Tax credit facility: FBR suggests simple procedure for charitable bodies

ISLAMABAD: The Federal Board of Revenue (FBR) has proposed a simple procedure for availing tax credit by charitable/ non-profits organisations engaged in welfare activities.

According to the sources, the revised procedure has been proposed under the draft amendments in the Income Tax Ordinance 2001. Under the simplification and harmonisation of Inland Revenue’s Tax Statutes, the FBR has proposed a revised procedure for charitable organisations to avail the facility of the tax credit.

“The law has been simplified for the charitable/ non-profits organizations engaged in welfare activities”, sources said.

Presently, Section 100-C of the Income Tax Ordinance 2001 deals with tax credit for charitable organisations. The FBR has proposed to break section 100-C of the Income Tax Ordinance 2001into different sections to simplify the law for the non-profits organisations.

Under the draft law, the new section 100-C has been proposed to deal with the tax credit for charitable organisations. Subject to the provisions of sections 100-CA, 100-CB and 100-CC there shall be allowed a tax credit equal to one hundred percent of tax payable under any of the provisions of this Ordinance including minimum and final taxes to the specified persons, the new law said.

The proposed section 100-CB is related to the conditions for availing Tax Credit.

Under the proposed section 100-CA (Incomes eligible for tax credit), the following categories of income derived by the persons specified in section 100C are eligible for tax credit, namely:— (a) income from donations, voluntary contributions and subscriptions; (b) income from house property; (c) income from investments in the securities of the Federal Government; (d) profit on debt from scheduled banks and microfinance banks; (e) grant received from federal, provincial, local or foreign government; Page 5 of 59 (f) any income of the persons mentioned in clauses (a), (b) and (h) of section 100-C; and (g) so much of the income chargeable under the head “income from business” as is expended in Pakistan for the purposes of carrying out welfare activities: Provided that in the case of income under the head “income from business”, only so much of such income shall be eligible for tax credit under this section that bears the same proportion as the said amount of business income bears to the aggregate of income from all sources. Provided further that “income from business” shall be eligible for tax credit under this clause only if the nature of business carried out by the person is in line with the charitable purposes of such person, it added.

Copyright Business Recorder, 2023