ISLAMABAD: The Federal Board of Revenue (FBR) has introduced several key tax reforms and exemptions through Income Tax Circular Number 1 of 2024. Key updates include:
- Tax Credit for Coal Mining Projects: A 100% tax credit is now available for individuals involved in coal mining in Sindh, provided they supply coal exclusively to power generation projects within the province.
- Revised Taxation on Capital Gains: The Finance Act 2024 has altered the taxation on capital gains. Previously, tax was deducted based on the fair market value of shares; now, the tax is deducted from the gross amount paid or payable at the time of payment or share registration, whichever comes first.
- Amendments in Taxation of Associations of Persons (AOPs): Shareholders of AOPs will no longer be exempt from tax if the AOP has a turnover of 300 million rupees or more and has not filed audited financial statements.
- Increased Withholding Taxes for Late Filers: Section 100BA has been amended to apply higher withholding tax rates to those not appearing in the active taxpayers’ list (ATL) and to those who file returns after the due date.
- Definition of Business Connection in Pakistan: The definition now includes “significant economic presence,” such as transactions or data downloads exceeding a prescribed amount.
- Higher Tax Rate on Mutual Fund Dividends: The tax rate on dividends from mutual funds, especially those deriving significant income from profit on debt, has been increased to 25%.
- Increased Toll Manufacturing Tax Rate: The toll manufacturing tax rate has been raised to 9% for companies and 11% for other entities.
- Tax Exemption for Diversified Payment Rights (DPRs): Income from DPRs purchased through authorized dealers in Pakistan is now exempt from tax.
- Extension of Tribal Areas Exemption: The tax exemption for incomes from individuals and entities in the erstwhile Tribal Areas of Khyber Pakhtunkhwa and Balochistan has been extended until June 30, 2025.
