In a move aimed at providing flexibility and mitigating financial burdens for taxpayers, Section 183 of the Income Tax Ordinance, 2001 grants the Federal Board of Revenue (FBR) and the Commissioner Inland Revenue (IR) the authority to exempt individuals or classes of persons from penalties and default surcharges.
The provision, incorporated through the Finance Act, 2021 and updated up to June 30, 2021, allows for exemptions under specific conditions and limitations, providing a mechanism for relief in certain situations.
Text of Section 183 – Exemption from Penalty and Default Surcharge:
Section 183 of the Income Tax Ordinance, 2001 reads as follows:
183. Exemption from penalty and default surcharge. The Federal Government may, by notification in the official Gazette, or the Board by an order published in the official Gazette for reasons to be recorded in writing, exempt any person or class of persons from payment of the whole or part of the penalty and default surcharge payable under this Ordinance subject to such conditions and limitations as may be specified in such notification or, as the case may be, order.
(1) Empowering the Federal Government and the Board: Section 183 grants authority to both the Federal Government and the FBR to provide exemptions from penalties and default surcharges. The Federal Government can issue notifications in the official Gazette, while the FBR can issue orders, both of which require written reasons for the exemption. This dual authority offers a flexible and responsive approach to addressing specific cases where relief is deemed necessary.
(2) Conditions and Limitations: Exemptions are not unconditional. The provision stipulates that any exemption granted will be subject to conditions and limitations specified in the notification or order. This ensures that exemptions are applied judiciously and in accordance with the circumstances of each case. The conditions and limitations may vary, catering to the specific needs and challenges faced by individuals or classes of persons seeking relief.
(3) Financial Relief Mechanism: The inclusion of Section 183 in the Income Tax Ordinance, 2001 reflects a recognition by tax authorities of the diverse financial challenges faced by taxpayers. The provision serves as a mechanism to provide relief to those who may find it difficult to meet their tax obligations, emphasizing a balanced and empathetic approach in tax administration.
(4) Transparent Decision-Making: The requirement for written reasons in the notification or order ensures transparency in the decision-making process. Taxpayers can have confidence that exemptions are not arbitrary but are based on well-documented justifications. This transparency contributes to building trust between taxpayers and tax authorities.
(5) Alignment with Policy Objectives: The authority granted under Section 183 aligns with broader policy objectives of fostering a taxpayer-friendly environment. It allows the government and tax authorities to tailor their approach, considering the unique challenges faced by certain individuals or classes of persons. This flexibility is essential for maintaining a dynamic and responsive tax system.
Section 183 of the Income Tax Ordinance, 2001 introduces a mechanism for the grant of exemptions from penalties and default surcharges, providing a tool for financial relief under specific conditions and limitations. The dual authority granted to the Federal Government and the FBR, along with the requirement for transparent and documented justifications, underscores the commitment to fairness and flexibility in tax administration. Taxpayers are encouraged to stay informed about potential exemptions and to engage with tax authorities when facing financial challenges that may warrant relief under this provision.
