Budget Highlights

BUDGET HIGHLIGHTS

Salient Features

• The overall size of the budget,
including provinces, is projected at
Rs. 3,259 billion which is 10.7%
higher than the current year’s
outlay.
• Total revenues projected are
Rs.2,574 billion.
• Projected fiscal deficit is Rs. 685
billion (4.0% of GDP).
• Gross federal revenues (tax and
non-tax) are projected at Rs.2,411
billion
• FBR collection is projected at
Rs.1667 billion.
• The federal budgetary outlay is
proposed at Rs.2,229 billion.
• The size of the PSDP 2010-11 is
proposed at Rs.663 billion

Income Tax

• The limit of basic exemption is Transfer, TDR, CDR, STDR and RTC,
proposed to be enhanced from are proposed to be subject to 0.3%
Rs.200,000 to Rs.300,000 for deduction of the advance tax
Salaried individuals and from (adjustable), if such transactions
Rs.100,000 to Rs.300,000 for non- exceed threshold of Rs.25,000 in a
salaried individuals irrespective of single day. Currently, it is applicable
gender. on cash withdrawals only.
• The rate of tax for small companies • Advance tax deductible on imports
has been increased to 25% from made by commercial importers is
existing 20%. proposed to be enhanced to @5%
• The tax rate for AOPs is proposed @ from existing 4%, being a final tax.
25% straight on their taxable • Tax on capital gains accruing on
income as compared to the current holding of stocks/shares/securities
different slab rates depending upon for six-months or less is proposed @
the level of taxable income. 10%, while for a period exceeding
• The e-filing of only quarterly six-months @ 7.5% and no tax on
withholding tax (WHT) statements is holding such securities for a period
proposed instead of monthly, exceeding 12 months.
quarterly and annual statements. • Advance tax deductible on goods
However, e-filing of Annual transport vehicles under Item (1) of
Statements for WHT on Salaries Division-III of Part-IV of Second
would be required to be filed. Schedule to the Income Tax
• Cash Withdrawals from Banks, Ordinance 2001 is proposed to be
various banking transactions abolished, and tax is proposed @
including modes like withdrawals Re.1 per kilogram of the laden
through Demand Draft, Pay Order, weight capacity of goods transport
Online Transfer, Telegraphic vehicle.
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• The rate of minimum tax is
proposed to be enhanced to @ 1%
from existing 0.5%. Further
Individuals and AOPs having annual
turnover of more than Rs. 50 million
in a year would also be subject to
payment of minimum tax. Currently,
it is applicable to Companies only.
• Withholding tax on gross value of
Inland Air Ticket has been proposed
@ 5%. This will be adjustable
against the tax liability of the
purchaser of such ticket.
• The withholding agents shall be
required to e-file quarterly
statements instead on monthly
filings. Further, it would
mandatory to e-file the
statements in the cases where no-
tax was deducted.
• The maximum rate of withholding
tax deductible on monthly
electricity bills is proposed to be
reduced from 10% to 5%.
• 10% withholding tax deductible on
Government Securities is proposed
to be final tax irrespective of legal
status of persons/business entities.
• To encourage enlistment
corporate sector, a 5% tax credit is
proposed to be allowed in the tax
year of its enlistment.
• The rate of withholding
deductible on cross-word puzzles
winnings is proposed to be reduced
to 10% from current 20%.
• Now senior citizens earning income
to the extent of Rs. 1000,000 will be
eligible for 50% tax relief, if their
income is not subject
Presumptive Tax Regime. The
current limit is Rs. 750,000.
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Budget Highlights
• Now 100% depreciation expense
can be claimed on ramp built to
provide access to disabled persons
• The maximum rate of withholding
tax deductible on payments made
to non-resident taxpayers who are
not subject to Avoidance of Double
Taxation Treaties (other than on
account of royalty and fee for
technical services) is proposed to be
reduced to 20% from existing 30%;
• In order to relieve the non-resident
taxpayers of statutory requirement
for filing income tax return,
withholding tax deductible on debt
instruments is proposed to be final
be tax.
NIL • A Tax credit for BMR costs incurred
by a listed company is proposed to
be provided @ 10% for the tax year
of its incurrence for the tax years
2011 to 2015;
• Under Prime Minister’s Relief
Package to rehabilitate the
economy of Khyber Paktunkhwa,
FATA and PATA, the following relief
has been offered to the taxpayers
(other than manufacturers and
of suppliers of cement, sugar,
beverages and cigarettes):
o Waiver of default surcharge &
penalty till 30th June 2010;
tax o Exemption from advance tax on
electricity for tax years 2010 and
2011;
o Exemption from withholding tax
on exports;
o Recovery of outstanding income
tax arrears through easy
to installments;
o Annual Audit with the approval
of FBR;
o Exemption from advance tax on
import of plant and machinery
up to 30th June 2011;
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Sales Tax and Federal Excise
• The general rate of sales tax is
proposed to be increased from 16%
to 17%. Similarly where different
sales tax rates are applicable, it
would be increased by 1%.
• To attract new investment in
beverage industry and to lower
prices, the restriction on adjustment
of FED paid on beverage
concentrate, flavours and syrups is
proposed to be withdrawn.
• The rate of Federal Excise Duty on
Natural and petroleum gases is
Customs
• Customs duty on crude palm oil is
proposed to be reduced from
Rs.9,000/MT to Rs.8,000/MT.
• Exemption of customs duty on
import of photographic plates and
film for X-ray is proposed in order
to lower cost of medical diagnoses.
• Reduction of duty to 5% on
pharmaceutical raw materials and
drugs.
• It has been proposed to reduce
duty on equipment for dedicated
use of renewable energy.
• Concession in customs duty on
import of Road Sweeping Lorries
proposed.
• Reduction of duty on raw materials
for laundry soap and detergent
proposed.
• Customs duty on import of fully
dedicated LPG buses and
dispensing equipment has been
exempted.
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Budget Highlights
proposed to be increased from Rs.
5.09 per Million British Thermal
Units (MMBTU) to Rs. 10/- per
MMBTu.
• Levy of Federal Excise Duty @ Re.
1/- per filter rod of cigarettes has
been proposed. Further, increase of
duty rate on cigarettes and tobacco
products has also been proposed.
• Levy of 10% Federal Excise Duty on
Air conditioners and deep freezers is
proposed as energy saving
measures.
• Customs duty on import of raw
materials/components for energy
saving lamps has been exempted.
• Customs duty and sales tax on rice
processing machinery has been
exempted.
• Reduction of duty on raw materials
of leather industry has been
proposed.
• Duty on raw materials of glass
industry has been reduced.
• Duty on secondary quality tin mill
black plate for manufacturers of tin
plate has been reduced.
• Duty on milk filters has been
proposed to be exempted.
• Exemption of duty on other than
pure bred breeding animals has
been proposed.
• Manufacturers of evaporators and
washing machines have been
proposed a concessionary duty of
5% on import of copper &
aluminum tubes and electro
galvanized steel sheets.
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• The customs value determined
under section 25A shall be
applicable unless revised
superseded or rescinded.
• Now the aggrieved person or an
officer of Customs may file an
appeal before the Appellate
Tribunal in cases of review order
passed by the Director General
Customs Valuation under section
25D provided the appeal is heard
by the double bench of the
Appellate Tribunal.
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Budget Highlights
• The facility of filing of goods
declaration after examining the
or goods by the importer is proposed
to be restricted to only in case of
used goods. Further, the
permission for filing of goods
declaration after examination of
goods can now only be granted by
the Additional Collector.
• Various penalties have been
revised upward to curb smuggling.
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 Budget Highlights
Regularization of Finance Amendment Ordinance, 2009 through Finance
Bill 2010

The Finance Bill 2010 contains most of the provisions already made through Finance
Amendment Ordinance 2009. As a part of restructuring of FBR, the three laws i.e
Income Tax Ordinance, 2001, Sales Tax Act, 1990 and Federal Excise Act, 2005
were grouped as Inland Revenue. The highlights of those amendments are as
follows:

SALES TAX AND FEDERAL EXCISE • Period to retain the records has
been enhanced from 05 to 06 years
• The authorities and
designations have been INCOME TAX
harmonized with the income tax
law. All the authorities of Sales Tax • The authorities under the
and Federal Excises has been Income Tax Ordinance, 2001 have
changed to the designations of been re-designated.
Inland Revenue • Restriction and penalties on
• The adjudication forum filing of revised returns by the
abolished. Now the authorities will taxpayers
issue assessment orders directly as • Empowering commissioners to
per procedures of Income Tax. make best judgment provisional
• The officers empowered to pass assessments of non-filers who fail
an order under these acts imposing to respond notices for filing of the
correct amount of sales tax/federal tax returns.
excise duty, charging default • Empowering Commissioners to
surcharge, imposing penalty and call for records for the purpose of
recovery of any amount investigation and audit and making
erroneously refunded after assessments.
completion after audit of records of • Period to retain the records
the taxpayers. enhanced from 05 to 06 years.
• The cases will be heard before • The Federal Govt. may appoint
the appellate tribunal established as many Special Judges as it wants
under the Income Tax Ordinance, specifying territorial jurisdiction
2001 instead of the Appellate limits for criminal proceedings
Tribunal established under the under the Income Tax Ordinance.
Customs Act, 1969.

Other Significant Amendments

• GDP Growth for the year 2009-10 is Enterprises during FY 2010-11

expected to be close to 4.1 per including WAPDA, Railways, PIA,
cent. TCP, PASSCO, Steel Mills, NHA and
• Government aims at restructuring Utility Stores.
of the eight major Public Sector
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• Minimum wage of the worker has
been enhanced from Rs. 6,000 to
Rs. 7,000.
• The wage threshold for receiving
social security benefits by the
workers has been raised to Rs
10,000
• Dowry grant for daughters of
workers has been enhanced to Rs
70,000 and the facility would be
available for all the daughters
instead of two as was the previous
policy.
• Federal Government employees
will be allowed an adhoc monthly
allowance equal to 50% of one
month’s basic pay.
• Medical allowance for employees in
BS-1 to 15 would be doubled. For
employees working in BPS-16 to
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Budget Highlights
22, medical allowance will be at
15% of basic pay.
• The minimum monthly pension is
proposed to be raised from
Rs.2000 to Rs.3000.
• 15% increase in pension of those
who retired after 2001 and 20%
increase for those who retired prior
to 2001.
• Pensioners who retired in BS 1 to
15 will be allowed medical
allowance at 25% of pension drawn
while those retired in BS 16 to 22
at 20% of pension drawn.
• The unskilled workers in rural areas
would be guaranteed employment
for one hundred days in a year at
the rate of minimum wage rate
through a pilot scheme in 12 least
developed sector.
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