Taxation for NGOs

[Jay]

I want to ask following questions;

1. Are employees working in NGOs are exempt from salary taxes? As it is a grant money?

2. Can a NPO/NGO witheld taxes on supplies and services?

3. Can NGOs accept SalesTax Invoices?

Waiting for the reply.

[LapTop]

Q1- NO

Q2- Yes

Q3- Yes

[Jay]

Few more questions please,
1. If the NGOs doesn't withheld taxes on supplies,would it be a violation of Sec 153(1)(A)???
2. Is there any space in tax regulations to avoid the responsibility of tax withholding???

[awaisaftab]

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by Jay</i>
<br />Few more questions please,
1. If the NGOs doesn't withheld taxes on supplies,would it be a violation of Sec 153(1)(A)???
2. Is there any space in tax regulations to avoid the responsibility of tax withholding???
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

Ans 1
NGO's are under legal obligation to deduct WHT as per rates specified in the Income Tax Ordinance, 2001. So if any NGO do not deduct WHT tax then it is confirmed violation of section 153 and any other relevent section of ITO,2001.But keep it in mind the minimum supplies should be Rs.25,000/- per year no WHT shall be deducted the supplies below this limit. You are required to make judgment that the supplies which are purchased by you from a particular vendor would reach at this limit or not. For instance you are purchasing stationery from a vendor the average value of supplies is Rs.1500 per month then you will not deduct WHT. Hence the total amount of stationery purchased will be 18000/- (1500x12). Keep it in mind that under section 165 of ITO ordinance you are also liable to file Statement of Collection/Deduction of tax for each month till 20th day of succeeding month. If any organization, liable to deduct WHT under the provisions of ITO, does not deduct WHT or file statement of Collection/Deduction of tax then it will be penalized under sub section 2 & 3 of section 182 and under section 161 of ITO if any person/ organization fail to deduct WHT then it shall be personally liable to pay WHT.

Ans 2
As per my information there is no such space or relaxation is available in tax law. However if a vendor produces “Exemption Certificate” then no WHT shall be deducted.

Regards,


Awais Aftab

[akbarkhan2]

Very briefly replied by Mr. Awais, Great effort keep it up...
Thank you...

[Jay]

Great feedback...thanks a lot!!!

[LapTop]

Awais bhai,,

App explain bohat acha karty ho.

[awaisaftab]

Thanks for all of you I am only a student of tax laws

[Jay]

Hi,
I have some question please;
1. Is the tax year and FY is same? i.e Jul to June?
2. Is Eid bonus, performance related bonus or any other monetary benefit needs to be included in annual income of employee?
3. Do you have a Tax calculator to solve all these ambiguities?

[awaisaftab]

Ans1 No but for convenience and to avoid legal and financial reporting complications almost 90% companies use tax year as FY.

Ans2 Yes all monetary benefits on which an organization incurs any "Mariginal Cost"is included in taxable income of an employee.

Ans3 I think a tax calculator can not resolve ambiguties rather a well designed software will also unable to resolve these ambiguties.

[Jay]

dear Awais, thanx for ur previous support. again there is a question;
1. if any employees has a six months contract (Non Extend-able), and even than his income falls into the tax slab,should we consider this six month salary as gross annual income and tax should be applied accordingly??or something else??

[LapTop]

agar Contract 6 months ka hay to aap 6 months ki salary ko taxable income layn gay, or usi par tax calculate karyn gay,,,,

Ye employee ki liability hay k us k baad agar wo koi or job karta hay to is salry to apni new job ki salary k sath associate kar k taxable income nikaly,

[mzeeshanpk]

kindly tell me if newly formed NGO has not yet obtained tax exemption certificate then is its income i.e. (surplus of income over expenses)is taxable under income tax ordinance.

[student_of_law]

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by mzeeshanpk</i>
<br />kindly tell me if newly formed NGO has not yet obtained tax exemption certificate then is its income i.e. (surplus of income over expenses)is taxable under income tax ordinance.
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

Exemption certificate has nothing to do with tax on surplus. The purpose of exemption certificate is to save oneself from withholding taxes. company is bound to deduct 3.5% tax on buying goods. However, if the seller produces exemption certificate ,company will not deduct/withhold tax.

On the other hand if you want to ask about tax on surplus. Surplus of non profit organizations are exempt under cl 58 of PartI 2nd Schedule of ITO, 2001. Whiled definition of Non Profit Organization in s.2 (36)contains a mandatory attribute of its being approved by Commissioner. Unless, NGO is approved by Commissioner as Non Profit Organization within the meaning of Income Tax Ordinance, 2001, its surplus is not exempt from tax.

[Jay]

Dear Mr. Laptop Aoa, hope you r in good health and spirit!

Please be kind (as always) to resolve my one little query!

I received an invoice as under;

Amount S.T 16% Total
Rs. 400,000- 64,000- Rs. 464,000-

With a late delivery, a deduction of Rs. 20,000- has to be made from due payment. Please guide from which amount i can withhold tax?

1. Would it be straight deduction from gross i.e Rs. 464,000- (464000-20000=444000 @ 3.5%)
2. Would it be on amount before sales tax i.e Rs. 400,000- (400000-20000=380000 x 16%=440800 @ 3.5%)

I shall be very thankful for your prompt reply.