For any motor vehicle leased by a Sharia compliant scheme or through the conventional mode of financial assistance, non-filers of income tax returns will be required to pay an advance tax of 4 percent.
The Sharia Compliant Mode
Under the Sharia compliant mode, Section 231B of Income Tax Ordinance 2001, non-filers are required to pay a tax on motor vehicles leased to them.
The Federal Board of revenue (FBR) explained this new tax for non-filers buying vehicles through the Sharia Compliant mode.
Imposition Of Tax Explained By FBR
The FBR said that prior to the Finance Act of 2017, an advance tax at a rate of 3 percent was obligatory to be collected under Section 231B of the ordinance upon leasing a motor vehicle to a non-filer.
The following were obliged to collect the tax:
- Every leasing company
- Scheduled bank
- Investment bank
- Development finance institution or modaraba
In addition to the above institutions, the collection of this tax has been extended to non-banking financial institutions and both Sharia compliant or conventional mode of leasing. Whether cars are leased via Ijara or some other method, the new tax rate will be applicable.
In short, everyone who hasn’t filed tax returns and buys a car on lease from any institution; he or she will have to pay 3 percent to 4 percent of the motor vehicle’s value as advanced tax.