Banks will be required to pay a 10 percent Super Tax in case their income exceeds Rs. 300 million.
The Federal Board of Revenue (FBR) has issued income tax circular 2 of 2023 to explain important amendments made in the Income Tax Ordinance, 2001 through Finance Act 2023.
According to the circular, the Super Tax on high-earning persons was introduced through Finance Act, 2022 providing for graduated tax rates ranging from 1 percent to 4 percent on income slabs starting from Rs. 150 million to Rs. 300 million and above. Certain specified business sectors were required to pay Super Tax at a higher rate of 10 percent where income exceeded Rs. 300 million.
In order to broaden the scope of Super Tax as well as to bring progressivity and uniformity in Super Tax rates structure, additional income slabs of Rs. 350 million to Rs. 400 million, Rs. 400 million to Rs. 500 million, and Rs. 500 million and above providing for Super Tax rates of 6 percent, 8 percent, and 10 percent respectively have been enacted through Finance Act, 2023. These Super Tax rates will apply to all persons across the board for Tax Year 2023 and onwards.
However, under the second proviso to Division IIB of Part I of the First Schedule, for the Tax year 2023, a banking company will be required to pay Super Tax at the rate of 10 percent if income as defined under section 4C exceeds Rs. 300 million.
Furthermore, an ambiguity persisted regarding payment of Super Tax as to whether Super Tax payable under section 4C of the Ordinance will only be discharged as a lump sum amount at the time of filing of income tax return or Super Tax has to be paid along with monthly/quarterly installments of advance tax payable under section 147 of the Ordinance.
In order to remove this ambiguity and to bring more clarity, Finance Act, 2023 has introduced a new sub-section (5A) in section 4C of the Ordinance whereby Super Tax liability computed by a person under the said section will be paid along with monthly/quarterly installments, as the case may be, of advance tax payable under section 147 of the Ordinance. Corresponding amendments have also been made in section 147 of the Ordinance, FBR added.
Source: Pro Pakistani