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Income tax exemption: religious bodies' rating by private agency from July

ISLAMABAD (October 01 2003): The Central Board of Revenue (CBR) has decided to start certification/rating of non-profit/religious organisations through independent rating agencies from July 1, 2004.

Sources said here on Tuesday that the existing procedure for the approval of non-profit organisations would continue up to June 30, 2004.

The CBR would give income tax exemption on the donations/ property income to these institutions/trusts on the basis of certification/rating by these agencies.

In this connection, the CBR would allow Pakistan Centre for Philanthropy (PCP) to work as an independent rating agency to evaluate/certify non-profit organisations/trusts etc eligible for income tax exemption.

Moreover, TVO of United Nations is also getting authorisation to act as a certified agency for the CBR.

Initially, PCP has informed CBR that it would not be in a position to conduct rating of institution, fund, trust, society or any other organisation providing religious/charitable and community services from 2003.

As the agency's set-up is under process, it would become fully operational from July 2004.

Till that time, the CBR would itself conduct rating/certification exercise for the purpose of income tax.

Sources said that the income spent for the charitable purposes and donations/property income is exempt from income tax.

However, business income is not exempt under the law.

The rating agencies would also see transparency in the financial transactions and resource mobilisations of the non-profit organisations.

The CBR has issued a draft amendment in the Income Tax Rules 2002 through SRO. 931(I)/2003 to inform non-profit organisations that rating agencies would start their work from July 2004.

Following is the text of the draft amendment in the Income Tax Rules 2001: S. R. O. 931(I)/2003.

The following draft amendments in the Income Tax Rules, 2002, proposed to be made in exercise of the powers conferred by section 237 of the Income Tax Ordinance, 2001 (XLIV of 2001), is hereby published, for the information of all persons likely to be affected thereby, and notice is hereby given that the draft will be taken into consideration after fifteen days of its publication in the official Gazette.

2. Any objection or suggestion, which may be received from any person, in respect of the said draft amendments before the expiry of the aforesaid period, shall be considered by the Central Board of Revenue.

DRAFT AMENDMENTS

In the aforesaid Rules, –

(1) In rule 211, sub-rule (2) after clause (g) full stop shall be substituted with a semi-colon and following provisos shall be inserted namely:

“Provided that till the approval of two such agencies, the applicant organisation shall have an option to get its performance appraised by CBR;

Provided further that CBR or its officers, shall apply the same parameters on applicant organisations for the purpose of aforesaid evaluation as are approved by the CBR to be applied by the certification agency.”

(2) In rule 214, after sub-rule (2) full stop shall be substituted with a semi-colon and following proviso shall be inserted, namely:-

“Provided that notwithstanding anything contained herein, for the purposes of this rule, clause (g) of sub-rule (2) of rule 211 shall take effect from July 1, 2004.”

(3) In rule 219, the words and figures “calendar year 2002 within the time specified before June 2003” shall be substituted by the words and figures “and up to calendar year 2003 by the 30th day of June 2004”.

(4) In rule 220A, sub-rule (1), clause (b) after sub-clause (vi), the words “by an authority designated by the Government of Pakistan for this purpose or till that authority is established, under arrangements made by the Central Board of Revenue” shall be substituted by the words “and appointed by the Central Board of Revenue:” and thereafter following provisos shall be inserted:-

“Provided that the CBR shall also receive applications for performance appraisal and certification of applicant organisations till at least two such agencies have been appointed:

Provided further that CBR or its officers shall apply the same parameters on applicant organisations for the purpose of aforesaid evaluation as are approved by the CBR to be applied by the certification agency.”

(5) In rule 220A, in sub rule (10), the words and figures “2002 by the 30th June, 2003” shall be substituted by the words and figures “2003 by the 30th June, 2004”.

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