Income Tax (amendment) Ordinance promulgated

ISLAMABAD: President Asif Ali Zardari Monday night promulgated Income Tax (Amendment) Ordinance, 2024 for bringing changes in Advance Deposit Ratio (ADR) of banks with estimated revenue of nearly Rs70 billion by December 31, 2024.

After the promulgation of Presidential Ordinance, 44 percent tax would be charged on the banking sector for tax year 2025.

The FBR is now expecting Rs 70 billion till December 31, 2024 from the banking sector which will help the tax machinery reduce its shortfall in tax collection to some extent.

Changes in banking sector’s ADR: Cabinet approves promulgation of tax ordinance

The Income Tax (Amendment) Ordinance, 2024 has amended the First Schedule and Seventh Schedule of the Income Tax Ordinance 2001.

Under the ordinance, the government has specified the “Type of Company-Rate of Tax” for banks.

In case of Banking Company, the rate of tax for the Tax Year for 2025 would be (44%); Tax year 2026 (43%) and Tax year 2027 and onwards (42%); Small Company (20%) and any other company 29 percent.

According to the Ordinance, the term “gross advances and deposit” referred to in this sub-rule for the purpose of computing gross advances to deposit ratio shall be the amount of “gross advances and deposit” at the end of the accounting period and as disclosed in the annual audited accounts:

Provided that from tax year 2025 and onwards profits and gains of a banking company shall be subjected to tax rates under Division-II of Part-I to the First Schedule and nothing contained in this sub-rule shall apply to compute part or whole of the tax liability of a banking company.

Copyright Business Recorder, 2024