The Federal Bureau of Revenue (FBR) has decided to collect lifetime income tax from the owners of cars with engine capacities ranging up to 1000cc. This has been done under the umbrella of lifetime token tax collection which already exists for these small cars. This seems like the FBR is taking advantage of the situation by putting an extra burden on the lower middle class of Pakistan. People will see this as an additional financial burden considering they have to pay the income tax in a lump sum.
Under the new measures, the owners of cars up to 1000cc engine capacity will have to pay a lump sum amount of PKR 20,000. This amount contains an income tax of PKR 10,000 if the owner is a taxpayer. An additional amount of PKR 10,000 will be collected if the owner is not a taxpayer. Earlier owners of these cars had to pay PKR 1,800 per annum, which included PKR 800 as income tax. This is a sweeping measure for those people who do not want to pay a significant amount up front.
In the case of pensioners, an application has to be submitted to explain that the owner does not have additional income. The application will be submitted to the income tax commissioner. If the commissioner fails to respond within a month, the pensioner will automatically get an exemption.
The lifetime token tax on cars up to 1000cc was introduced in the Finance Act 2019 for Islamabad. Previously, the option to pay token tax on an annual basis was available for this class of cars registered in Islamabad. Sindh government has also introduced a lifetime token tax following the federal capital from July 1st. In the case of Punjab, the lifetime token tax for cars up to 1000cc was introduced back in 2012.
In the case of renewal of registration, the income tax rates are lower compared to a new registration. Lifetime token tax has also been introduced for scooters and motorcycles in Sindh and Islamabad. However, the KPK and Balochistan authorities are sticking to the old annual token tax collection.
The excise department has also laid out lifetime token tax rates for cars and jeeps over 1000cc engine capacity. This has been done to facilitate the extension of lifetime token tax collection to bigger vehicles by provinces. The collection of token tax and income tax on a lifetime basis will free people from the hassle of waiting in long queues and taking the time out to deposit annual payments. Moreover, the tax revenue will also increase dramatically with the collection of lifetime token and income tax on cars in the short term.
Tell us about your opinion in the comments section below on collecting token tax for a lifetime versus collecting it on an annual basis. Stay tuned for more informative content on similar issues.
Desperate measure to boost income tax collection is what this is. If I buy a new car (Lets say an Alto) I pay 10,000 income tax (which as a salaried individual, I will claim from my employer as I don’t have to pay income tax twice on the same source) and when I sell it after lets say 4 years, I will still have paid an extra 6,800 in income tax which of course I’ll add to the sale price.
On the plus side, the only benefit to the scheme is that it will be just one trip to the bank / excise and taxation office for that particular car.