Return filers to get 15-25 pc tax rebate

Tax-Rebate.jpg

Investment in REIT, Mutual Funds

Zubair Yaqoob

Karachi

Tax break has been given to return filers of income tax to 15 percent from 25 percent on the investments of REIT schemes and the mutual funds. Circular of Federal Board of Revenue (FBR) on Thursday disclosed.
Income Tax Circular No. 03 issued by the Federal Board of investment (FBR) saying that prior to the Finance Act, 2018 the dividend received by a company from a collective investment scheme, a REIT scheme or a mutual fund (except a stock fund) was subjected to tax at 25 percent for the tax year 201 5 onwards under section 5 of the Income Tax Ordinance, 2001.
In order to incentivize investment by companies in collective investment schemes, REIT schemes and mutual funds, an amendment has been made in the second proviso to Division Ill of Part I of the First Schedule to the Income Tax Ordinance, 2001 whereby the rate of tax has been reduced from 25 percent to 15 percent in respect of dividend received by a company from a collective investment scheme, REIT scheme or a mutual fund (other than a stock fund).
Similarly, in consonance with the reduction in the rate of tax on dividend received by a company from a collective investment scheme, a REIT scheme or a mutual fund under section 5 of the Income Tax Ordinance, 2001 the tax required to be deducted under section 150 of the Income Tax Ordinance, 2001 by a collective investment scheme, REIT scheme or mutual fund upon payment of dividend to a company has also been reduced from 25 percent to 15 percent (in case such company is a filer) by making amendment in Division I of Part Ill to the First Schedule to the Income Tax, 2001. However the rate of tax under section 150 of the Ordinance required to be deducted upon payment of dividend by a collective investment scheme, REIT scheme or mutual fund to a company, being a nonfiler, has not witnessed any change and has remained static at 25 percent.
The FBR further said prior to the Finance Act, 2018 any person receiving dividend from a Developmental REIT Scheme set up by 3oth June, 2018 (for the purpose of development and construction of residential buildings) could avail a 50 percent reduction in tax for a period of three years with effect from June 30, 2018 in terms of the third proviso to Division Ill of Part I of First Schedule to the Income Tax Ordinance, 2001.
In order to promote and encourage investment in Developmental REIT Schemes appropriate amendments have been introduced in the third proviso to Division Ill of Part-l of the First Schedule to the Ordinance through the Finance Act, 2018 whereby persons receiving dividend from a Developmental REIT Scheme shall be entitled to a 50 percent tax reduction if such Developmental REIT scheme (with the object of development and construction of residential buildings) is set up by 3oth June, 2020.
In addition, 50 percent tax reduction on dividend received from such Developmental REIT Schemes would be available for three years from the date of setting up of such Developmental REIT Scheme.
Corresponding amendments have also been made in the third proviso to Division I of Part-Ill of the First Schedule to the Ordinance in respect of the tax required to be deducted under section 150 of the Income Tax Ordinance, 2001 on the dividend paid by a Developmental REIT Scheme (with the object of development and construction of residential buildings).
The FBR explained that prior to the Finance Act, 2018 the rate of advance tax to be deducted under section 150 of the Ordinance on payment of dividend by a rental REIT scheme to an individual as well as an AOP was 12.5 percent in the case of a filer and 15 percent in the case of a non-filer. In order to incentivize investment by individuals in rental REIT schemes, a fifth proviso has been added in Division I of Part Ill of the First Schedule to the Income Tax Ordinance, 2001 through the Finance Act, 2018 whereby advance tax to be deducted under section 150 of the Ordinance upon payment of dividend to an individual by a rental REIT Scheme has been reduced to 7.5 percent irrespective whether the individual is a filer or a non-filer.

Share this post

PinIt
    scroll to top