KARACHI- The Federal Board of Revenue (FBR) in Pakistan has been granted enhanced powers under the recently updated Income Tax Ordinance, 2001, enabling it to recover taxes directly from individuals or entities holding money on behalf of a taxpayer.
The amended Section 140 of the Income Tax Ordinance, 2001 outlines the procedures and conditions under which the FBR can exercise this authority.
Key Provisions of Section 140:
Sub-Section (1):
The Commissioner, as per the amended law, can issue a written notice requiring any person or entity to pay to the FBR a specified amount of money owed to or held on behalf of a taxpayer. This includes individuals or entities owing money to the taxpayer, holding money for the taxpayer, holding money on account of another person for payment to the taxpayer, or having the authority to pay money to the taxpayer.
Proviso: The Commissioner is restricted from issuing such a notice if the taxpayer has filed an appeal under section 127 concerning the order under which the tax becomes payable. However, this exception applies only if the taxpayer has paid ten percent of the tax amount due.
Sub-Section (2):
The amount specified in the notice shall not exceed the amount of tax due by the taxpayer. If the money held is equal to or less than the tax amount, the notice cannot demand more than the held money. In other cases, the notice can only demand an amount sufficient to pay the tax due.
Sub-Section (3):
For individuals or entities making a series of payments to a taxpayer (e.g., salary), the notice may specify an amount to be paid out of each payment until the total tax due is paid.
Sub-Section (4):
The specified date for payment in the notice shall not precede the date on which the money becomes payable to the taxpayer or is held on the taxpayer’s behalf.
Sub-Section (5):
Provisions of sections 160, 161, 162, and 163 shall apply to the amount due under this section, treating it as if it were required to be deducted from a payment under Division III of Part V of the Income Tax Ordinance.
Sub-Section (6):
Any person complying with the notice and making a payment will be considered to have paid the amount under the authority of the taxpayer. The Commissioner’s receipt constitutes a valid discharge of the person’s liability to the taxpayer up to the paid amount.
Sub-Sections (7, 8, and 9):
These sub-sections have been omitted, suggesting a simplification or streamlining of the recovery process.
Sub-Section (10):
The definition of “person” in this section includes any Court, Tribunal, or other authority, broadening the scope of entities subject to these recovery provisions.
The amended Section 140 seeks to strengthen the FBR’s ability to expedite the recovery of taxes by directly engaging with third parties holding funds on behalf of taxpayers. This move is anticipated to enhance the efficiency of tax collection processes and address potential delays associated with traditional tax recovery mechanisms.
