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Rate of advance income tax on education fee

ISLAMABAD: Federal Board of Revenue (FBR) has updated rate of advance income tax to be collected by educational at the time of preparing fee challan during tax year 2021 (July 01, 2020 to June 30, 2021).

The FBR issued Income Tax Ordinance, 2001 (updated up to June 30, 2020) after incorporating amendments brought through Finance Act, 2020.

The FBR updated the rate of collection of tax under section 236I of Income Tax Ordinance, 2001, which shall be 5 percent of the amount of fee.

Following is the text of Section 236I under which the advance tax to be collected by educational institutions:

236I. Collection of advance tax by educational institutions.— (1) There shall be collected advance tax from a person not appearing on the active taxpayers’ list at the rate specified in Division XVI of Part-IV of the First Schedule on the amount of fee paid to an educational institution.

(2) The person preparing fee voucher or challan shall charge advance tax under sub-section (1) in the manner the fee is charged.

(3) Advance tax under this section shall not be collected from a person on an amount which is paid by way of scholarship or where annual fee does not exceed two hundred thousand rupees.

(4) The term “fee” includes, tuition fee and all charges received by the educational institution, by whatever name called, excluding the amount which is refundable.

(5) Tax collected under this section shall be adjustable against the tax liability of either of the parents or guardian making payment of the fee.

(6) Advance tax under this section shall not be collected from a person who is a non-resident and,—

(i) furnishes copy of passport as an evidence to the educational institution that during previous tax year, his stay in Pakistan was less than one hundred eighty-three days;

(ii) furnishes a certificate that he has no Pakistan-source income; and

(iii) the fee is remitted directly from abroad through normal banking channels to the bank account of the educational institution.