First Schedule (2nd Division) of the Income Tax Ordinance 2001

The Second Division of the first schedule of the Income Tax Ordinance provides the tax rates for the companies. Companies can be divided into three types i.e. Small Companies, Banking Companies, and Any other Companies. The rate of tax for small companies is 20%, for banking companies 39%, and for any other companies 29%.

However, certain types of companies may be eligible for a super tax, for a reduced tax rate or exemption, depending on their business activities. For example, companies engaged in the export of goods or services may be eligible for a reduced tax rate of 25% or less of the total income. Similarly, companies involved in IT & IT-enabled services and exporting them are only liable to pay 1% of their income as final tax in Tax year 2022-23.

The tax rate for super tax is 4% of the taxable income, in addition to the regular income tax rate. However, for banks, the tax rate is 3% of the taxable income. It is increased from 4% to 10% for those individuals, Association of Persons (AOP), and companies whose profit is over Rs. 500 million in the outgoing fiscal year, and this tax will continue to apply in the future, resulting in the effective tax rate of 39%, payable in the form of quarterly advance tax.

Rates of Tax for Companies

(First Schedule, Division-II, Part 1)

Small Companies

20%

Banking Companies

39%

All Other Companies

29%

 

Rates of Super Tax for Companies

(First Schedule, Division-IIA, Part 1)

Banking Companies

4%

Other Persons

0%

Progressive rates of super tax will be applicable for the tax year 2023 and onwards

(Division IIB, Part I, First Schedule)

For the tax year 2023 and onwards, the Bill proposes to impose super tax at progressive rates ranging from 1% to 10% on the income of all persons (including banking companies) earning taxable income exceeding Rs 150 million.

Earlier vide Finance Act, 2022, rates of super tax for the tax year 2023 under section 4C were based on progressive rates for other than banking companies whilst banking companies were required to pay super tax at 10% where income exceed Rs. 300 million. Prescribed sectors were also required to pay super tax at 10% for the tax year 2022 where income exceed Rs. 300 million.

After the proposed changes Table of the progressive rates now appears below:

It is important to note that the tax rates and exemptions are subject to change each year.  

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