Karachi, November 3, 2024 – The Federal Board of Revenue (FBR) has issued a streamlined procedure for taxpayers seeking income tax refunds under the Income Tax Ordinance, 2001. In a detailed announcement, the FBR outlined the steps required to apply for refunds under Section 170 of the ordinance, providing clarity for taxpayers who have paid more tax than what they owe.
Section 170 of the ordinance states that any taxpayer who has overpaid their tax obligations can apply for a refund from the Commissioner of Income Tax. Specifically, if a taxpayer has paid tax beyond the amount chargeable under the law, they are eligible to request reimbursement for the excess. Additionally, those who have repaid advances or loans previously treated as dividends may also claim a refund on any tax paid on such amounts.
To initiate the refund process, taxpayers must submit an application in a prescribed form, verified according to specified guidelines. The FBR mandates that refund applications be filed within three years of either the issuance of the assessment order or the payment date of the tax in question, whichever is later.
Once an application is received, the Commissioner will assess whether a tax overpayment has indeed occurred. Upon confirming the excess, the Commissioner will first apply the surplus towards reducing any other tax liabilities under the Income Tax Ordinance. Any remaining balance will be used to settle other outstanding tax obligations, with the remainder, if any, refunded to the taxpayer. The Commissioner is required to issue a written decision on the refund request within 60 days of receiving the application, after giving the taxpayer an opportunity to be heard.
Taxpayers dissatisfied with the Commissioner’s decision or who face delays beyond the stipulated timeframe may appeal under Part III of the ordinance’s relevant chapter.
In a further development, the FBR has also outlined an automated refund mechanism under Section 170A. Starting from the 2021 tax year, the FBR may electronically process and issue refunds directly to taxpayers who have filed their income returns without requiring a separate refund application. Refund amounts verified by the FBR’s computerized system will be automatically transferred to the taxpayer’s registered bank account.
This automated approach under Section 170A marks a significant step towards enhancing efficiency in Pakistan’s tax administration, reducing procedural delays, and ensuring timely refunds for compliant taxpayers. By introducing these new guidelines, the FBR aims to streamline the refund process, support taxpayer convenience, and improve compliance across the country.
