Karachi, July 30, 2024 – In a bid to ensure timely compliance with income tax filing requirements, the Federal Board of Revenue (FBR) has announced the imposition of higher withholding tax rates on late filers and non-filers. This significant change has been enacted through amendments in the Finance Act, 2024.
The FBR released Circular No. 1 of 2024-25 of Income Tax, which elaborates on crucial amendments made to the Income Tax Ordinance, 2001. The Finance Act, 2024 has expanded the scope of Section 100BA and the Tenth Schedule of the Ordinance to include additional categories of taxpayers subject to higher withholding taxes.
Prior to these amendments, Section 100BA of the Income Tax Ordinance, 2001, outlined higher withholding tax rates for individuals not listed in the Active Taxpayers List (ATL). However, the recent changes have broadened this provision to target those who, despite appearing in the ATL, have failed to file their income tax returns by the specified deadlines.
Specifically, the amendment to Section 100BA and the introduction of Rule 1A in the Tenth Schedule now categorize taxpayers into two distinct groups for the application of higher withholding tax rates. The first group comprises individuals not appearing in the ATL at the time of a transaction. The second group includes those who are listed in the ATL but have not filed their returns within the due date specified in Section 118 of the Income Tax Ordinance, 2001, or within any extensions granted under Sections 119 or 214A.
The FBR’s decision to implement these changes aims to promote punctual tax filing and broaden the tax base by penalizing late filers. The move is expected to enhance revenue collection and encourage more taxpayers to comply with deadlines, thereby contributing to the overall economic stability of the country.
Tax experts have noted that this measure underscores the FBR’s commitment to enforcing tax compliance. “By imposing higher withholding taxes on late filers and non-filers, the FBR is sending a strong message about the importance of timely tax compliance,” said one industry analyst. “This will likely lead to an increase in the number of individuals who adhere to filing deadlines.”
In summary, the FBR’s recent amendments to the Income Tax Ordinance, 2001, as enacted through the Finance Act, 2024, signify a robust effort to enforce tax compliance. By targeting late filers and non-filers with higher withholding tax rates, the FBR aims to streamline the tax filing process, increase revenue, and support Pakistan’s fiscal health.