Karachi, August 1, 2024 – The Federal Board of Revenue (FBR) has elaborated on the penalties for non-compliance introduced through the Finance Act, 2024. These amendments to the Income Tax Ordinance, 2001, are aimed at enhancing tax compliance and ensuring stricter adherence to tax laws.
The FBR highlighted that prior to the Finance Act, 2024, there were no penalties or prosecution measures for individuals who discontinued their business and failed to file a return, even in response to a notice issued by the concerned commissioner. To address this, the Finance Act, 2024, has inserted serial 1B to Section 182 of the Income Tax Ordinance. This new provision states that if a business is discontinued and the taxpayer fails to file a return in response to a notice, a penalty will be imposed. The penalty will be the higher of 0.1% of the tax payable for the tax year for each day of default or Rs 1,000 per day of default, subject to a minimum penalty of Rs 10,000 for individuals and Rs 50,000 for other persons.
Additionally, the Finance Act, 2024, has introduced serial 3A under Section 182, prescribing penalties for non-compliance with Section 99B. According to this provision, if a trader fails to register or pay advance tax under the Tajir Dost Special Procedure, 2024, their shop will be sealed for seven days on the first default and for twenty-one days for each subsequent default.
A new penalty under serial 10A has been established for non-compliance with Section 114B. If any person fails to comply with an income tax general order issued by the FBR within 15 days, they will face a penalty of Rs 50 million for the first default and Rs 100 million for each subsequent default. This penalty is applicable from a date to be notified by the FBR.
To address non-compliance with Section 37(6), serial 12A has been introduced. This provision targets individuals who fail to pay tax at the time of making payment as consideration for shares or at the time of registration of shares by the Securities and Exchange Commission of Pakistan (SECP) or by the State Bank of Pakistan (SBP), whichever is earlier. Such individuals will be subject to a penalty equal to 50% of the amount of tax involved.
The FBR also noted measures to address the filing of blank documents or annexures along with returns. Through the insertion of serial 35 in Section 182, a penalty has been introduced for companies, including banking companies and associations of persons (AOP), for submitting blank or incomplete documents. The penalty for such non-compliance is Rs 500,000 or 10% of the tax chargeable on the taxable income, whichever is higher.
These amendments reflect the FBR’s commitment to enforcing tax laws more rigorously and ensuring greater compliance among taxpayers. By imposing stringent penalties for non-compliance, the FBR aims to deter tax evasion and enhance the integrity of the tax system.
The FBR encourages all taxpayers to familiarize themselves with these new provisions and ensure timely and accurate filing of their tax returns to avoid the substantial penalties outlined in the Finance Act, 2024.