Section 138A of the Income Tax Ordinance, 2001, allows the FBR to refer unpaid tax demands to a District Officer (Revenue), while Section 138B addresses tax liabilities involving bankrupt estates.
ISLAMABAD: The Federal Board of Revenue (FBR) can recover outstanding income tax through a District Officer (Revenue) by treating unpaid tax as an arrear of land revenue during Tax Year 2027.
The provisions are outlined in Sections 138A and 138B of the Income Tax Ordinance, 2001, updated up to June 30, 2026, for the tax year running from July 1, 2026, to June 30, 2027.
Under Section 138A, the Commissioner may forward a recovery certificate to the District Officer (Revenue) of the district where the taxpayer resides, carries on business or owns property.
The certificate specifies the amount of tax due from the taxpayer. Upon receiving it, the District Officer (Revenue) is required to recover the specified amount as if it were an arrear of land revenue.
District officer empowered to recover tax
Section 138A(2) further provides that the District Officer (Revenue) has powers similar to those exercised by a civil court under the Code of Civil Procedure, 1908, for recovering amounts due under a decree.
These powers are available without prejudice to any other authority vested in the District Officer (Revenue) for recovery purposes.
The provision establishes a mechanism through which the FBR can use the district revenue administration to recover outstanding tax liabilities.
Tax liability of bankrupt estates
The FBR has also outlined the treatment of tax liabilities when a taxpayer is declared bankrupt under Section 138B of the Ordinance.
According to Section 138B(1), the taxpayer’s liability under the Income Tax Ordinance passes to the estate in bankruptcy.
Under subsection (2), tax liability incurred by the bankrupt estate is treated as a current expenditure in the estate’s operations.
The provision further stipulates that such tax must be paid before the claims of other creditors are settled.
These provisions address two distinct aspects of tax recovery: the use of district revenue authorities to collect unpaid tax and the treatment of tax liabilities when a taxpayer’s estate is subject to bankruptcy proceedings.
Taxpayers and relevant estate administrators should examine the applicable provisions to understand their obligations and the procedures governing recovery of outstanding tax.