FBR directs issuing exemption certificates to gratuity, provident funds

FBR directs issuing exemption certificates to gratuity, provident funds

ISLAMABAD: Federal Board of Revenue (FBR) has issued directives for grant of income tax exemption to gratuity and provident funds.

Through an office order, the FBR issued directives on complaints received from taxpayers that tax offices were refusing to grant income tax exemption against gratuity funds/ provident funds.

The FBR expressed concern on the treatment being given by some field formations on the provident funds/ gratuity funds requests for exemption certificates under section 159/150/151 of the Income Tax Ordinance, 2001.

The FBR said that the taxpayers had pointed out the exemption granted to the funds prior to tax year 2013, the tax offices were refusing the request for exemption certificates.

The tax offices were asking the taxpayers to move fresh applications for recognition of the funds on the pretext that the fact of their approval is not available/evident in the FBR’s system IRIS.

The FBR clarified the position by stating that the exemption requests of recognized provident/gratuity funds cannot be refused. Therefore, the revenue body directed the tax offices to process the exemption certificate requests of all the provident / gratuity funds who produce evidence of recognition under the relevant rules framed under the Income Tax Ordinance, 2001 or repealed law Income Tax Ordinance, 1979.

“Further, asking for fresh applications for recognition merely on the pretext that such recognition is not available on the system is not a valid excuse,” the FBR directed.

However, the FBR cautioned the tax offices: “Mere issuance of exemption certificate under section 159 of the Income Tax Ordinance, 2001 does not foreclose the possibility of reviewing/recalling such action in case it is later-on discovered that the taxpayer produced some incorrect/invalid or wrong evidence for obtaining the favor.”

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