 -
50%
20%
10,000
15,000
30,000
12,000
40,000
35,000
45,000
75,000
100,000
150,000
200,000
300,000
500,000
800,000
900,000
Withholding /
Collection Rate
% / Rupees
Filer
Non-filer
Tax on
Tax on
License
Renewal
fee
(Rupees)
(Rupees)
H
H-l
H-II
R
B
B-l
B-2
B-3
B-4
B-5
B-6
B-7
B-8
B-9
B-10
License Category
FINANCE ACT 2016
Section
PEMRA
PEMRA
Responsibility for
Deduction / Deposit

Remarks
Advance tax on sale to retailer
Collection of advance tax by educational

institutions
236H(1)
236I(1)
FINANCE ACT 2016
Advance tax on sales to distributors,

dealers and wholesalers:
- Fertilizers
- Other than fertilizers
236G(1)
Section
5%
0.5%
0.7%
0.1%
5%
0.5%
1.4%
0.2%
- 49 -
Withholding /
Collection Rate
% / Rupees
Filer
Non-filer

fee voucher or challan
Manufacturer,
distributors, dealer,
wholesaler or
commercial importer
Manufacturer,
commercial importer
Responsibility for
Deduction / Deposit
-Tax shall also not be collected on the amount

which is refundable.
the fee is remitted directly from abroad

through normal banking channel to the bank
account of the educational institution
a certificate is furnished that he has no

Pakistan source income; and
copy of passport is provided as an evidence

to the educational institution that during
previous tax year, his stay in Pakistan was
less than one hundred eighty-three days;
Adjustable Tax shall not be deducted from

a person where annual fee does not exceed
two hundred thousand rupees.
-No tax shall be collected from a non-resident
where;
Adjustable - Tax credit for the tax deducted

under sections 236G(1) and 236H(1) shall be
allowed in computing the tax due by the
distributor, dealer, wholesaler / retailer on the
taxable income for the tax year in which the
tax was collected.
Adjustable - Tax shall be deducted in respect

of following sectors: Electronic, sugar,
cement, iron and steel products, fertilizer,
motorcycles, pesticides, cigarettes, glass,
textile, beverages and paint of foam sector.
Remarks
Advance tax on bonus shares issued by

companies quoted on stock exchange
- First / Executive class

-Others excluding Economy
- Economy
Advance tax on purchase of international

air tickets:
FINANCE ACT 2016
236M
236L
236K(1) Advance tax on purchase or transfer of

immovable property:
- where value of immovable property is
upto Rupees 3 million
- where value of immovable property is
more than 3 million
Group or Class A
Group or Class B
Group or Class C
Any other category
Group
236J(1) Advance tax on dealers, commission

agents and arhatis etc.
Section
5%
5%
- 50 -
16,000
12,000
-
Rupees
per person
4%
2%
Rupees
per
person
16,000
12,000
-
0%
10,000
7,500
5,000
5,000
0%
10,000
7,500
5,000
5,000
Tax (per annum)

(Rupees)
(Rupees)
Withholding /
Collection Rate
% / Rupees
Filer
Non-filer
or
Company issuing bonus

shares
Airline issuing air ticket
Person registering
attesting transfer
Market committee
Responsibility for
Deduction / Deposit
Final
Adjustable
Adjustable - Tax shall also not be collected

from a scheme introduced by the Federal
Government, or Provincial Government or an
Authority under a Federal or Provincial law for
expatriate Pakistanis provided that the mode
of payment by the expatriate Pakistanis in the
said scheme or schemes shall be in the foreign
exchange remitted from outside Pakistan
through normal banking channels
Adjustable
Remarks
Advance tax on banking transactions

otherwise than through cash
Payments to residents for use of

machinery and equipments
Advance tax on educaion

expenses remitted abroad
236P
236Q
236R
FINANCE ACT 2016
Advance tax on bonus shares issued by

companies not quoted on stock exchange
236N
related
Section
5%
10%
5%
10%
0.6%
- 51 -
Withholding /
Collection Rate
% / Rupees
Filer
Non-filer
5%
5%
Banks,
financial
institutions,
foreign
exchange companies or
any
other
person
responsible
for
remitting
foreign
currency abroad

making payment
Every banking company
Company issuing bonus

shares
Responsibility for
Deduction / Deposit
Adjustable against the income of the person

remitting payment of education related
expenses.
Final Tax shall not be collected in case of

agricultural machinery and machinery leased
by a leasing company, an investment bank or
a modaraba or a scheduled bank or a
development finance institution in respect of
assets owned by the leasing company or an
investment bank or a modaraba or a
scheduled bank or a development finance
institution.
Adjustable No tax shall be collected, if sum

of all transactions mentioned in this section
does not exceed Rupees 50,000, in aggregate
from all bank accounts in a day. However, if
amount exceeds Rs. 50,000 in a day, tax will
be collected on the whole amount.
-Tax shall not be collected in case of Pakistan
Realtime Interbank Settlement Mechanism
(PRISM) transactions or payments made for
Federal, Provincial or local Government taxes.
Withholding tax rate of 0.6% has been
reduced to 0.4% up till 31-07-2016 [S.R.O
494(I)/2016 dated 30-06-2016.
Final
Remarks
Advance tax on insurance premium:

- General insurance premium
- Life insurance premium exceeding
Rs. 0.2 million per annum
- Others
Advance tax on extraction of minerals
236U
236V
FINANCE ACT 2016
Dividend in specie
236S
Section
5%
4%
1%
As stated above in
Section 150
- 52 -
Withholding /
Collection Rate
% / Rupees
Filer
Non-filer
insurance
Provincial authority
Every
company
Every person making

payment of dividend
Responsibility for
Deduction / Deposit
Adjustable
Adjustable
Final
Remarks

SALES TAX
Cottage Industry
Section 2(5AB)
Turnover threshold for qualifying as cottage industry, which is exempt from tax, has been enhanced to
Rupees 10 million from Rupees 5 million.
Due date
Section 2(9)
Concept of specifying different dates for furnishing of different parts or annexures of the return has been
introduced.
Input tax
Section 2(14)
The definition of input tax has been amended to exclude Provincial sales tax levied on services rendered
or provided to the person. This amendment will lead to dual indirect taxation in the country as indirect
taxes paid to Provinces shall not reduce the incidence of sales tax paid to Federation.
Time and manner of payment
Section 6(2)
Due date for payment of sales tax shall now be notified. Previously sales tax was to be paid at the time of
filing of return.
Determination of tax liability
Section 7(2)(i) and Section 8(1)(l)
Now, input tax adjustment will not be available, if the supplier has not declared such supply in his return
or has not paid tax due as per his return.
In this connection following new sub-rules have been inserted in the Sales Tax Rules, 2006 vide SRO
493(I)/2016 dated 01 July 2016:
(2)
The proviso to clause (i) of sub-section (2) of section 7 and clause (l) of sub-section (1) of
section 8 of the Sales Tax Act, 1990 and sub -section (2A) of section 6 of the Federal Excise Act, 2005
shall be applicable for sales tax and federal excise returns for the tax periods from July, 2016 and
onwards.
(3)
A registered person shall enter data of supplies in Annexure-C and data of Debit or Credit Notes
in Annexure-I and submit the said data by the 10 th day of the month following the end of the tax period.
As soon as, the registered person (supplier) submits partial or complete data of Annexure-C and
Annexure-I, the said data shall be immediately available to the respective registered person (buyer) in
his "Purchase Data" and "Debit or Credit Note Data". The registered person (buyer) shall load the data in
his Annexure-A from "Purchase Data" and in his Annexure-I from "Debit or Credit Note Data" to prepare
his return.
Provided that the data relating to purchases made from un-registered person or from such
registered persons as allowed by the Board in this respect, shall be manually entered by the registered
person in Annexure-A.
(4)
In case registered person's all suppliers have declared their supplies made to him and have filed
their monthly sales tax and federal excise returns for the same tax period, he shall be informed by the
automated system of the Board that his all suppliers have filed their monthly sales tax and federal excise
returns.
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SALES TAX
(5)
In case,--(I) supplier of the registered person has not filed his monthly sales tax and federal excise return
till the filing of his own return, he shall be communicated regarding his supplier who has not so
far declared supplies made to him in sales tax and federal excise return. He shall, however, be
allowed provisional adjustment of input tax against-said invoices but if the supplier fails to file
his return by the 10th day of the next month, registered person's said inadmissible input tax credit
shall be adjusted or recovered in terms of clause (l) of sub-section (1) of section 8 read with
proviso to clause (i) of sub-section (2) of section 7 of the Sales Tax Act, 1990 and sub -section
(2A) of section 6 of the Federal Excise Act, 2005. He shall, therefore, be advised by the
automated system of the Board to contact the supplier and persuade him to declare said supplies
made to him and file return so that registered person could get input tax credit relating to said
supplies. In case registered person's supplier declares said supplies and files monthly sales tax
and federal excise return for the same tax period, he shall be informed that the objection raised
by the automated
system of the Board on the invoices of the said supplier stands
settled;
(ii) any buyer of the registered person has not declared sales tax withheld amount in the monthly
sales tax and federal excise return till the filing of return by the supplier, the supplier shall be
allowed provisional reduction in his output tax against the said amount but if the buyer fails to
declare the said withheld amount of sales tax by the 10 th day of the next month in the monthly
sales tax and federal excise return, registered person's said reduction in output tax shall be
adjusted or recovered. The registered person shall, therefore, be advised by the automated
system of the Board to contact the said buyer and persuade him to declare the said withheld
amount of sales tax in the monthly sales tax and federal excise return so that the registered
person could get benefit of reduction of output tax. In case the registered person's buyer has
declared withheld amount of sales tax for the same tax period in his sales tax and federal excise
return, the objection raised, in this regard, shall stand settled and the registered person shall be
informed accordingly;
(iii) any buyer of the registered person has not accepted a Credit Note issued by him, the
supplier shall be allowed provisional reduction in his output tax against the said Credit Note but if
the buyer fails to so accept such Credit Note in the sales tax and federal excise return by the 10th
day of the next month, the registered person's said reduction in output tax shall be adjusted or
recovered. The registered person shall, therefore, be advised by the automated system of the
Board to contact the said buyer and persuade him to accept such Credit Note in the return so
that the registered person could get benefit of reduction of output tax. In case registered
person's buyer has accepted such Credit Note in his monthly sales tax and federal excise return
for the same tax period, the objection raised, in this regard, shall stand settled and the
registered person shall be informed accordingly; and
(iv) action required at para (i), (ii) and (iii) is not done, the inadmissible input tax credit in terms
of clause (l) of sub-section (1) of section 8 read with proviso to clause (i) of sub-section (2) of
section 7 of the Sales Tax Act, 1990 and sub -section (2A) of section 6 of the Federal Excise Act,
2005 and reduction in output tax in respect of withholding of sales tax or Credit Note shall be
adjusted or recovered through column 7(a) in the next return of the registered person.
(6)
In case,--(i) registered person's supplier has declared his supplies made to him in his same monthly sales
tax and federal excise return, the input tax credit relating to the said supplies shall be allowed
to the registered person;
(ii) registered person's buyer has declared sales tax withheld amount in his same monthly sales
tax and federal excise return, the reduction in output tax shall be allowed to the registered
person;
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SALES TAX
(iii) registered person's buyer has accepted the Credit Note issued by him, the reduction in
output tax shall be allowed to the registered person; and
(iv) the action required at para (i), (ii) and (iii) is done, the input tax credit and reduction of
output tax in respect of withholding of sales tax or Credit Note shall be allowed to the registered
person through column 7(b) in his next return.
(7)
The balance of earlier disallowed input tax credit in terms of clause (l) of sub-section (1) of
section 8 read with proviso to clause (i) of sub-section (2) of section 7 of the Sales Tax Act, 1990 and
sub-section (2A) of section 6 of the Federal Excise Act, 2005 and disallowed reduction of output tax in
respect of withholding of sales tax or Credit Notes shall appear in column 7(c) of the monthly sales tax
and federal excise return of the registered person with the advice to contact and persuade the respective
supplier or buyer to declare his supplies made to the registered person and file monthly sales tax and
federal excise return or to accept relevant Credit Note or to declare sales tax withheld amount as the
case may be.
Assessment of tax and recovery of tax not levied or shortlevied or erroneously refunded
Section 11(4A)
A new sub-section has been introduced to enable recovery proceedings for sales tax not/short withheld
or failure to deposit such tax by withholding agents. An officer of Inland Revenue shall after a notice to
such person to show cause, determine the amount in default.
Exemption
Section 13(2)(a)
In line with the amendments in Income Tax Ordinance, 2001, Federal Government has been empowered
to allow exemptions from sales tax in relation to the international financial institutions and foreign
government owned financial institutions.
Return
Section 26(2)
Requirement for separate return in case of change in rate of tax during a tax period has been withdrawn.
Directorate General
Organization
of
Input
Output
Co-efficient
Section 30DDD
A new section has been introduced to prescribe that the Directorate General of Input Output Co-efficient
Organization (IOCO)-Inland Revenue shall consist of a Director General and as many Directors, Additional
Directors, Deputy Directors, Assistant Directors and such other officers as FBR may, by notification in the
official Gazette, appoint.
Offences and penalties
Section 33, Sr. No. 19
Scope of penalty provisions has been enhanced to include contravention of any rules made under the
sales tax law.
Section 47A
Previously, an alternative dispute resolution committee could have consisted of an officer of Inland
Revenue not below the rank of Additional Commissioner. Now, an officer of Inland Revenue not below
the rank of Commissioner can be a part of an alternative dispute resolution committee, appointed by
FBR.
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SALES TAX
Now, FBR may, on the recommendation of the alternative dispute resolution committee, pass such order,
as it may deem appropriate within 90 days of the receipt of recommendations of the alternative dispute
resolution committee. Previously, this time limit was 45 days.
Further, a new proviso has been introduced to provide that if such order is not passed by FBR within the
aforesaid period, the recommendation of the committee shall be treated to be an order passed by FBR.
Sale of taxable activity or transfer of ownership
Section 49
Under section 49 of the Sales Tax Act, 1990, sale of taxable activity or part thereof or transfer of
ownership of such activity as an ongoing concern to another registered person is a non-taxable event. In
order to document the aforesaid transaction, now, in the case of such sale or transfer, a zero -rated
invoice shall be issued by the transferor to the transferee.
Disclosure of information by a public servant
Section 56B
In line with the amendments in the Income Tax Ordinance, 2001, information received or supplied in
pursuance of bilateral or multilateral agreements with government of foreign countries for exchange of
information shall be confidential notwithstanding anything contained in the Freedom of Information
Ordinance, 2002.
THE THIRD SCHEDULE
Supply of mineral/bottled water by manufacturer shall be taxed at retail price, under the Third Schedule
to the Sales Tax Act, 1990.
THE FIFTH SCHEDULE
(ZERO RATING)
Conditional zero rating on import and supply of following items has been withdrawn, however, these
items will continue to fall under the Sixth Schedule (Exemptions):
Description
PCT Heading
Colors in sets
Writing drawing and marking inks
Erasers
Exercise books
Pencil sharpeners
Geometry boxes
Pens and ball pens
Pencils including color pencils
Milk
Fat filled milk
3213.1000
3215.9010 and 3215.9090
4016.9210 and 4016.9290
4820.2000
8214.1000
9017.2000
96.08
96.09
04.01
1901.9090
Zero rating on import and supply of markers and porous tipped pens (PCT Heading 96.08) has been
withdrawn.
THE SIXTH SCHEDULE
(EXEMPTIONS)
Conditional exemption from sales tax allowed under SRO No 115(I)/2008 dated 06 February 2008 on
import and supply of materials and equipment for construction and operation of Gwadar Port and
development of Free Zone has been restricted to certain specified entities and their contractors and subcontractors subject to specified conditions. The aforesaid notification has been rescinded with effect from
30 June 2016.
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SALES TAX
Supplies made within Gwadar Free Zone by businesses to be established in said Zone shall be exempt for
a period of 23 years, subject to the condition that the sales and supplies outside the Gwadar Free Zone
and into the territory of Pakistan shall be subjected to sales tax.
Import and supply, up to the year 2020, of ships of gross tonnage exceeding 15 LDT have now also been
exempted from sales tax, subject to certain conditions. Previously, import and supply of ships of gross
tonnage less than 15 LDT was exempted.
Import or supply of raw materials for the basic manufacture of pharmaceutical active ingredients and for
manufacture of pharmaceutical products, provided that in case of import, only such raw materials shall be
entitled to exemption which are liable to customs duty not exceeding 11% (previously, it was 10%)
advalorem, either under the First Schedule or Fifth Schedule to the Customs Act, 1969 (IV of 1969) or
under a notification issued under section 19 thereof.
Import or supply of following items with dedicated use of renewable source of energy, subject to
certification by the Alternative Energy Development Board (AEDB), Islamabad shall also be exempt:
Description
Heading Nos. of the First

Schedule to the Customs Act,
1969 (IV of 1969)
Tubular day lighting device

Energy saver lamps and tube lights of varying voltages (operating
on AC or DC)
Invertors (off-grid/on grid/ hybrid) with provision for direct
connection/ input from renewable energy source and with
Maximum Power Point Tracking (MPPT )
9405.5010
8539.3110, 8539.3120
8504.4090
Import or supply of aircraft, whether imported or acquired on wet or dry lease is exempt from sales tax.
Now, by way of insertion of a proviso, it has been specified that in case of import or acquisition on wet or
dry lease by Pakistan International Airlines Corporation, this exemption shall be available with effect from
19th March 2015.
Import or supply of following items shall be exempted:
Description
PCT Heading
Premixes for growth stunting
Laptop computers, notebooks whether or not

incorporating multimedia kit
Personal computers
Import of dump trucks for Thar Coal field has been
conditionally exempted
Respective heading and subject to conditions

imposed for importation under the Customs
Act, 1969
8471.3010
8471.3020
EIGHTH SCHEDULE
TABLE - 1
Increase in sales tax rate on ingredients of poultry feed and cattle feed has been made from 5% to 10%
and following PCT headings shall now be included:
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SALES TAX
PCT Heading
2301.1000 (Meat and Bone Meal)
2833.2940 (Zinc Sulphate)
2923.9010 (Betaine)
Following items shall now be removed from the Eighth Schedule:
PCT Heading
2301.2010 (Shrimp meal)
2833.2600 (Zinc Sulphate)
2923.9000 (Betafin)
Reduction in rate allowable to specific items used in production of biodiesel as certified by Alternate
Energy Development Board has been withdrawn. However, reduction in rate to related plant, machinery
and equipment shall continue.
Sales tax rate on agricultural tractors (PCT Heading 8701.9020) has been reduced to 5%. Previously, it
was 10%. This amendment is effective from 25 June 2016.
Laser Land Leveler (PCT Heading 8432.8090) shall also now be subject to sales tax at the rate of 7%.
Certain pesticides and their active ingredients registered by the Department of Plant Protection under the
Agricultural Pesticides Ordinance, 1971, stabilizers, emulsifiers and solvents, previously covered under the
Eighth Schedule have now been exempted from sales tax under the Sixth Schedule. This amendment is
effective from 25 June 2016.
Supply of urea, whether or not in aqueous solution (PCT heading 3102.1000) shall now be taxed @ 5%,
previously, it was included in Fertilizers under the Third Schedule. This amendment is effective from 25
June 2016.
Following items shall now be charged to sales tax at reduced rate of 5% subject to the condition
specified thereagainst:
Description
PCT Headings
Rate of
Sales Tax
Condition
8517.6950
5%
Subject to type
approval by
PEMRA. This
concession shall
be available upto
30th June, 2017.
1. Set top boxes for gaining access to internet

2. TV broadcast transmitter
3. Reception apparatus for receiving satellite
signals of a kind used with TV (satellite dish
receivers)
4. Other set top boxes
8525.5020
8528.7110 and
8528.7220
8528.7190 and
8528.7290
WHITE CRYSTALLINE SUGAR

The ad valorem federal excise duty on white crystalline sugar has been withdrawn and replaced by the
sales tax regime at a reduced rate of 8%. This amendment is effective from 25 June 2016.
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SALES TAX
Vide SRO 492(I)/2016 dated 30 June 2016 (effective from 01 July 2016), FBR has fixed the following
minimum values of white crystalline sugar falling under heading Nos. 1701.9910 and 1701.9920, of the
First Schedule to the Customs Act, 1969, namely:
S.
No.
Description
Value
1.
Domestically produced white crystalline sugar
2.
Imported white crystalline sugar
Rs. 56 per kg
US$ 725 per MT
Previously, through SRO 563(I )/2006 dated 05 June 2006, FBR fixed the value of white crystalline sugar
for the purpose of sale tax assessment at import stage at the rate of US$ 440 per metric ton irrespective
of the value at which the import is made. SRO 563(I)/2006 has now been rescinded.
TABLE - 2
Import of grain holding silos shall now be subjected to sales tax @ 10%.
Import of following items shall be subjected to sales tax @ 5%:
Description
1. Milk chillers.
2. Tubular heat exchanger (for
pasteurization).
3. Milk processing plant, milk spray drying
plant, Milk UHT plant.
4. Milk filters
5. Any other machinery and equipment
for manufacturing of dairy products.
PCT Heading
Conditions
8418.6910 and
8418.6990
8419.5000
8419.3900 and
8419.8100
8421.2900
Chapter 84 and 85
If imported by registered
manufacturer
who
is
member of Pakistan Dairy
Association.
NINTH SCHEDULE
Sales tax rates under the Ninth Schedule on import or local supply of cellular mobile phones or satellite
phones and/or registration of International Mobile Equipment Identity (IMEI) number by Cellular Mobile
Operators (CMOs) have been increased as follows:
Medium priced cellular mobile phones or satellite phones from Rupees 500 to Rupees 1,000
Smart cellular mobile phones or satellite phones from Rupees 1,000 to Rupees 1,500.
This amendment is effective from 25 June 2016.
SRO 491(I)/2016 DATED 30 JUNE 2016 (EFFECTIVE FROM 01 JULY 2016)
Vide SRO 491(I)/2016 following significant changes have been made in SRO 1125(I)/2011 dated 31
December 2011:
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Table II of SRO 1125(I)/2011 dated 31 December 2011 has been substituted as under:
S. No.
(1)
Description of goods and point of taxation

(2)
1.
Goods useable as industrial inputs, specified in

Table I, including fabric
PCT Heading No.

(3)
As specified in
column (3) of Table I
(i) Import for in-house consumption by

registered manufacturers of the five sectors
mentioned in condition (i)
0%
(ii) Commercial imports
2.
0%, Plus 0% value

addition tax
(iii) Supplies to registered or unregistered

persons of the said five sectors, excluding
supplies of finished fabric
0%
(iv) Supplies to persons outside the said five

sectors
17%
(v) Import by, or supplied to, registered

manufacturers, whether or not of the said five
sectors, for the manufacture of goods specified
in Table -I or Table -II
0%
(vi) Supplies
manufacturers
condition (i)
of
finished
fabrics
to
of five sectors specified in
0%
(vii) Supplies of finished fabric to and by

retailers; supplies of finished fabric to end
consumers; other supplies of finished fabric
5%
Processed goods, including fabrics
Respective Headings
Processing of goods owned by other persons, by

registered manufacturers of five sectors mentioned
in condition (i)
3.
Locally manufactured finished articles of

(a)textiles and textile made-ups
(b)leather and artificial leather
0% of the processing
charges
Respective Headings
Supplies to any person, including retail sales

4.
Rate of Sales Tax

(4)
5%
Imported finished goods of five sectors

mentioned in condition (i), ready for use by
the general public
(i)
Import
Respective Headings
17%, plus 2% value

addition tax
(ii) Supply thereof
17%
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Amendments have also been made in the Conditions contained in SRO 1125(I)/2011. A registered person
who has consumed inputs acquired on payment of sales tax, shall be entitled to input tax adjustment,
subject to the relevant provisions of the Sales Tax Act, 1990 and Rules made thereunder.
No input tax credit or refund shall be admissible on the packing material of all sorts.
Post-refund audit and scrutiny shall be conducted and finalized in the manner as provided in the Sales
Tax Rules, 2006 .
Supply of furnace oil, diesel oil and coal to the registered manufacturers of the five sectors specified in
condition (i) of SRO 1125(I)/2011, shall be charged at the rate of zero percent subject to the issuance of
a general order by FBR.
SRO 488(I)/2016 DATED 30 JUNE 2016 (EFFECTIVE FROM 30 JUNE 2016)
Retailers specified in Rule 4, Chapter II Special Procedure for Payment of Sales Tax by Re tailers of the
Sales Tax Special Procedure Rules, 2007 such as retailers operating as a unit of a national or international
chain of stores, retailers operating in air conditioned shopping mall, plaza, retailers having credit or debit
card machines, retailers with high electricity bills, wholesaler-cum-retailer, engaged in bulk import and
supply of consumer goods etc. shall, in lieu of the net tax payable at the applicable rate, have an option
to pay sales tax under the turnover regime at the rate of two percent of their total turnover, including
turnover relating to exempt supplies, without adjustment of any input tax whatsoever.
Provided also that the aforesaid retailers shall furnish an option to the chief commissioner of the regional
tax office or the large taxpayers Unit having jurisdiction by the fifteenth day of July 2016 opting to pay
sales tax on the basis of turnover and such an option shall remain enforce for the whole financial year.
Through another amendment vide SRO 488(I)/2016, Special Procedure for Payment of Sales Tax by the
Marble Industry has been specified. Marble and granite manufacturing and polishing units operating on
electric power and having valid registration with All Pakistan Marble Industries Association (APMIA) have
been subjected to sales tax on the basis of electricity units consumed @ one rupee and twenty five paisa
per unit of electricity consumed as a final discharge of their net sales tax liability to the extent of marble
and granite manufacturing, grinding and polishing process and the sales tax will be recovered by
respective electricity distribution company. However, in case the respective electricity distribution
company does not recover the sales tax through monthly bill, the respective unit will be required to pay
sales tax on the basis of this rate through its monthly sales tax return. If a marble and granite
manufacturer exports more than 50% of its supplies, the aforesaid sales tax amount shall be excluded
from its electricity bill, subject to permission of the Commissioner concerned. No input tax adjustment
shall be allowed to the marble and granite manufacturer paying sales tax under these rules.
SRO 487(I)/2016 DATED 30 JUNE 2016 (EFFECTIVE FROM 30 JUNE 2016)
Vide SRO 487(I)/2016 dated 30 June 2016, amendments have been made in SRO 648(I)/2013 dated 09
July 2013 relating to exemption from further tax. Through this amendment, second hand worn clothing
and other worn articles falling under PCT heading 6309.000 have been exempted from further tax of 2%,
otherwise leviable under section 3(1A) of the Sales Tax Act, 1990.
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FEDERAL EXCISE DUTY

Due date
Section 2(8a)
Concept of specifying different dates for furnishing of different parts or annexures of the return has been
introduced.
Filing of return and payment of duty
Section 4(2)
Due date for payment of federal excise duty shall now be notified. Previously duty was to be paid at the
time of filing of return.
Requirement for separate return in case of change in rate of duty during a month has been withdrawn.
Adjustment of duties of excise
Section 6(2A)
Adjustment of duty of excise shall now be admissible only if the supplier of input goods and services has
declared such supply in his return and he has paid amount of tax due as indicated in his return. This
condition will be effective from the tax periods from July 2016 and onwards. Please refer to the text of
SRO 493(I)/2016 dated 01 July 2016, reproduced in previous Chapter.
Exemption
Section 16(2)
Federal Government has been empowered to allow exemptions on excisable goods or services in relation
to the international financial institutions or foreign government owned financial institutions.
Offences, penalties, fines and allied matters
Section 19(13)
A new sub-section has been introduced in this section to prescribe that any person who contravenes any
provision of Federal Excise Act, 2005 or rules made thereunder for which no penalty has specifically been
provided in this section shall be liable to pay a penalty of Rupees 5,000 or 3% of the amount of duty
involved, whichever is higher.
Section 38
Previously, an alternative dispute resolution committee could have consisted of an officer of Inland
Revenue not below the rank of Additional Commissioner. Now, an officer of Inland Revenue not below
the rank of Commissioner can be a part of an alternative dispute resolution committee, appointed by
FBR.
Now, FBR may, on the recommendation of the alternative dispute resolution committee, pass such order,
asit may deem appropriate within 90 days of the receipt of recommendations of the alternative dispute
resolution committee. Previously, this time limit was 45 days.
Further, a new proviso has been introduced to provide that if such order is not passed by FBR within the
aforesaid period, the recommendation of the committee shall be treated to be an order passed by FBR.
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FEDERAL EXCISE DUTY

Disclosure of information by a public servant
Section 47B
In line with the amendments in Income Tax Ordinance, 2001, disclosure of information received or
supplied in pursuance of bilateral or multilateral agreements with foreign governments for exchange of
information shall be confidential notwithstanding anything contained in the Freedom of Information
Ordinance, 2002.
FIRST SCHEDULE
TABLE I (EXCISABLE GOODS)
AERATED WATERS / BEVERAGES
The rate of duty has been enhanced from 10.5% to 11.5% of retail price with effect from 25 June 2016.
LOCALLY PRODUCED CIGARETTES
Description of and duty on the locally produced cigarettes (PCT heading 24.02) has been modified /
enhanced as follows:
Sr.
No.
Description of goods
9a.
For the period from 01-07-2016 to 30-11-2016, locally

produced cigarettes if their on-pack printed retail price
exceeds four thousand rupees per thousand cigarettes
For the period from 01-12-2016 onwards, locally
exceeds four thousand four hundred rupees per
thousand cigarettes
For the period from 01-07-2016 to 30-11-2016, locally
does not exceed four thousand rupees per thousand
cigarettes
For the period from 01-12-2016 onwards, locally
does not exceed four thousand four hundred rupees
per thousand cigarettes
9b
10a.
10b.
Heading
/ subheading
No.
Rate of duty
24.02
Rupees three thousand four

hundred and thirty-six per
thousand cigarettes
Rupees three thousand
seven hundred and five per
thousand cigarettes
24.02
24.02
Rupees one thousand five

hundred and thirty-four per
thousand cigarettes
Rupees one thousand six
hundred and forty-nine per
thousand cigarettes
This enhancement in duty on locally produced cigarettes is effective from 04 June 2016 due to SRO
473(I)/2016 dated 03 June 2016 which was rescinded through SRO 486(I)/2016 dated 30 June 2016
after approval of Finance Act, 2016.
CEMENT
Rate of federal excise duty on various types of cement (PCT heading 25.23) has been changed from 5%
of retail price to One rupee per kilogram, with effect from 25 June 2016.
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Exemption from duty has been withdrawn on White Cement (PCT heading 25.23) with effect from 01
July 2016.
TABLE 2
(EXCISABLE SERVICES)
SERVICES SUBJECT TO PROVINCIAL SALES TAX
FED on following services which are now subject to provincial sales tax shall not be levied:
Advertisements on closed circuit T.V.;
Advertisements on cable T.V. network;
Advertisements in newspapers and periodicals (excluding classified advertisements), and on
hoarding boards, pole signs and sign boards;
Shipping agents;
Services provided or rendered by banking companies, insurance companies, cooperative
financing societies, modarabas, musharikas, leasing companies, foreign exchange dealers, nonbanking financial institutions, asset management companies and other persons dealing in any
such services;
Franchise services; and
Services provided or rendered by stockbrokers.
SECOND SCHEDULE
WHITE CRYSTALLINE SUGAR
The ad valorem duty on white crystalline sugar has been withdrawn and replaced by the sales tax regime
at a reduced rate of 8%. This amendment is effective from 25 June 2016.
THIRD SCHEDULE
(CONDITIONAL EXEMPTIONS)
TABLE I (GOODS)
Certain exemptions have been allowed in relation to Gawadar Port and development of Gawadar Free
Zone. These exemptions are identical to serial 100A and 100B introduced in Table 1 of the Sixth Schedule
of the Sales Tax Act, 1990.
TABLE II (SERVICES)
Following service has been exempted from levy of duty:
Sr.
No.
13
Description of Services
Heading / subheading number
Chartered flight services used by or for armed forces to move troops and
equipment deployed locally or internationally, including those for
movement of troops and equipment to UN missions.
FINANCE ACT 2016

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98.03

OTHER LAWS
Islamabad Capital Territory (Tax on Services) Ordinance, 2001
The following provisions of the Sales Tax Act , 1990 relating to the powers of Federal Government shall
apply, mutatis mutandis, to the services rendered or provided under this Ordinance, namel y:
Specifying a higher or lower rate of tax, subject to such conditions and restrictions.
Levy and collect such amount of tax as it may deem fit on any services or class of services in lieu
of sales tax.
Allow exemptions under section 13 of the Sales Tax Act, 1990.
Notify any person or class of person as withholding agent for the purpose of deduction and
deposit of sales tax.
Zero rating facility available under Sales Tax Act , 1990 to diplomats shall apply to the Ordinance.
Exemptions available under Sales Tax Act, 1990 to grants in aid shall apply to the Ordinance.
Tax levied under this Ordinance shall not apply to regulatory and licensing services rendered or provided
by an organization established under a Federal statute.
Description of valuation services; competency and eligibility testing services mentioned at Serial Number
37 of the Schedule to the Ordinance has been amended to exclude education testing services provided or
rendered under a bilateral or multilateral agreement signed by the Government of Pakistan.
Through SRO 495(I)/2016 dated 04 July 2016, the Federal Government has directed that sales tax on
services as specified in column (2) of the table below shall be levied at the rates specified in column (4)
subject to the conditions mentioned therein, namely:
S.
No.
(1)
Service Description
PCT heading
Conditions
(2)
(3)
(4)
Construction services, excluding:

(i) Construction
projects
(industrial
and
commercial) of the value (excluding actual and
documented cost of land) not exceeding Rs. 50
million per annum.
(ii) the cases where sales tax is otherwise paid
as property developers or promoters.
(iii) Government civil works including Cantonment
Boards.
(iv) Construction of industrial zones, consular
buildings and other organizations exempt from
income tax.
(v) Residential construction projects where the
covered area does not exceed 10,000 square feet
for houses and 20,000 square feet for apartments
Services provided for personal care by beauty
parlours, clinics and slimming clinics; body massage
centres, pedicure centres; including cosmetic and
plastic surgery by such parlours / clinics, but excluding
cases where:
(i) Annual turnover does not exceed Rs. 3.6
million; or
(ii) The facility of air-conditioning is not installed
or available in the premises.
9824.0000 and
9814.2000
Five per cent subject to the

condition that no input tax
adjustment or refund shall be
admissible
9810.0000,
9821.4000 and
9821.5000

admissible
FINANCE ACT 2016

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OTHER LAWS
S.
No.
(1)
Service Description
(2)
(3)
(4)
Services provided by freight forwarding agents, and

packers and movers.
Services provided by tour operators and travel agents
including all their allied services or facilities (other
than Hajj and Umrah)
9805.3000 and
9819.1400
9805.5100,
9805.5000 and
9803.9000
Services provided by specialized workshops or

undertakings
(auto-workshops;
workshops
for
industrial machinery, construction and earth-moving
machinery or other special purpose machinery etc;
workshops for electric or electronic equipments or
appliances etc. including computer hardware; car
washing or similar service stations and other
workshops).
Services provided by health clubs, gyms, physical
fitness centres, indoor sports and games centres and
body or sauna massage centres
98.20
Rs. 1000 per bill of lading,

whichever is higher
admissible
admissible
PCT heading
9821.1000,
9821.2000 and
9821.4000
Services provided by laundries and dry cleaners
9811.0000
Services provided by property dealers and realtors.
Services provided by car / automobile dealers.
Conditions

admissible
admissible
admissible
admissible
Members of Parliament (Salaries and Allowances) Act, 1974, Federal Ministers and Ministers
of State (Salaries, Allowances and Privileges) Act, 1975, Chairman and Speaker (Salaries,
Allowances and Privileges) Act, 1975 and Deputy Chairman and Deputy Speaker (Salaries,
Allowances and Privileges) Act, 1975
Through insertion of a new section in each of the above mentioned Acts, the Federal Government has
been empowered to revise the salaries, allowances and privileges of members of parliament including
chairman of standing committees of a house, federal ministers, ministers of state, chairman, speaker,
deputy speaker and deputy chairman, by notification in the official Gazette, to enable them to perform
their functions and discharge their responsibilities in a befitting and effective manner. The provisions of
newly inserted section in each of the above mentioned Acts shall have effect notwithstanding anything
contained in any other provisions of the above mentioned Acts.
Fiscal Responsibility and Debt Limitation Act, 2005
By way of amendment through the Finance Act, 2016, now the long title and preamble of the Fiscal
Responsibility and Debt Limitation Act, 2005 reads as follows:
FINANCE ACT 2016

- 66 -

OTHER LAWS
An Act to provide for reduction of Federal fiscal deficit and ratio of public debt to gross domestic product
to a prudent level by effective public debt management.
Federal fiscal deficit has been defined to mean the difference between total net revenue receipts and
total expenditure of the Federal Government.
Total expenditure has been defined to mean a sum of total recurrent expenditure, development
expenditure and net lending of the Federal Government.
Total public debt has been defined to mean the debt of the Government (including the Federal
Government and the Provincial Governments) serviced out of the Consolidated Fund and debts owed to
the International Monetary Fund.
Total net revenue of Federal Government has been defined to mean a sum of tax revenues, non-tax
revenues and surcharges of the Government minus transfer of provincial share.
The principles of sound fiscal and debt management that have been revised are as follows:
New targets
Old Targets
Limiting the Federal fiscal deficit excluding foreign

grants to four percent of gross domestic product
during the three years, beginning from the financial
year 2017-18 and maintaining it at a maximum of
three and a half percent of the gross domestic
product thereafter.
Ensuring that within a period of two financial years,
beginning from the financial year 2016-17, the total
public debt shall be reduced to sixty percent of the
estimated gross domestic product.
Reducing the revenue deficit to nil not later than

the thirtieth June, 2008, and thereafter maintaining
a revenue surplus.
Ensuring that within a period of five financial years,

beginning from the financial year 2018-19 total
public debt shall be reduced by 0.5 percent every
year and from 2023-24 and going up to financial
year 2032-33 a reduction of 0.75 percent every
year to reduce the total public debt to fifty percent
of the estimated gross domestic product and
thereafter maintaining it to fifty percent or less of
the estimated gross domestic product.
Ensuring that in every financial year, beginning

from the first July, 2003, and ending on the
thirtieth June, 2013, the total public debt is
reduced by not less than two and a half per cent.
of the estimated gross domestic product for any
given year:
Ensuring that within a period of ten financial years,

beginning from the first July, 2003 and ending on
the thirtieth June, 2013, the total public debt at the
end of the tenth financial year does not exceed
sixty per cent of the estimated gross domestic
product for that year and thereafter maintaining
the total public debt below sixty per cent of gross
domestic product for any given year.
Provided that the social and poverty alleviation

related expenditures are not reduced below 4.5%
of the estimated gross domestic product for any
given year and budgetary allocation to education
and health, will be doubled from the existing level
in terms of percentage of gross domestic product
during the next ten years.
FINANCE ACT 2016

- 67 -

CONTACT PARTNERS
For further explanations, please contact following partners:
LAHORE:
Principal Office
Mr. Sarfraz Mahmood

FCA, FITM, FICS
10-B, Saint Mary Park

Main Boulevard, Gulberg-III
LAHORE-54660
Phones
: (042) 35718137-9
Fax
: (042) 35718136,
35714340
E-Mail
: racolhr@racopk.com
Syed Mustafa Ali

FCA
Mr. Sarwar Khan
ACA
Mr. Muddassar Mehmood
FCA
Mr. Mubashar Mehmood
FCA
Other offices at:

ISLAMABAD:
2-A, ATS Centre, 30-West

Fazal-e-Haq Road, Blue Area
ISLAMABAD
Phones
: (051) 2274121-22
Fax
: (051) 2278859
E-Mail
: racoisd@racopk.com
Mr. Inaam Ellahi Sheikh

FCA, FCA (England & Wales)
FAISALABAD:
560-F, Raja Road, Gulistan Colony

FAISALABAD-38000
Phones
: (041) 8861042,
8863644
Fax
: (041) 8863611
E-Mail
: racofsd@racopk.com
Mr. Liaqat Ali Panwar

FCA, FITM, FICS
KARACHI:
108, Park Avenue, Block-6, P.E.C.H.S.,

Shahrah-e-Faisal KARACHI
Phones
: (021) 34310826-7,
34313952
Fax
: (021) 34313951
E-Mail
: racokhi@racopk.com
Mr. Muhammad Hamid Jan

ACA
Website
www.racopk.com
FINANCE ACT 2016

- 68 -
Mr. Atif Bin Arshad

FCA
Mr. Muhammad Waqas

ACA
Riaz Ahmad & Company

Lahore Office
Faisalabad Office
Karachi Office
Islamabad Office
10-B, Saint Mary Park

Main Boulevard, Gulberg-III
Lahore 54660, Pakistan
Telephones (92-42) 3571 81 37-9
Fax
(92-42) 3571 81 36
racolhr@racopk.com
560-F, Raja Road,

Gulistan Colony
Faisalabad 38000, Pakistan
Telephone (92-41) 886 10 42
Fax
(92-41) 886 36 11
racofsd@racopk.com
108-109, 1st Floor, Park Avenue

Block-6, P.E.C.H.S., Shahrah-e-Faisal
Karachi 75400, Pakistan
Telephones (92-21) 3431 08 26-7
Fax
(92-21) 3431 39 51
racokhi@racopk.com
2-A, ATS Centre, 30-West

Fazal-ul-Haq Road, Blue Area
Islamabad, Pakistan
Telephones (92-51) 227 41 21-2
Fax
(92-51) 227 88 59
racoisd@racopk.com
www.racopk.com

Finance Act 2016

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Riaz Ahmad & Company

FINANCE ACT 2016

Celebrating 60 years of adding value to our clients

RIAZ AHMAD & COMPANY

FEDERAL EXCISE DUTY

FINANCE ACT 2016

RIAZ AHMAD & COMPANY

This Memorandum may be accessed on our web-site: www.racopk.com

Muhammad Hamid Jan

Liaqat Ali Panwar

LAHORE: 15 July 2016

FINANCE ACT 2016

Inaam Ellahi Sheikh

RIAZ AHMAD & COMPANY

FINANCE ACT 2016

RIAZ AHMAD & COMPANY

FINANCE ACT 2016

RIAZ AHMAD & COMPANY

FINANCE ACT 2016

RIAZ AHMAD & COMPANY

FINANCE ACT 2016

RIAZ AHMAD & COMPANY

INCOME TAX ORDINANCE, 2001

FINANCE ACT 2016

RIAZ AHMAD & COMPANY

INCOME TAX ORDINANCE, 2001

Section 59B and Clause 103A, Part I, Second Schedule

FINANCE ACT 2016

RIAZ AHMAD & COMPANY

INCOME TAX ORDINANCE, 2001

is the persons taxable Income for the tax year; and

one hundred thousand rupees.

Contribution to an Approved Pension Fund

FINANCE ACT 2016

RIAZ AHMAD & COMPANY

INCOME TAX ORDINANCE, 2001

is the total amount invested in setting up the new industrial undertaking.

FINANCE ACT 2016

RIAZ AHMAD & COMPANY

INCOME TAX ORDINANCE, 2001

Section 107 & 198

FINANCE ACT 2016

RIAZ AHMAD & COMPANY

INCOME TAX ORDINANCE, 2001

FINANCE ACT 2016

RIAZ AHMAD & COMPANY

INCOME TAX ORDINANCE, 2001

FINANCE ACT 2016

RIAZ AHMAD & COMPANY

INCOME TAX ORDINANCE, 2001

FINANCE ACT 2016

RIAZ AHMAD & COMPANY

INCOME TAX ORDINANCE, 2001

FINANCE ACT 2016

RIAZ AHMAD & COMPANY

INCOME TAX ORDINANCE, 2001 THE FIRST SCHEDULE

Gross amount of rent

5% of the gross amount exceeding

Rs. 20,000 + 10% of the gross

Rs. 60,000 + 15% of the gross

Where the gross amount of rent exceeds Rs. 2,000,000

Rs. 210,000 + 20% of the gross

Division VII Capital Gains on Disposal of Securities

Where holding period of a security is less than