Treshhold for Deduction of Income Tax

[zurpk]

AOA to All

I just want to know the exact section of income tax ordinance where treshhold has been defined for deduction of tax under section 153.

In my knowledge, it is 10,000 p.a. for services and Rs. 25,000 per annum for supplies Goods. However, my friends do not agree with me on this point.

Thanks

[kamranACA]

Dear Zia,

For clarifying this matter, first of all you have to see Section 239 of Income Tax Ordinance,2001 which provides for "savings" clauses. Savings cover various things applicable under previous ordinance (ITO,1979) that are not inconsistent with the current tax law (ITO,2001) and are allowed to be carried on or treated as these were treated before the promulgation of ITO,2001.

Sub-section 9 and sub-section 12 (along with other subsection) of section 239 of ITO,2001 provide to save various notifications or circulars issued under repealed ordinance (ITO 1979). All those notifications and actions under repealed ordinance are saved and are effective, unless specifically withdrawn by the authorities.

CBR issued CIRCULAR NO. 11 DATED 30 JUNE 1991 to instruct and clarify certain matters relating to deduction of tax at source under section 50 (4) of ITO,1979 (now section 153 of ITO 2001). Its paragraph 8 specified monetary limits for deduction of tax at source in respect of supplies as Rupees 25,000 and in respect of services as Rupees 10,000.

However, this exemption is available only upto the time when these limits are not crossed. If any supplier or services provider crosses these limits, tax would be deducted on entire amount of supplies and services received during a financial year and would be adjusted from the amount outstanding in his account or any subsequent payments to be made to him.

Please note this limit has to be seen in the context of a financial year i.e. income year. If any organization (who has to deduct tax) has an income year different than the financial year, it will take care that crossing of limits for suppliers and service providers have to be seen in the context of financial year i.e. 01 July to 30 june.

You can get this circular from S.A. Salam's book or Huzaima Bukhari's book searching under the foot notes of section 153.

This circular is saved and has not been withdrawn by CBR so far.

Hope your matter is clarified.

Regards,

Kamran.

[msc286]

I fully substantiate the views of Mr. Kamran. This threshold has not been provided in the main law, i.e. Income Tax Ordinance, 2001, but has been devised through the above mentioned circular. You can download the circular from CBR website also.

[zurpk]

Thank you all. i shall read the relevent circulars.

Thanks again.