No service charges allowed for collecting withholding tax

No service charges allowed for collecting withholding tax

KARACHI: Federal Board of Revenue (FBR) has not allowed deduction of service charges by withholding agents for collecting/deducing withholding tax on behalf of the federal tax authority.

According to an official document, under the Income Tax Ordinance, 2001 the withholding agents are not entitled to receive any service charges for collection or deduction of tax as a withholding agent.

However, it has been noticed that certain withholding agents including provincial governments and other autonomous organizations are claiming service charges for acting as withholding agents.

In order to expressly disallow such claims, new sub-section (6) and (7) have been inserted in section 168 which provides that notwithstanding anything contained in any other law or any rules, for the time being in force, no amount is to be deducted on account of service charges from the tax withheld or collected by any person under the provisions of this Ordinance.

As provided in sub-section (7) in case any amount is deducted on account of service charges by the person, the said person will be liable to pay this amount to the Federal Government and all the provisions of the Ordinance shall apply in so far as they apply to the recovery of tax.

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