Tag: FBR

KARACHI: Any person who commits any offence under provisions of Income Tax Ordinance, 2001, he may be liable to penalty.

According to updated Income Tax Ordinance, 2001 issued by Federal Board of Revenue (FBR), Section 182 explains the offenses and penalty under the Ordinance:

01. Where any person fails to furnish a return of income as required under section 114 within the due date. Section 114 and 118

— Such person shall pay a penalty equal to 0.1 percent of the tax payable in respect of that tax year for each day of default subject to a maximum penalty of 50 percent of the tax payable provided that if the penalty worked out as aforesaid is less than twenty thousand rupees or no tax is payable for that tax year such person shall pay a penalty of twenty thousand rupees:

Explanation.— For the purposes of this entry, it is declared that the

expression “tax payable” means tax chargeable on the taxable income on the basis of assessment made or treated to have been made under section 120, 121, 122 or 122C.

01A.Where any person fails to furnish a statement as required under section 115, 165, or 165A, 165A or 165B within the due date. Sections 115, 165 and 165A, 165A and 165B

— Such person shall pay a penalty of Rs.5000 if the person had already paid the tax collected or withheld by him within the due date for payment and the statement is filed within ninety days from the due date for filing the statement and, in all other cases, a penalty of Rs.2500 for each day of default from the due date subject to a minimum penalty of Rs. 10,000.

01AA. Where any person fails to furnish wealth statement or wealth reconciliation statement. Sections 114, 115 and 116

— Such person shall pay a penalty of “0.1 percent of the taxable income per week or Rs.20,000 whichever is higher.”

01AAA. Where any person fails to furnish a foreign assets and income statement within the due date. Section 116A

— Such persons shall pay a penalty of 2 percent of the foreign income or value of the foreign assets for each year of default.

02. Any person who fails to issue cash memo or invoice or receipt when required under this Ordinance or the rules made thereunder. Section 174 and Chapter VII of the Income Tax Rules.

— Such person shall pay a penalty of five thousand rupees or three per cent of the amount of the tax involved, whichever is higher.

03. Any person who is required to apply for registration under this Ordinance but fails to make an application for registration. Section 181

— Such person shall pay a penalty of five thousand rupees.

04. Any person who fails to notify the changes of material nature in the particulars of registration. Section 181

— Such person shall pay a penalty of five thousand rupees.

05. Any person who fails to deposit the amount of tax due or any part thereof in the time or manner laid down under this Ordinance or rules made thereunder.

Provided that if the person opts to pay the tax due on the basis of an order under section 129 on or before the due date given in the notice under sub-section (2) of section 137 issued in consequence of the said order, and does not file an appeal under section 131 the penalty payable shall be reduced by 50 percent. Section 137

— Such person shall pay a penalty of five per cent of the amount of the tax in default.

For the second default an additional penalty of 25 percent of the amount of tax in default.

For the third and subsequent defaults an additional penalty of 50 percent of the amount of tax in default.

06. Any person who repeats erroneous calculation in the return for more than one year whereby amount of tax less than the actual tax payable under this Ordinance is paid. Section 137

— Such person shall pay a penalty of five thousand rupees or three per cent of the amount of the tax involved, whichever is higher.

07.Any person who fails to maintain records required under this Ordinance or the rules made thereunder. Sections 174 and 108

— Such person shall pay a penalty of ten thousand rupees or five per cent of the amount of tax on income whichever is higher.

08. Where a taxpayer who, without any reasonable cause, in non-compliance with provisions of section 177—

(a) fails to produce the record of documents on receipt of first notice.

— Such person shall pay a penalty of twenty-five thousand rupees;

(b) fails to produce the record or documents on receipt of second notice;

— such person shall pay a penalty of fifty thousand rupees; and

(c) Fails to produce the record or documents on receipt of third notice.

— such person shall pay a penalty of one hundred thousand rupees.

09. Any person who fails to furnish the information required or to comply with any other term of the notice served under section 176 or 108.

— Such person shall pay a penalty of twenty-five thousand rupees for the first default and fifty thousand rupees for each subsequent default.

10. Any person who –

(a) makes a false or misleading statement to an Inland Revenue Authority either in writing or orally or electronically including a statement in an application, certificate, declaration, notification, return, objection or other document including books of accounts made, prepared, given, filed or furnished under this Ordinance;

(b)furnishes or files a false or mis-leading information or document or statement to an Income Tax Authorityeither in writing or orallyor electronically;

(c) omits from a statement made or information furnished to an Income Tax Authority any matter or thing without which the statementor the information is false or misleading in a material particular.

Sections 114, 115, 116, 174, 176, 177 and general

— Such person shall pay a penalty of twenty five thousand rupees or100 percent of the amount of tax shortfall whichever is higher:

Provided that in case of an assessment order deemed under section 120, no penalty shall be imposed to the extent of the tax shortfall occurring as a result of the taxpayer taking a reasonably arguable position on the application of this Ordinance to the taxpayers’ position.

11. Any person who denies or obstructs the access of the Commissioner or any officer authorized by the Commissioner to the premises, place, accounts, documents, computers or stocks. Sections 175 and 177

— Such person shall pay a penalty of twenty five thousand rupees or one hundred per cent of the amount of tax involved, whichever, is higher.

12. Where a person has concealed income or furnished inaccurate particulars of such income, including but not limited to the suppression of any income or amount chargeable to tax, the claiming of any deduction for any expenditure not actually incurred or any act referred to in sub-section (1) of section 111, in the course of any proceeding under this Ordinance before any Income Tax authority or the appellate tribunal. Sections 20, 111 and general

— Such person shall pay a penalty of twenty five thousand rupees or an amount equal to the tax which the person sought to evade whichever is higher. However, no penalty shall be payable on mere disallowance of a claim of exemption from tax of any income or amount declared by a person or mere disallowance of any expenditure declared by a person to be deductible, unless it is proved that the person made the claim knowing it to be wrong.

13. Any person who obstructs any Income Tax Authority in the performance of his official duties. Sections 209, 210 and general

— Such person shall pay a penalty of twenty five thousand rupees.

14. Any person who contravenes any of the provision of this Ordinance for which no penalty has, specifically, been provided in this section.

— Such person shall pay a penalty of five thousand rupees or three per cent of the amount of tax involved, which-ever is higher.

15. Any person who fails to collect or deduct tax as required under any provision of this Ordinance or fails to pay the tax collected or deducted as required under section 160. Sections 148, 149, 150, 151, 152, 153, 153A, 154, 155, 156, 156A, 156B, 158, 160, 231A, 231B, 233, 233A, 234, 234A, 235, 236, 236A.

— Such person shall pay a penalty of twenty five thousand rupees or the 10 percent of the amount of tax which-ever is higher.

16. Any person who fails to display his NTN at the place of business as required under this Ordinance or the rules made thereunder. Section 181C

— Such person shall pay a penalty of five thousand rupees.

17. Any reporting financial institution or reporting entity who fails to furnish information or country-by-country report to the Board as required under section 107, 108 or 165B within the due date.

— Such reporting financial institution or reporting entity shall pay a penalty of two thousand rupees for each day of default subject to a minimum penalty of twenty five thousand rupees.

18. Any person who fails to keep and maintain document and information required under section 108 or Income Tax Rules, 2002. Section 108

— 1 percent of the value of transactions, the record of which is required to be maintained under section 108 and Income Tax Rules, 2002.

19. Where any manufacturer of a motor vehicle accepts or processes any application for booking or purchase of a locally manufactured motor vehicle in violation of the provisions of clause (a) of section 227C

— Such person shall pay a penalty of 5 percent of the value of the motor vehicle

20. (i) Where any registering authority of Excise and Taxation Department accepts, processes or registers any application for registration of a locally manufactured motor vehicle or for the first registration of an imported vehicle in violation of the provisions of clause (a) of section 227C

(ii) Where any authority responsible for registering, recording or attesting the transfer of immovable property accepts or processes the registration or attestation of such property in violation of the provisions of clause (b) of section 227C

— Such person shall pay a penalty of 3 percent of the value of motor vehicle or immovable property.

(2) The penalties specified under sub-section (1) shall be applied in a consistent manner and no penalty shall be payable unless an order in writing is passed by the Commissioner, Commissioner (Appeals) or the Appellate Tribunal after providing an opportunity of being heard to the person concerned:

Provided that where the taxpayer admits his default he may voluntarily pay the amount of penalty due under this section.

(3) Where a Commissioner (Appeals) or the Appellate Tribunal makes an order under sub-section (2), the Commissioner (Appeals) or the Appellate Tribunal, as the case may be, shall immediately serve a copy of the order on the Commissioner and thereupon all the provision of this Ordinance relating to the recovery of penalty shall apply as if the order was made by the Commissioner.

KARACHI: Banks are required to provide certain details of their customers and transactions to Federal Board of Revenue (FBR) for subsequent use of identifying new taxpayers and tax evasion.

After the implementation of Finance Act, 2018 and Finance (Supplementary) Act, 2018 there are various changes made to Section 165A of Income Tax Ordinance, 2001 related to furnishing of information by banks.

Section 165A: Furnishing of information by banks

Sub-Section (1): Notwithstanding anything contained in any law for the time being in force including but not limited to the Banking Companies Ordinance, 1962 (LVII of 1962), the Protection of Economic Reforms Act, 1992 (XII of 1992), the Foreign Exchange Regulation Act, 1947 (VII of 1947) and the regulations made under the State Bank of Pakistan Act, 1956 (XXXIII of 1956), if any, on the subject every banking company shall make arrangements to provide to the Board in the prescribed form and manner,—

(a) a list of persons containing particulars of cash withdrawals exceeding Rs50,000 (fifty thousand rupees) in a day and tax deductions thereon for filers and non-filers, aggregating to Rupees one million or more during each preceding calendar month.”;

(b) a list containing particulars of deposits aggregating rupees ten million or more made during the preceding calendar month;

(c) a list of payments made by any person against bills raised in respect of a credit card issued to that person, aggregating to rupees two hundred thousand or more during the preceding calendar month;

“(d) a list of persons receiving profit on debt exceeding one million rupees for filers and five hundred thousand rupees for non-filers and tax deductions thereon during preceding financial year.”

Sub-Section (2): Each banking company shall also make arrangements to nominate a senior officer at the head office to coordinate with the Board for provision of any information and documents in addition to those listed in sub-section (1), as may be required by the Board.

Sub-Section (3): The banking companies and their officers shall not be liable to any civil, criminal or disciplinary proceedings against them for furnishing information required under this Ordinance.

Sub-Section (5): Subject to section 216, all information received under this section shall be used only for tax purposes and kept confidential.

Section 165B: Furnishing of information by financial institutions including banks

Sub-Section (1): Notwithstanding anything contained in any law for the time being in force including but not limited to the Banking Companies Ordinance, 1962 (LVII of 1962), the Protection of Economic Reforms Act,1992 (XII of 1992), the Foreign Exchange Regulation Act, 1947 (VII of1947) and any regulations made under the State Bank of Pakistan Act,1956 (XXXIII of 1956) on the subject, every financial institution shall make arrangements to provide information regarding non-resident or any other reportable persons to the Board in the prescribed form and manner for the purpose of automatic exchange of information under bilateral agreement or multilateral convention.

Sub-Section (2): All information received under this section shall be used only for tax and related purposes and kept confidential.”

Sub-Section (3): For the purpose of this section, the terms “reportable person” and “financial institution” shall have the meaning as provided in Chapter XIIA of the Income Tax Rules, 2002.

KARACHI: Every withholding agent is required to provide details of each person whose withholding tax is deducted or whom withholding tax is paid through a monthly statement to Federal Board of Revenue (FBR).

According to updated Income Tax Ordinance, 2001 the withholding agent is required to provide information including name, CNIC and address of each persons from whom tax had been collected.

Section 165: Statements

Sub-Section (1): Every person collecting tax under Division II of this Part or Chapter XII or deducting tax from a payment under Division III of this Part or Chapter XII shall, furnish to the Commissioner a monthly statement in the prescribed form setting out—

(a) the name, Computerized National Identity Card Number, National Tax Number and address of each person from whom tax has been collected under Division II of this Part or Chapter XII or to whom payments have been made from which tax has been deducted under Division III of this Part or Chapter XII in each month;

(b) the total amount of payments made to a person from which tax has been deducted under Division III of this Part or Chapter XII in each month;

(c) the total amount of tax collected from a person under Division II of this Part or Chapter XII or deducted from payments made to a person under Division III of this Part or Chapter XII in each month; and

(d) such other particulars as may be prescribed:

Provided that every person as provided in sub-section (1) shall be required to file withholding statement even where no withholding tax is collected or deducted during the period.

Explanation.— For the removal of doubt, it is clarified that this sub-section overrides all conflicting provisions contained in the Protection of Economic Reforms Act, 1992 (XII of 1992), the Banking Companies Ordinance, 1962 (LVII of 1962), the Foreign Exchange Regulation Act, 1947 (VII of 1947) and the regulations made under the State Bank of Pakistan Act, 1956 (XXXIII of 1956), if any, on the subject, in so far as divulgence of information under section 165 is concerned.

Sub-Section (2): Every prescribed person collecting tax under Division II of this Part or Chapter XII or deducting tax from payment under Division III of this Part or Chapter XII shall furnish or e-file statements under sub-section (1) by the 15th day of the month following the month to which the withholding tax pertains.

Sub-Section (2A): Any person who, having furnished statement under sub-section (1) or sub-section (2), discovers any omission or wrong statement therein, may file a revised statement within sixty days of filing of statement under sub-section (1) or sub-section (2), as the case may be.

Sub-Section (3): Board may prescribe a statement requiring any person to furnish information in respect of any transactions in the prescribed form and verified in the prescribed manner.

Sub-Section (4): A person required to furnish a statement under sub-section (1), may apply in writing, to the Commissioner for an extension of time to furnish the statement after the due date and the Commissioner if satisfied that a reasonable cause exists for non-furnishing of the statement by the due date may, by an order in writing, grant the applicant an extension of time to furnish the statement.

Sub-Section (5): The Board may make rules relating to electronic furnishing of statements under this section including,-

(a) mandatory electronic filing of statements; and

(b) determination of eligibility of the data of such statements and e-intermediaries, etc.

Sub-Section (6): Every person deducting tax from payment under section 149 shall furnish to the Commissioner an annual statement in the prescribed form and manner.

Through Finance Supplementary (Second Amendment) 2019, the following changes have been proposed in section 165,—

(A) in sub-section (1),—

(a) for the word “monthly”, wherever occurring, the word “biannual” shall be substituted;

(b) for the word “month”, wherever occurring, the word “half-year” shall be substituted; and

(B) for sub-section (2), the following shall be substituted, namely:—

“(2) Every prescribed person collecting tax under Division II of this Part or Chapter XII or deducting tax under Division III of this Part of Chapter XII shall furnish statements under sub-section (1) as per the following schedule, namely:—

(a) in respect of the half-year ending on the 30th June, on or before the 31st day of July;

(b) in respect of the half-year ending on the 31st December, on or before the 31st day of January”; and

(C) after sub-section (2A), the following new sub-section shall be inserted, namely:—

“(2B) Notwithstanding anything contained in this section, the Commissioner as he deems fit, may by notice in writing, require any person, collecting or deducting tax under this Ordinance, to furnish a statement for any period specified in the notice within such period of time as may be specified in the notice.”

KARACHI: A person fails to pay taxes by due date shall be liable to pay default surcharge at 12 percent per annum.

The Federal Board of Revenue (FBR) recently issued updated Income Tax Ordinance, 2001 explaining the default surcharge on failure to pay tax by due date.

Section 205: Default surcharge

Sub-Section (1): A person who fails to pay –

(a) any tax, excluding the advance tax under section 147 and default surcharge under this section;

(b) any penalty; or

(c) any amount referred to in section 140 or 141, on or before the due date for payment shall be liable for default surcharge at a rate equal to “12” per cent per annum on the tax, penalty or other amount unpaid computed for the period commencing on the date on which the tax, penalty or other amount was due and ending on the date on which it was paid:

Provided that if the person opts to pay the tax due on the basis of an order under section 129 on or before the due date given in the notice under sub-section (2) of section 137 issued in consequence of the said order, and does not file an appeal under section 131, he shall not be liable to pay default surcharge for the period beginning from the due date of payment in consequence of an order appealed against to the date of payment in consequence of notice under sub-section (2) of section 137.

Sub-Section (1A): A person who fails to pay advance tax under section 147 shall be liable for default surcharge at a rate equal to “12” per cent per annum on the amount of tax unpaid computed for the period commencing on the date on which it was due and ending on the date on which it was paid or date on which the return of income for the relevant tax year was due, whichever is earlier.

Sub-Section (1B): Where, in respect of any tax year, any taxpayer fails to pay tax under sub-section (4A), or (6) of section 147 or the tax so paid is less than ninety percent of the tax chargeable for the relevant tax year, he shall be liable to pay default surcharge]at the rate of 12 per cent per annum on the amount of tax so chargeable or the amount by which the tax paid by him falls short of the ninety percent, as the case may be; and such default surcharge shall be calculated from the first day of April in that year to the date on which assessment is made or the thirtieth day of June of the financial year next following, whichever is the earlier:

“Provided that in the case of person having a special tax year, the default surcharge shall be calculated on and from the first day of the fourth quarter of the special tax year till the date on which assessment is made or the last day of special tax year, whichever is earlier.”;

Sub-Section (2): Any default surcharge paid by a person under sub-section (1) shall be refunded to the extent that the tax, penalty or other amount to which it relates is held not to be payable.

Sub-Section (3): A person who fails to collect tax, as required under Division II of Part V of this Chapter or Chapter XII or deduct tax as required under Division III of Part V of this Chapter or Chapter XII or fails to pay an amount of tax collected or deducted as required under section 160 on or before the due date for payment shall be liable for default surcharge at a rate equal to “12” percent per annum on the amount unpaid computed for the period commencing on the date the amount was required to be collected or deducted and ending on the date on which it was paid to the Commissioner:

Provided that if the person opts to pay the tax due on the basis of an order under section 129 on or before the due date given in the notice under sub-section (2) of section 137 issued in consequence of the said order and does not file an appeal under section 131, he shall not be liable to pay default surcharge for the period beginning from the date of order under section 161 to the date of payment.

Sub-Section (4): Omitted

Sub-Section (5): The Commissioner shall make an assessment of any default surcharge imposed under this Part in accordance with the provisions of Part II of this Chapter as if the default surcharge were tax.

Sub-Section (6): The provisions of Parts III and IV apply to an assessment of default surcharge as if it were an assessment of tax.

Section 205A: Reduction in default surcharge, consequential to reduction in tax or penalty.— Where, in consequence of any order made under this Ordinance, the amount of tax or penalty in respect of which default surcharge is chargeable under section 205 is reduced, the default surcharge, if any, levied under the aforesaid section shall be reduced accordingly.