The Finance Bill 2011-2012 has not proposed any continuation of section 4A of the Income Tax Ordinance 2001, which clearly reflects government''s intention for not extending 15 percent income tax surcharge beyond June 30, 2011.
Tax experts told Business Recorder on Sunday that if the government had any intention to continue the surcharge beyond June 30, 2011, there would have been an amendment in the Income Tax Ordinance 2001, through Finance Bill 2011-2012. However, as no such amendment was made in the Finance Bill, the FBR has not carried over the provision of section 4A relating to the flood surcharge in the Finance Bill. Thus, the section 4A (income tax surcharge) would automatically be abolished on June 30, 2011, unless the federal government separately presents the Income Tax Amendment Ordinance 2011 before the National Assembly.
By a Presidential Ordinance, called ''Income Tax (Amendment) Ordinance, 2011'', section 4A was inserted into Income Tax Ordinance, 2001. It said, "4A, surcharge,- (1) Subject to this ordinance, a surcharge shall be payable by every taxpayer at the rate of fifteen percent of the income tax payable under this Ordinance including the tax payable under part V of Chapter X of Chapter XIII, as the case may be, for the period commencing from the promulgation of this ordinance, till the 30th June, 2011.
"(2) Surcharge shall be paid, collected, educated and deposited at the same time and in the same manner as the tax is paid, collected, deducted and deposited under this Ordinance including Chapter X or XII as the case may be:
"Provided that this surcharge shall not be payable for the tax year 2010 and prior tax years and shall be applicable, subject to the provisions of sub-section (1), for the tax year 2011 only".
Experts said that, by this insertion, surcharge @ 15 percent was levied on all taxes that were to be withheld during the period from March 15th 2011 to June 30th 2011 as defined in Part V of Chapter X and Chapter XII of the Income Tax Ordinance, 2001. This includes Advance Tax; Tax at Import stage; Tax on Salary; Dividend; Supplies; Contracts; Services; Rent; Bank Interest etc.
The proviso to the newly inserted Section 4A was being interpreted as applicable on the tax liability of full tax year 2011. It was also being presumed that this provision would be carried over into the Ordinance permanently by making the insertion through Finance Act, 2011 rather than letting the Ordinance die out its original death, they opined.
Experts observed that as the things are being seen now and by understanding the clarifications issued by the Federal Government as well as the FBR it seems clearer now that the Surcharge @ 15 percent levied through Income Tax (Amendment) Ordinance, 2011 would only be for a period of only 3 1/2 months and not for the full year. This view is fortified if the provisions of Section 4A do no not remain on the statute book. In this way the matter of the surcharge @ 15 percent of the tax paid by the Tax Payers will not be required to be paid for the full tax year 2011 but only the identified 3 1/2 months.
The tax payers who have been subjected to surcharge on tax collected by way of withholding of tax at the time of receiving their payments will have to give a clear declaration in their tax returns for the tax year 2011. For this declaration, a special amendment would be required to be made in the Tax Returns that will be made available by the FBR/PRAL for the Tax Year 2011 on the e-portal, the experts added.