Section 195 of the Income Tax Ordinance, 2001 provides for imprisonment of up to two years, a fine or both for knowingly or recklessly making materially false or misleading statements to tax authorities.
The Federal Board of Revenue (FBR) has warned taxpayers about the legal consequences of submitting false or misleading statements under the Income Tax Ordinance, 2001 for Tax Year 2027.
The FBR has issued the Income Tax Ordinance, 2001, updated up to June 30, 2026, covering Tax Year 2027, which runs from July 1, 2026, to June 30, 2027. Section 195 outlines the prosecution provisions for making false or misleading statements to income tax authorities.
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Under Section 195, a person commits an offence by making a statement to an income tax authority that is false or misleading in a material particular. The same provision applies when a person omits information from a statement and the omission makes it materially misleading.
Penalties for false tax statements
The law provides for different penalties depending on the circumstances of the offence.
Where a false statement or omission is made knowingly or recklessly, the person may face a fine, imprisonment for a term not exceeding two years, or both upon conviction.
In other cases, where the statement or omission does not fall within the knowingly or recklessly category, the law provides for a fine.
However, Section 195 also sets out a safeguard. A person will not commit an offence under this section if they did not know, and could not reasonably have been expected to know, that the statement was false or misleading.
The provision also refers to entry No. 10 in the table under Section 182(1) for determining whether a person has made a statement to an income tax authority.
Importance for taxpayers
The provisions highlight the importance of providing accurate and complete information when dealing with the FBR. Taxpayers should ensure that statements submitted to the authorities do not contain materially false information or omit details in a way that creates a misleading impression.
The potential consequences depend on the circumstances and the applicable legal provisions, with imprisonment of up to two years reserved under Section 195 for knowingly or recklessly making false or misleading statements.
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