Income Tax deduction on all the electricity bills is not directly refundable. Whether you are using the electricity under any company like LESCO, GEPCO, MEPCO or K-Electric the deduction of income tax return is still not directly refundable. The section 235 of Income Tax Ordinance 2001 discuss about the tax deduction on consumption of electricity.
Income Tax deduction on electricity bill is a form of advance tax that acts as an advance payment towards your final tax liability. Let see an example to understand.
Suppose, you have a tax liability of Rs. 50,000 rupees to pay in the current financial year. In the same year you have paid income tax on your electricity bill of Rs. 40,000. Now you can adjust your admitted income tax with your electricity tax that you have paid in advance. Resultantly, you have to pay only Rs. 10,000. This is how you cannot get direct refund of your income tax paid on your electricity bill but you can adjust it in the final tax liability.
Now let’s see how section 235 in actually works:
Understanding Section 235
Section 235 authorizes electricity providers to collect advance tax at specific rates on your bill. According to section 235, “there shall be collected advance tax at the rates specified in Division IV of Part-IV of the first schedule. The tax rate is specified on the amount of the electricity bill of a commercial or industrial or domestic consumer.
There’s also a tax exemption for those domestic consumers who appears on the Active Taxpayers List. As no income tax shall be collected from them.
Similarly, this advance tax shall not be collected from a person who produces a certificate from the Commissioner that his income during the current tax year is exempted from tax.
In the case of a taxpayer other than a company, if the bill amounting to Rs. 360,000 per year then it is treated as minimum tax on the income of such person and no refund would be allowed.
In an other case of a taxpayer not as a company, tax collected on monthly bill over and above Rs. 30,000 per month, then is adjustable; and
in case of a company, tax collected shall be adjustable against tax liability.
So now it is clear that income tax deduction on electricity bill is not directly refundable rather is adjustable in the final tax liability.
Let’s understand the different tax rates on electricity consumption.
Different Tax Rates on Electricity Consumption
There is a clear different between a commercial and industrial consumer than a domestic one. In the below table I have given the tax rates of a commercial and industrial electricity consumer:
| Sr. No | Gross Amount of Bill | Tax Rate |
|---|---|---|
| 1 | upto Rs. 500 | Zero |
| 2 | If exceeds Rs. 500 but does not exceed Rs. 20,000 | 10% of the amount |
| 3 | If exceeds Rs. 20,000 | Rs. 1950 plus 12% of the amount exceeding Rs. 20,000 for commercial consumers. Rs. 1950 plus 5% of the amount exceeding Rs. 20,000 for industrial consumers. |
For a domestic electricity consumer, rate of tax to be collected shall be as:
- Zero percent if the amount of the monthly bill is less than Rs. 25,000
- 7.5% if the amount of monthly bill is Rs. 25,000 or more
Now during filing of income tax returns, a person must declare his tax as it will be give much benefit in the final tax liability. I hope you will find this article helpful if yes, then must visit the relevant articles given below.
Also Read:
- Learn Income Tax Return at your home
- How Section 114B of the Income Tax Ordinance Impacts Taxpayers in Pakistan
- Understanding Section 7(e) of Income Tax Ordinance 2001
- How to File Tax Return for Salary Person in 2024
