Non-profit organizations entitled to tax credit instead of tax exemptions in Finance Bill 2014

KARACHI: The Finance Bill 2014 has proposed to withdraw all exemptions which are being given to the non-profit organizations, trusts or welfare institutions and it is mentioned that organizations should be entitled to tax credit instead of tax exemption.
According to the budget 2014/2015 brief issued by KPMG Taseer Hadi & Co, Chartered Accountants, the Finance Bill proposes to withdraw the exemptions and instead allow tax credit equal to 100 percent of the tax payable including minimum tax and final taxes payable under any provisions of the ordinance.
However, the tax credits shall be allowed subject to the following conditions: (a) that the return of total income has been filed (b) tax required to be deducted or collected has been deducted and collected and paid (c) withholding tax statements for immediately preceding tax years have been filed.
The tax authorities have been alleging that the exemption provisions contained in the Second Schedule were being misused under the garb of NPOs or welfare institutions etc. The proposed provisions will not enhance any tax liability for the above stated persons but will help documentation and compliance to the withholding tax and other provisions of the Ordinance.
At presently, certain clauses of part I of the second schedule provided exemption from tax for the income of following persons subject to specified conditions: Clause (58)(1) income of a trust, welfare institution or non-profit organization from donations, voluntary contributions, subscriptions, house property, investment in securities of federal government; clause (58)(2) a trust administered under a scheme approved by the federal government; clause (58)(3) a trust or welfare institution or NPO approved by the chief commissioner; clause (58A) income of a university or educational institution run by an NPO; clause (59) income from investment in securities of Federal Government, profit on debt from scheduled banks, grant received from Federal, Provincial or District governments, foreign grants and house property held under a trust for religious or charitable purposes; clause (60) income of a religious or charitable institution from voluntary contributions.

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