NAME AZEEM KHALIQ

ROLL NUM 121 BBA/13-F

3RD BATCH
SUBJECT
CORPORATE FINANCE
ASSIGNMENT STUDY BUDGET
2016-17

1.What are the changes you observed in this budget which are relevent to company taxes?
Finance Minister Ishaq Dar announced income tax benefits in his budget speech for promoting
industrialisation, attracting investment and creating jobs amid the highest unemployment level in
years and declining investment.they also extend benefits for listing of companies on the stock
exchange, expand the definition of greenfield projects and offer more incentives for housing
finance, said sources in the Federal Board of Revenue.
Income tax returns: Government mulls punitive measures against non-filers
the income tax benefits will largely be concentrated in the industrial sector and the government
will have little to offer in tax breaks to the services and agriculture sectors.
The unemployment rate is also estimated to be at a 13-year high in the last fiscal year. might be
announce a 100% increase in tax credit to 2% of the payable tax on creation of 50 new jobs and
their registration with the Employees Old-age Benefits Institution.
The tax credit will be available for 10 years from the date of establishing a new industrial unit.
Compared to the current expiry date of 2018, it may be extended to 2019.
the govt announced an increase in tax credit from 2.5% to 3% of the payable tax for the
manufacturers who are making over 90% of their sales to the registered sales tax persons.
However, he has rejected similar benefits for the purchasers.
BMR scheme
In order to promote modernisation and replacement of old machinery, the government may also
increase the tax credit available under the Balancing, Modernisation and Replacement (BMR)
scheme to 20% of the investment.
The scheme is going to expire next month and its current rate is 10%. However, it may be
extended for three more years in the upcoming budget.
The government may also enhance the limit for 20% tax credit on listing a company on the stock
exchange from one year to two years.
The period for listing benefits should be extended to five years to offset the impact of regulatory
burden on companies due to the listing, said Arif Habib, an industrialist and stock market
investor.
New industries
govennment announced additional tax benefits for establishing new industrial units in the
country. At present, 100% tax credit is allowed, if 100% fresh equity is raised through issuance of
new shares for setting up a new industrial concern. The tax credit is linked with the five-year
performance.

According to the new proposal, may reduce the equity limit to 70% and remaining 30% can be
arranged through borrowing. The scheme may be extended till June 2019. The tax credit will be
directly proportionate to the equity ratio also announce similar tax benefits for the expansion of
existing industrial units.
FBR plans to tax pension funds, non-profit organisations
governmet is expected to extend the 20% tax benefit scheme for attracting 50% foreign
investment for two more years. The facility is available for five years from the date of
production.the income tax exemption on investment in greenfield projects may be extended by
two more years
govt is also expected to expand the scope of sectors that can benefit from this tax holiday
package. Industries like aerated beverages, sugar, arms and ammunition, explosives, fertilisers,
cigarettes, cement, textile spinning units, flour mills, vegetable ghee and cooking oil
manufacturing may be brought under this package and also offer tax benefit allowance on getting
loans for constructing homes. Currently, the tax allowance is limited to only Rs1-million loan,
which may be increased to Rs1.5 million.
2.what are the changes you observed relevent to stock market which will
positively/negatively impact on invester decision?
the federal budget for 2016-17 will reduce trading volumes and drive investors away from the
stock market, according to capital market representatives.
Finance Minister Ishaq Dar proposed a number of budgetary measures that will have a direct
impact on the participants of the capital markets. This sector is expected to make its due
contribution to the national exchequer, and also said while announcing yet another
rationalisation in the capital gains tax (CGT) rates.
govt also nnounced a large number of incentives for the agriculture sector during his speech,
although its share in federal taxes is less than 1%. In contrast, total tax contribution of listed
companies was Rs562.3 billion in 2014-15, which equalled 21.7% of FBRs tax collection of
Rs2.6 trillion.
This is an anti-stock market budget. Every stock investor is already fully documented and taxcompliant, said Muhammad Yasin Lakhani, who serves as director on the board of the Pakistan
Stock Exchange (PSX).
They have not done away with capital value tax or the tax on bonus shares, which are totally
unjustified. In addition, they have tinkered with CGT rates and holding periods yet again, he
added.
the govt has proposed that the maximum taxable holding period for capital gains on shares be
extended from four to five years. This will force investors to hold on to their stocks for a longer
period of time to avoid excessive taxation, thus drying up trade volumes from the bourse.
The CGT rates for non-filers should be 18%, 16% and 11% for the holding period of up to one

year, two years and five years, respectively, the budget document say. Currently, the CGT rates
are 15%, 12.5% and 7.5% for the holding period of up to one year, two years and four years,
respectively
govt had imposed a one-time super tax last year on individuals, association of persons and
companies earning over Rs500 million for 2014-15 at the rate of 4% for banking companies and
3% for others.
The finance minister announced that the super tax will remain in effect for 2016-17 as well. The
decision will take away any gains that the corporate sector would have made because of the
reduction of 1% in its income tax rate in the next fiscal year.
Govt also proposed doubling the withholding tax rate of 0.01% on the commission of PSX
members, arguing that it is quite low. His proposals entail that the rate of tax on dividends in
the case of non-filers be increased from 17.5% to 20%. The tax withheld in excess of 12.5%,
however, will be adjusted in the case of return filing.
The proposed budget would also hurt the mutual funds industry. It proposes higher tax rates of
15% for non-filers receiving dividend from mutual funds. But more importantly, it proposes that
the upper limit of investment for senior citizens in the Behbood scheme of National Savings be
increased from Rs4 million to Rs5 million.
Many people invest in government-run National Savings Schemes (NSS) in the name of family
elders. These schemes offer a higher rate than money market mutual funds operated mostly by
private asset management companies.
As a result, growth in the asset base of the mutual funds industry has remained stunted in
Pakistan. The finance ministry utilises cheap funds generated through NSS mainly for debt
financing, which is not a productive use of public money.
"The decision to enhance the maximum investment limit for NSS will not bode well for the
mutual funds industry"
3.what is the concept of filler and non filler of tax in pakistan? Is there any change in tax
rate for both?
FILERS
They are not increasing the (existing) tax rate.It would remain unchanged for the (tax) filers,
Non-filers
those listed at PSX without having a National Tax Number (NTN), would see CGT rate to
increase by 2.5 percent.non-filers would also take a hit in terms of dividend tax which would be
enhanced from 17.5 to 20 percent in next budget.
4.What would be the role of CNIC from current year in Income Tax Return?
The role of CNIC is introduced in the Budget 2015/16 for facilitating the individuals in filing

income tax return who have taxable income or required by the law to file return.
The National Assembly has approved the use of Computerised National Identity Card (CNIC) in
place of National Tax Number (NTN) for filing income tax returns by individuals.
According to Section 114 of the ordinance, every person who obtained National Tax Number
(NTN) is required to file income tax return.
In Pakistan over 100 million people have obtained CNIC, which simply means that the Federal
Board of Revenue (FBR) should expect over 100 million returns for the year against around
875,000 returns filed last year.
5.Budget 2016-2017 is aimed to spur growth in pakistan.what specific steps where proposed
in budget 2016-2017 that will led to faster economice growth?
INDUSTRIAL DEVELOPMENT
Our industrial sector has shown good performance during the current year as it has registered a
growth rate of 6.8%, while Large Scale Manufacturing (LSM) has registered a growth of 4.6% in
FY2015-16. It is important that the process of industrial investment should be further accelerated
in the country for which the following concessions are announced for the industry:1) Enhancing Tax Credit on Employment Generation: In order to promote industrial growth and
employment generation tax credit @ 1% of the tax payable for a period of ten years that is
allowed for every 50 employees in an industrial undertaking to be set up by June 2018, is
proposed to be increased to 2%. This concession will be made available for 10 years to the
industrial undertakings set up by June 2019.
2) Tax Credit for Making Sales to Registered Persons: At present a manufacturer registered under
sales tax who is making over 90% sales to registered sales tax persons is entitled to a tax credit of
2.5% of tax payable. The tax credit is proposed to be enhanced from 2.5% to 3% of tax payable;
3) Tax Credit for Balancing, Modernization and Replacement (BMR) of Plant and Machinery: At
present, tax credit on BMR is allowable at the rate of 10% of investment
against tax payable for two years. In case of investment through 100% new equity, tax credit on
BMR is allowable at the rate of 20% of investment against tax payable for five years. The period
is proposed to be extended to 30th June 2019;
4) Tax Credit for Establishing New Industry: Till 30 June 2016, 100% tax credit on tax payable is
allowed if 100% fresh equity is raised for establishing new industry through issuance of new
Budget Speech 2016-17 shares. This tax credit is allowable for five years from start of
commercial production. It is proposed to reduce the condition of 100% fresh equity to at least
70% equity. In addition, period of setting up of new industrial undertaking, which is going to
expire on 30th June, 2016 is also proposed to be extended to June,2019;
5) Tax Credit for Expansion of Existing Plant or New Project: At present, 100% tax credit on tax

payable is allowed for expansion of existing plant or new project if 100% fresh equity is
raised through issuance of new shares. This tax credit is allowable for five years from start of
commercial production. It is proposed to reduce the condition of 100% fresh equity to at least
70% equity. Tax credit would be allowed, proportionately, on owned new equity. In addition, last
date for installation of the plant and machinery which is going to expire on 30th June 2016 is also
proposed to be extended to June, 2019;
6) Exemption on investment in green-field industrial undertakings: Period of exemption to
investment in green field industrial undertakings announced under Prime Minister's package of
investment that is going to expire on 30th June 2017 is proposed to be extended up to 30th June,
2019;
7) Reduction in Customs Duty on Raw Materials and Machinery: To further increase in GDP of
industrial sector existing customs duty of 5% will be reduced to 3% on twothousand items of
mostly machinery and raw materials, which will benefit industrial sector to the tune of Rs.18
billion;
8) Abolishing regulatory duty on Bead Wire: Bead wire is the raw material of the tyres
manufacturing industry which is currently subject to 10% customs duty and 30% regulatory duty.
This item is not locally produced. In order to provide incentive to the local tyres manufacturers, it
is proposed that regulatory duty may be exempted on import of Bead Wire.Budget Speech201617
6.historically,42 to 44 percent of our budget aimed at debt servicing ,do you think this
budget is any different for previous and how ?
Pakistan spent 44.5% of its total revenue to service debt payments in nine months till March 2015
compared to 47% spent during the same period of previous year, the Economic Survey 2014-15
Debt servicing ate up Rs1,193 billion during July-March 2014-15 against the annual budgeted
estimate of Rs1,686 billion,Around 76% of these payments were made on domestic debt, which
has grown in recent years.
As a percentage of GDP, Pakistans public debt came down to 61.8% by the end of March 2015,
compared to 62% during the same period last year.
Public debt stands at Rs16,936 billion with the major chunk (Rs11,932.2 billion) comprising of
domestic debt while component of external debt is around Rs5,004 billion.
Domestic debt increased by Rs1,012 billion in nine months till March 2015 over the same period
of last year.
This increase mainly stems from net issuance of PIBs and T-bills amounting to Rs781 billion
and Rs566 billion respectively, while the stock of Market Related Treasury Bills (MRTBs)
amounting to Rs605 billion was retired during the first nine months, states the survey.

While the countrys debt-to-GDP ratio has gradually increased in the last five years, the
government has been relying more on medium- to long-term credit instruments including
Pakistan Investment Bonds and Ijara Sukuk.
External debt and liabilities stood at $62.6 billion at the end of March 2015 out of which external
public debt was $49.1 billion.
Public external debt witnessed a decline of $2.3 billion during the first nine months of current
fiscal year despite net positive disbursements. This reduction in external debt was mainly
contributed by translational gain on account of appreciation of US dollar against other major
currencies, the survey added.
During the period under review, disbursements including loans and grants stood at $4,001 million
compared with $2,301 million during the same period last year.
Pakistan also received $2,106 million from the IMF. Importantly, net inflows from the IMF
stood at $1,041 million during the first nine months of current fiscal year compared with net
outflow of $861 million during the same period last year.
This pace of external inflows is likely to continue in the future, according to the survey.
Pakistan also returned to the international bond market in November 2014 and issued of $1billion sukuk bonds.
7.What particular initiatives have been taken to adress power issues in year ahead?
To save energy and promote alternate sources of energy, the following measures are being
proposed:
1) Concessions of Customs Duty on Local Manufacturing of LED Lights: Customs duty on
imports of parts of LED lights is being reduced from 20% to 5%
2) Incentivizing Import of Items used in Renewable Sources of Energy Technologies: As per
existing laws listed items used in renewable sources of technology are allowed duty free import.
More generic descriptions and classifications are proposed to be included in this list which
include items like led bulbs/lights, offgrid portable solar home system etc.
3) Extension in Relief on Import of Solar Panels: Import of solar panels and related components
were exempted from customs duty regardless of local manufacturing of their substitutes till
30th June 2016. It is proposed that this relaxation be extended till 30th June, 2017.
4) Exemption to Dumper Trucks for Thar Coal Field: Sales tax on import on dumper trucks for
Thar Coal is proposed to be abolished.