Karachi, December 12, 2023 – Issuance of tax collection certificates has been made mandatory for withholding agents during tax year 2024.
The Federal Board of Revenue (FBR) released updated Income Tax Rules, 2002 for tax year 2024 to make compulsory for withholding agents to issue tax collection or deduction certificates.
Rule 42 specifically focuses on the issuance of certificates for the collection or deduction of tax, in line with the requirements set forth in sub-section (1) of section 164 of the Income Tax Ordinance, 2001.
The rule applies to individuals or entities responsible for various tax-related activities, including collecting tax under Division II of Part V of Chapter X of the Ordinance, deducting tax from payments under Division III of Part V of Chapter X (excluding salary payments), collecting or deducting tax under Chapter XII of the Ordinance, or deducting tax under the Sixth Schedule to the Ordinance.
According to Rule 42(1), the withholding agent must issue a certificate to the person from whom tax has been collected or deducted. This certificate, as detailed in Part VII of the Second Schedule to the rules, is required to be issued within fifteen days after the end of the financial year or discontinuation of business, among other specified events.
Rule 42(2) outlines that if the person from whom tax has been collected or deducted requests the certificate before the end of the financial year, the withholding agent must issue the certificate for the requested period within seven days of the request.
In the event that the issued certificate is lost, stolen, or destroyed, Rule 42(3) allows the recipient to request a duplicate in writing from the issuer. Rule 42(4) specifies that upon such request, the issuer shall comply and issue a duplicate certificate, which must be clearly marked as “duplicate.”
Furthermore, Rule 42(5) mandates that the certificates issued under sub-rules (1), (2), or (3) should be in duplicate and serially numbered, ensuring proper documentation and record-keeping.
This newly introduced requirement is designed to enhance transparency and accountability in tax transactions, facilitating efficient record-keeping and compliance with tax regulations. Withholding agents are advised to familiarize themselves with these updated rules and ensure timely compliance to avoid any potential penalties or legal consequences.
The FBR’s emphasis on issuing tax certificates underscores its commitment to streamlining tax processes and fostering a culture of compliance among withholding agents, contributing to a more robust and accountable taxation system in Pakistan.
