This Blog is written by Mr. Muhammad Kaleem Majeed, Manager, Taxation Advisory Services. Pleas read this blog and provide your valued Comments

PROCEDURE FOR CHANGE OF RATE FOR SMALL COMPANIES IN IRIS

“You don’t get gushers of revenue by raising tax rates. You get it through expansion”

 The purpose of this blog is to explain the procedure for having the effect of reduced rate on IRIS portal for small companies as provided in Income Tax Ordinance, 2001.

CONDITIONS FOR SMALL COMPANY

“Small company” means a company

Description Existing Condition
Registration under Companies Ordinance, 1984 [Now Companies Act, 2017]     on or after July 1, 2005               

 
Paid up capital + undistributed reserves Equal to or, less than 50 million
Employees any time during the year Equal to or, less than 250
Annual turnover Equal to or, less than 250 million
Not formed By the splitting up or the reconstitution of a company already in existence

Reference:       Section 2(59A) of the Income Tax Ordinance, 2001

RATE FOR SMALL COMPANY

Where the taxpayer is a small company as defined above, the tax shall be payable at the rates mentioned below 

Tax Year Rate of Tax
2019 24%
2020 23%
2021 22%
2022 21%
2023 and onwards 20%

Reference:       Division II, Part I OF First Schedule of Income Tax Ordinance, 2001

PROCEDURE

Online application on IRIS for the relevant tax year under section 2(59A) of ITO, 2001 is required to be filed before Commissioner having jurisdiction in concerned tax office.

DOCUMENTS REQUIRED

  1. Application on company’s letterhead for change of rate
  2. Certified copy of Incorporation Certificate
  3. Certified copy of Form A showing particulars of paid-up capital
  4. Latest audited accounts along-with certificate from auditors that company’s paid up capital and undistributed reserves are not exceeding Rs. 50 million
  5. Month wise payroll sheets of complete year
  6. Undertaking on stamp paper from taxpayer

Muhammad Kaleem Majeed