Tax credit for charitable organizations Section 100C
Tax credit for charitable organizations Section 100C: Section 100C has be restructured in order to bring clarity for eligibility of 100% tax credit. Restructuring changes are as follows;
The conditions and limitations to claim tax credit under Section 100C has been removed from sub section (1) and has been added to subsection (4) to the same section, with no changes in the Conditions and limitations except as follows:
i) Withholding tax statements are now required to be filed for the relevant tax year for which credit is being claimed;
ii) Condition for obtaining approval of NPO under section 2(36), for the organization listed in Table II of Clause (66) would take effect from July 1, 2022 (instead of July 1, 2021) and the requirements of section 2(36) shall not be applicable for years prior to July 1, 202.
The taxation of surplus funds of non-profit organization and the definition of surplus funds previously provided under sub-section 1A and 1B has been omitted and added to subsection (5) and (6) to the same section, with no changes in the taxation of surplus funds of nonprofit organization and the definition of surplus funds.
Previously the Persons and income eligible for Tax credit were provided under sub-section 2 of Section 100C. Now the Amendment Ordinance bifurcate the Persons eligible for Tax credit and income eligible for Tax credit under Section 100C vide insertion of sub-section 2 and sub-section 3. The proposed restructuring adds the eligible persons and incomes as follows;
Eligible Persons for tax credit
a) Institutions, foundations, societies, boards, trusts and funds as are provided in Second Schedule, Clause (66) of Table 2 of the Income Tax Ordinance, 2001;
b) a welfare institution registered with Provincial or Islamabad Capital Territory (ICT) social welfare department;
c) a not-for-profit company registered with the Securities and Exchange Commission of Pakistan under section 42 of the Companies Act, 2017;
d) a welfare society registered under the provincial or Islamabad Capital Territory (ICT) laws related to registration of co-operative societies; and (e) International non-governmental organizations (INGOs) approved by the Federal Government
Eligible Income for tax credit
a) Income from donations, voluntary contributions, subscriptions; b) Income from house property;
c) Income from investments in the securities of the Federal Government;
d) Profit on debt from scheduled banks and microfinance banks;
e) Grants received from Federal, provincial, local or foreign Government;
f) Income from business to the extent that the same is expended in Pakistan for welfare purposes provided that only such extent of income shall be eligible for tax credit that bears the same proportion to income from all sources;
g) Any income of persons specified in Table II of clause (66) of Part I of the Second Schedule to the Ordinance;
h) Any income of a trust administered under a scheme approved by the Federal Government;
i) Any income of a university or educational institute being run by non-profit organization j) existing solely for educational purposes and not for the purpose of profit.