Important Withholding Points

Question 1

What if Employers fails to deduct W/H tax from salary?

Will the Salary Expense be allowed as deduction?

Answer 1

no tax deduction is required in case salary is below the taxable limit of Rs.25,000 per Month

Question 2

What if payer fails to deduct W/H tax from interest expense?

Answer 2

1. Interest on bank loan
2. inter corporate interest when group taxation
3. interest paid to special purpose vehicle
4. interest paid to venture capital company
5. Interest payment on security issued to non resident by resident with FBR approval
6. Profit on debt to International Finance Corporate (IFC) (Worldbank group)
7. Foreign payment of interest in respect of (project finance foreign loan) private loan, approved by FBR

Question 3

What if payer fails to deduct W/H tax from foreign payment (Non-resident)?

Answer 3

Follwoings do not require deduction of WHT, hence allowed;

Payment against import when title passes outside Pakistan

Educational Exp (SBP guidelines)

Medical Exp (SBP guidelines)

Question 4

What if payer fails to deduct W/H tax while making payment of invoice for local purchases?

Answer 4

Follwoings do not require deduction of WHT, hence allowed;

WH not required to be deducted from Invoice of local goods purchase, hence allowed as expense;

1. Purchases from large import house
2. Purchases from large trade house
3. Purchase of renewable sources of energy goods e.g solar even locally manufactured
4. Payment for food to hotels & restaurants when payment in cash
5. Purchase worth less than 75k in FY
6. Purchase of (food items) unprocessed zinda murghi ya anday from poultry farm/industrial undertaking

Question 5

What if payer fails to deduct W/H tax while making payment of invoice for local services?

Answer 5

Follwoings do not require deduction of WHT, hence allowed;

1. accommodation (or food) or both by hotels and restaurants, if payment in cash.
2. Purchase equal/less than 25k in FY
3. Carriage of goods (karai di gaddi), ek phayra saal wich
4. Insurance premium
5. Claims payment by insurance

Question 6

What if payer fails to deduct W/H tax while making payment of invoice for local contract?

Answer 6

Payment for contract value equal/less than 25k in FY,

Expense is allowed as deduction…..No tension

Question 7

What if payer fails to deduct W/H tax while making payment of rent?

Answer 7

Follwoings do not require deduction of WHT, hence allowed;

When Tenent is individual / AOP and gross rent 1.5M in a year

When landlord/owner is Ind/AoP and rent less than 200k in a year

Karayadar - Ind/Aop 1.5M karaya

Malik-Ind/Aop 200k karaya

Question 8

What if payer fails to deduct W/H tax while making payment of Prize/Wining Money?

Answer 8

Expense will be DNA/Disallowed

Question 9

What if payer fails to deduct W/H tax while making payment of invoice for comission/brokerage?

Answer 9

Follwoings do not require deduction of WHT, hence allowed;

Broker or Comm. Agent

is Ind/Unregistered AoP

Dalal Ind/Unreg. AoP - No tension

Question 10

SRO 586 (1)/91

Important

Answer 10

1. Unprocessed Agri-produce - persons receiving payments from a company exclusively for the supply of agricultural produce which has not been subjected to any process other than that which is ordinarily performed to render such produce fit to be taken to market
2. Hotels for Accomodation & Food when in cash
3. Restaurants for Accomodation & Food when in cash

​Hotels and restaurants receiving payments in cash for providing accommodation or food or both as the case may be

1. Cargo & Airtickets

shipping companies and air carries receiving payments for the supply of passenger tickets and for the cargo charges of goods transported

Others

1. a Provincial Government;
2. a local authority;
3. persons who are residents of the Tribal Areas or Azad Kashmir and execute contracts in Tribal Areas, or as the case may be, Azad Kashmir only and produce a certificate to this effect from the Political Agent concerned or the district authority, as the case may be, or in the case of Azad Kashmir, from the Income Tax Officer concerned;
4. persons who produce a certificate from the Commissioner of Income Tax to the effect that their income during the income year is exempt from tax under the Second Schedule to the Income Tax Ordinance, 1979;
5. companies receiving payments for the supply of electricity and gas;
6. companies receiving payments for the supply of crude oil; Attock Refinary Limited, National Refinary Limited and Pakistan Refinary Limited, receiving payments for the supply of their products; (ix) Pakistan State Oil Company Limited, Pakistan Burmah Shall Limited, and Caltex Oil (Pakistan) Limited, receiving payments for the supply of petroleum products;

Question 11

What is Sales amount for application of tax u/153

Answer 11

Gross Sales incl. of sales tax+FED+disc etc