ISLAMABAD: Federal Government has withdrawn the tax exemptions provided to education institutions running under NGOs, NPOs and welfare trusts. Instead of that they will now receive 100% tax credit facility equal to their payable tax but private charity institution that were not active in welfare efforts will not eligible for this privilege too.
The three mandatory conditions to get 100% tax credit were that NGOs should submit Tax returns, withholding tax statements and details about payable tax to FBR.
After the amendment through the Finance Act, 2014 to Income Tax Ordinance, 2001, the NPOs/NGOs have been allowed tax credit instead tax exemption for the tax year 2015, and later are to be issued certificate.
The certificate, however, linked with the filing of income tax return but the tax year was not mentioned. Several NPOs/ NGOs were denied the issuance of exemption certificate for the tax year 2015.
According to an explanation on Finance Act, 2014 issued by the FBR, all the exemptions have been withdrawn in this respect and replaced with tax credit equal to the amount of tax payable on such income. The FBR also said that approval already obtained in respect of NPOs, trust and welfare institutions shall continue to be valid.
The FBR said that the concept of providing such concessions in case of NPOs was a preferable method and would promote documentation of tax laws by NPOs/NGOs.
The FBR said that earlier income of the trust, welfare institutions, non-profit organizations, religious and charitable institutions, universities, etc. was exempt from tax and they were allowed to get exemption certificate.
It further said that since the exemption had been withdrawn and replaced with 100 percent tax credit, a equivalent amendment had also been made in the Income Tax Ordinance, 2001 for grant of exemption.