Tax Book 2023

Banking Business Chapter- 27

Section

Topic covered

(For CA Mod F & ICMAP students)

100A Special provisions relating to banking business

7 th Schedule Rules for the computation of the profits & gains of banking company & tax payable thereon

Practical example

MCQ’s with solutions

Special provisions relating to banking business [section 100A]

1. 
   

   Rules in 7th schedule shall apply in calculating the income, profit and gain of a banking company

   
   


2. 
   

   Sub-section (1) shall apply form tax year 2009 and onward.

   
   


3. 
   

   Notwithstanding anything contained in sub-section (1), income, profits and gains and tax payable

   
   

thereon shall be computed subject to the limitations and provisions contained from sections 101 to 112.

The seventh schedule

rules for the computation of the profits and gains of banking company and tax payable thereon

(1) Subject to the provisions of section 101 to 112 the following adjustments shall be made, where
applicable, in the total net income, profit and gains before tax from all sources as per annual accounts
reported to the State Bank of Pakistan.
(a) Accounting depreciation, initial allowance and amortization shall be added back to the income
while tax depreciation, initial allowance and amortization shall be allowed u/s 22, 23 and 24. In
case of asset given on finance lease, any deduction or allowance shall be inadmissible.
(b) Provisions of deductions not admissible u/s 21, depreciation allow-ability on disposal of
depreciable asset u/s 22(8) and computation of cost and disposal consideration u/s 75 to 79
shall apply accordingly.
(c) If the actual provision of advances and off balance sheet items is greater than the 1% (5% of
for consumers and SME’s) of total advances then the provision shall be restricted to 1% or 5%
as the case may be, of total advances otherwise actual provision shall be allowed on having
certificate from the external auditor that the provision is in line with the prudential regulations.
However the excessive provision over 1% or 5% as the case may be, shall be carried over in
subsequent years.
If provisioning is less than 1% of advances, for a banking company then actual provisioning for the
year shall be allowed. Further that if provisioning is less than 5% of advances for consumers and
small and medium enterprises (SMEs) then actual provisioning for the year shall be allowed and this
provisioning shall be allowable from the first day of July, 2010.
Explanation.— For removal of doubt, it is clarified that—
i. provision for advances and off balance sheet items allowed under this clause, at the
rate of 1% or 5%, as the case may be, shall be exclusive of reversals of such
provisions;

27 Banking business

Chapter