Income Tax Ordinance, 2001 — Section 65: Miscellaneous provisions relating to tax credits

65. Miscellaneous provisions relating to tax credits.— (1) Where the person entitled to a tax credit under 1[this]Part is a member of an association of persons to which sub-section (1) of section 92 applies, the following shall apply

(a)component A of the formula in sub-section (2) of section 61, sub section (2) of section 62, sub-section (2) of section 63 and sub section (2) of section 64 shall be the amount of tax that would be assessed to the individual if any amount derived in the year that is exempt from tax under sub-section (1) of section 92 were chargeable to tax; and

(b)component B of the formula in sub-section (2) of section 61, sub section (2) of section 62, sub-section (2) of section 63 and sub section (2) of section 64 shall be the taxable income of the individual for the year if any amount derived in the year that is exempt from tax under sub-section (1) of section 92 were chargeable to tax.

(2)Any tax credit allowed under this Part shall be applied in accordance with sub-section (3) of section 4.

(3)Subject to sub-section (4), any tax credit or part of a tax credit allowed to a person under this Part for a tax year that is not able to be credited under sub section (3) of section 4 for the year shall not be refunded, carried forward to a subsequent tax year, or carried back to a preceding tax year.

(4)Where the person to whom sub-section (3) applies is a member of an association of persons to which sub-section (1) of section 92 applies, the amount of any excess credit under sub-section (3) for a tax year may be claimed as a tax credit by the association for that year.

(5)Sub-section (4) applies only where the member and the association agree in writing for the sub-section to apply and such agreement in writing must be furnished with the association’s return of income for that year. Chapter III – Tax on Taxable Income 1 [65B. Tax credit for investment.— (1) Where a taxpayer being a company invests any amount in the purchase of plant and machinery, for the purposes of 2[extension, expansion,] balancing, modernization and replacement of the plant and machinery, already installed therein, in an industrial undertaking set up in Pakistan and owned by it, credit equal to ten per cent of the amount so invested shall be allowed against the tax payable 3[, including on account of minimum tax and final taxes payable under any of the provisions of this Ordinance,] by it in the manner hereinafter provided 4[:] 5[Provided that for the tax year 2019 the rate of credit shall be equal to five percent of the amount so invested: Provided further that the provisions of sub-section (5) relating to carry forward of the credit to be deducted from tax payable, to the following tax years, as specified in the said sub-section, shall continue to apply after tax year 2019; and]

(2)The provisions of sub-section (1) shall apply if the plant and machinery is purchased and installed at any time between the first day of July, 2010, and the 30th day of June, 6[ ] 7[ ] 8[2019].

(3)The amount of credit admissible under this section shall be deducted from the tax payable by the taxpayer in respect of the tax year in which the plant or machinery in the purchase of which the amount referred to in sub-section (1) is invested and installed. payable for a tax year, if ninety per cent of his sales are to the person who is registered under the aforesaid Act during the said tax year.

(2)For claiming of the credit, the person shall provide complete details of the persons to whom the sales were made.

(3)No credit will be allowed to a person whose income is covered under final tax or minimum tax.

(4)Carry forward of any amount where full credit may not be allowed against the tax liability for the tax year, shall not be allowed. Chapter III – Tax on Taxable Income 1[(4) The provisions of this section shall mutatis mutandis apply to a company setup in Pakistan before the first day of July, 2011, which makes investment, through hundred per cent new equity, during first day of July, 2011 and 30th day of June, 2016, for the purposes of balancing, modernization and replacement of the plant and machinery already installed in an industrial undertaking owned by the company. However, credit equal to twenty per cent of the amount so invested shall be allowed against the tax payable, including on account of minimum tax and final taxes payable under any of the provisions of this Ordinance. The credit shall be allowed in the year in which the plant and machinery in the purchase of which the investment as aforesaid is made, is installed therein. “Explanation.— For the purpose of this section the term “new equity” shall, have the same meaning as defined in sub-section (7) of section 65E.] 2[(5) Where no tax is payable by the taxpayer in respect of the tax year in which such plant or machinery is installed, or where the tax payable is less than the amount of credit as aforesaid, the amount of the credit or so much of it as is in excess thereof, as the case may be, shall be carried forward and deducted from the tax payable by the taxpayer in respect of the following tax year and so on, but no such amount shall be carried forward for more than two tax years in the case of investment referred to in sub-section (1) and for more than five tax years in respect of investment referred to in sub-section (4), however, the deduction made under this section shall not exceed in aggregate the limit specified in sub-section

(1)or sub-section (4), as the case may be.] Chapter III – Tax on Taxable Income 1[ ] 2[ ] 3[ ] 4[ ] 1 Added by the Finance Act, 2010. 2 Section 65C omitted by the Finance Act, 2021. Earlier this omission was made through Tax Laws (Second Amendment) Ordinance, 2021. The omitted section read as follows: