Witholding Tax On Purchase of Agri Produce
Monday, January 17, 2011
Federal Board of Revenue (FBR) has clarified news reports published in a section of the press recently regarding the exemption of 3.5% withholding tax on purchase of agricultural produce, withdrawn through issuance of Board’s SRO 1161(I)/2010 Dated 31st December 2010. The issue needs clarification for the facilitation of general public, as follows:
i) Section 41 of the Income Tax Ordinance 2001 provides exemption to ‘agricultural income’ on sale/supply of agricultural produce by a cultivator/grower. Similar exemption was also available in the Repealed Income Tax Ordinance 1979. Earlier through Clause (v) of Board’s SRO 586(I)/91 Dated 30th June 1991 persons receiving payments from a company or an Association of Persons (AOP) having turnover of fifty million rupees or above exclusively for the supply of agricultural produce which has not been subjected to any process other than that which is ordinarily performed to render such produce fit to be taken to market, was exempted from deduction of withholding tax @ 3.5%
ii) Through Finance Act 2010, the definition of ‘prescribed persons’ was amended and “an individual having turnover of Rs.50 million rupees or above” was added in the list of withholding agents, to deduct withholding tax on sales/supplies [section 153(1)(a) of the Income Tax Ordinance 2001];
iii) Afterwards, Board had received various representations requesting to include “an individual having turnover of Rs.50 million rupees or above” in clause (v) of SRO 586(I)/91 of 30th June 1991;
iv) SRO 1161(I)/2010 Dated 31st December 2010 was issued with approval of competent authority, wherein following amendments were made in clause(v) of SRO 586:
- a) The word “persons” was replaced with the words “growers/producers of agricultural produce”, in order to restrict exemption to actual growers/cultivators as prescribed in the law; and
- b) The phrase “an individual having turnover of Rs.50 million rupees or above” was added in the list of prescribed persons, who will not deduct withholding tax from growers on sale / supply of agricultural produce.
It is therefore clarified that exemption of withholding tax on sale / supply of agricultural produce by a grower / cultivator is still intact, and SRO 1161(I)/2010 Dated 31st December 2010 has aligned the whole situation in line with the exemption on agricultural income by a grower, as provided in section 41 of the Income Tax Ordinance 2001.
Labels: Agricultural Income, Withholding Tax
posted @ 11:10 AM,
2 Comments:
-
At January 18, 2011 at 5:31 PM,
Tax Withholding said...
-
It is always interesting to see the updates to with regards to withholding tax - especially in industries which might not spring to mind
-
At October 30, 2014 at 6:18 PM,
Unknown said...
-
This is pretty great stuff. I am thankful that I saw this site today before I left to work. Ill go ahead and bookmark this site to check for upcoming updates.
Claim Your PIC Bonus Today
Post a Comment