The Federal Board of Revenue (FBR) in Pakistan has introduced a noteworthy amendment, providing substantial relief to taxpayers falling under the Final Tax Regime (FTR).
According to the updated Income Tax Ordinance, 2001 (ITO 2001), individuals falling under the Final Tax Regime are no longer required to file income tax returns under Section 114, marking a significant departure from the conventional filing obligations.
The amendment, communicated through an updated version of the Income Tax Ordinance, 2001, brings about a relaxation in the conditions of filing income tax returns for those taxpayers governed by the Final Tax Regime. This move is expected to simplify compliance requirements for this specific category of taxpayers and streamline the overall tax filing process.
Section 169: Tax Collected or Deducted as a Final Tax:
The heart of this amendment lies in Section 169 of the Income Tax Ordinance, 2001, which specifies the treatment of tax collected or deducted as a final tax. The key provisions of this section are outlined as follows:
Sub-Section (1): This section applies when the advance tax collected or paid is deemed as a final tax under various specified sections of the ordinance, including Section 148, 148A, and Section 234A. It also covers cases where tax is required to be deducted and treated as final tax under specific sub-sections mentioned in Section 151, Section 152, Section 153, Section 154, Section 156, and Section 233.
Sub-Section (2): Under this section, if tax is collected or deducted as a final tax, certain implications follow:
• The income is not chargeable to tax under any head of income.
• No deduction is allowable for any expenditure incurred in deriving the income.
• Deductible allowances under Part IX of Chapter III are not applicable.
• The tax deducted shall not be reduced by any tax credit allowed under this Ordinance.
• There shall be no refund of the tax collected or deducted unless it is in excess of the amount for which the taxpayer is chargeable under this Ordinance.
Sub-Section (3): If all income derived by a person in a tax year is subject to final taxation under the specified provisions, the person is deemed to have undergone an assessment under Section 120, and there is no requirement to furnish a return of income under Section 114 for the year.
Sub-Section (4): In cases where separate rates for filers and non-filers have been prescribed for final tax, the tax rate for filers shall apply, and any excess tax deducted or collected on account of the higher rate for non-filers is adjustable in the return filed for the relevant tax year.
Implications and Simplification:
This amendment, particularly the relaxation from filing income tax returns for those under the Final Tax Regime, is anticipated to simplify the compliance process for a specific segment of taxpayers. The provisions outlined in Section 169 underscore the finality of the tax treatment for certain categories, reducing the administrative burden on taxpayers and streamlining the tax collection process.
As the FBR continues to refine the tax framework, this amendment demonstrates a commitment to enhancing efficiency and reducing unnecessary complexities in the tax system, ultimately benefiting both taxpayers and tax authorities alike.
