ISLAMABAD, June 17: The government has abolished withholding tax on bonus share, dividend income of mutual fund, private car with token tax, purchases by poultry processing unit, while it has rationalized withholding tax on pre-paid telephone cards of mobile as well as fixed telephones.

Through the finance ordinance of 2002-03, the withholding tax rate on government securities has been reduced from 30 per cent to 20 per cent and the tax rebate equivalent to 50 per cent has been allowed to taxpayers of 65 years or above having income of Rs200,000.

The taxation of allowances and perquisites of salaried taxpayers have been retained except for the only change that up to an income of Rs600,000 per year, senior post allowance and entertainment allowance have been made taxable.

According to the finance ordinance, in case of government employees the burden of tax would be grossed up so as not to decrease take home salary. While in case of persons earning salary income over Rs600,000, the house facility on yardage basis and cost of vehicles have been increased.

The government has fixed 10 per cent withholding tax on the pre-paid telephone cards of mobile as well as fixed telephone bill, while withholding tax on dividend income of mutual fund distributing 90 per cent of their income have been abolished.

Similarly, the withholding tax payable on private car with token has been abolished in respect of the cars which have been used in Pakistan for more than 10 years.

The government has reduced the taxable limit on national saving scheme from Rs300,000 to Rs150,000.

According to the finance ordinance 2002-03, the bonus share was not only exempted from withholding tax but also the bonus share has been taken out of the definition of dividend as well as income.

The value of motor car for depreciation purposes presently restricted to Rs7.5 lakh, was enhanced to Rs10 lakh, while annuity payment admissible as a deduction on average tax rate up to Rs50,000 was being raised to Rs100,000.

The mark up ceiling on housing loan facility presently available up to Rs50,000 has been raised to Rs100,000 and loan limit of Rs600,000 has been done away with.

Through the finance ordinance, the government has abolished the withholding tax on purchases by poultry processing unit. Furthermore, on export of processed poultry meat the withholding tax rate has been reduced to 0.75 per cent as against existing 1.25 per cent.

Fiscal incentives have been allowed for merger of banking and non-banking financial institutions. It will facilitate transfer/carry forward losses of the merged institution, tax admissibility of expenses on merger, continued availability of un-absorbed depreciation and different tax rates for banking and non-banking operation.