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Tag: Income Tax Ordinance 2001

  • Income Tax Ordinance 2001: Withholding agent requires to provide information of tax deduction

    Income Tax Ordinance 2001: Withholding agent requires to provide information of tax deduction

    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.”

  • Income Tax Ordinance 2001: default surcharge at 12 percent on failure to pay tax

    Income Tax Ordinance 2001: default surcharge at 12 percent on failure to pay tax

    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.

  • Income Tax Ordinance 2001: three-year jail for person assisting tax evasion

    Income Tax Ordinance 2001: three-year jail for person assisting tax evasion

    Individuals who assist in or encourage tax evasion face severe penalties under Pakistan’s tax laws. Specifically, a person can be sentenced to up to three years in prison for aiding, abetting, or inciting another individual to commit a tax offense. The Federal Board of Revenue (FBR) has emphasized the strict nature of punishments associated with tax evasion, concealment, and willful non-compliance as outlined in the Income Tax Ordinance of 2001.

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  • Two-year jail on deliberate non filing of return, statement

    Two-year jail on deliberate non filing of return, statement

    KARACHI: Federal Board of Revenue (FBR) is going to invoke certain provisions of tax laws, including prosecution for non-compliance to return and statement filing, under which about two years jails suggested for failing in return filing.

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  • Authorities to pay penalty for processing non-filers’ request

    Authorities to pay penalty for processing non-filers’ request

    KARACHI: Provincial motor or immovable property registration authorities will liable to pay penalty around three percent of the value in case of processing registration request by non-filers of income tax return.

    According to updated Income Tax Ordinance, 2001 issued by the Federal Board of Revenue (FBR), the government imposed restriction on registration of motor vehicle and immovable properties by non-filers under Section 227C.

    A penalty of three percent of the value of motor vehicle or immovable property is liable to pay:

    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.

    Similarly car manufacturers are also liable to pay penalty in case of selling motor car to non-filer of income tax return.

    A car manufacturer is liable to pay penalty of five percent of the value of the motor vehicle:

    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.

    Related Stories
    Income Tax Ordinance 2001: Late filers not to get names on ATL
    Income Tax Ordinance 2001: No commercial, industrial gas or electricity connection without NTN
    Income Tax Ordinance 2001: Commissioner can take assistance of police, civil armed forces to conduct audit
    Income Tax Ordinance 2001: Commissioner IR has court powers for production of taxpayers’ record
    Income Tax Ordinance 2001: Tax officials’ power to enter premises without notice

  • Income Tax Ordinance 2001: Late filers not to get names on ATL

    Income Tax Ordinance 2001: Late filers not to get names on ATL

    KARACHI: Late filers of income tax returns will not get their name on the Active Taxpayers List (ATL) that will be issued tomorrow (March 01, 2019).

    The Federal Board of Revenue (FBR) will issue the latest edition of ATL, which will carry names of those taxpayers who filed their income tax returns by due date for Tax Year 2018.

    With the issuance of new active taxpayers’ list the FBR will also suspend the weekly updated list as the late filers have been denied to have their names on the list.

    The previous PML-N government in its last budget announcement made a law to restrict the list with those name, who filed their list by due date.

    Through Finance Act, 2018 a new provision Section 182A was added to Income Tax Ordinance, 2001 for this purpose.

    Section 182A: Return not filed within due date.—

    Sub-Section (1): Notwithstanding anything contained in this Ordinance, where a person fails to file a return of income under section 114 by the due date as specified in section 118 or by the date as extended by the Board under section 214A or extended by the Commissioner under section 119, as the case may be, such person shall—

    (a) not be included in the active taxpayers’ list for the year for which return was not filed within the due date; and

    “Explanation.—For the removal of doubt it is clarified that the provisions of this section shall apply from tax year 2018 and onwards for which the first Active Taxpayers List is to be issued on first day of March, 2019 under Income Tax Rules, 2002.; and

    (b) not be allowed, for that tax year, to carry forward any loss under Part VIII of Chapter IV.

    The FBR issued its last weekly updated ATL for Tax Year 2017 on Monday, February 25, 2019, which carried those taxpayers list who filed their returns up to February 24, 2019.

    The last ATL shows the FBR received 1.84 million returns till February 24, 2019 for tax year 2017.

    While, the FBR received around 1.55 million income tax returns for tax year 2018 by due dates for individuals and corporate entities.

    The appearance on ATL is important for a taxpayer to avail reduced rate of withholding tax rates.

    The appearance of name has become even more important after the amendments brought in to restrict non-filers in purchase / registering new motor vehicles and immovable properties.

  • Income Tax Ordinance 2001: No commercial, industrial gas or electricity connection without NTN

    Income Tax Ordinance 2001: No commercial, industrial gas or electricity connection without NTN

    KARACHI: The National Tax Number (NTN) is mandatory for a person applying by commercial or industrial connection for electricity or natural gas.
     
    The Federal Board of Revenue (FBR) recently updated Income Tax Ordinance, 2001 which explained about taxpayer’s registration.
    Section 181: Taxpayer’s registration.—

    Sub-Section (1): Every taxpayer shall apply in the prescribed form and in the prescribed manner for registration.

    Sub-Section (2): The Commissioner having jurisdiction over a case, where necessitated by the facts of the case, may also register a taxpayer in the prescribed manner.

    Sub-Section (3): Taxpayers’ registration scheme shall be regulated through the rules to be notified by the board.

    Sub-Section (4): From tax year 2015 and onwards, in case of individuals having Computerized National Identity Card (CNIC) issued by the National Database and Registration Authority, CNIC shall be used as National Tax Number.

    Section 181A: Active taxpayers’ list

    Sub-Section (1): The Board shall have the power to institute active taxpayers’ list.

    Sub-Section (2): Active taxpayers’ list shall be regulated as may be prescribed.

    Section 181AA: Compulsory registration in certain cases

    Sub-Section (1): Notwithstanding anything contained in any law, for the time being in force, any application for commercial or industrial connection of electricity or natural gas, shall not be processed and such connection shall not be provided unless the person applying for electricity or gas connection is registered under section 181.

    Section 181B: Taxpayer card

    Subject to this Ordinance, the Board may make a scheme for introduction of a tax-payer honour card for individual taxpayers, who fulfill a minimum criteria to be eligible for the benefits as contained in the scheme.

    Section 181C: Displaying of National Tax Number

    Every person deriving income from business chargeable to tax, who has been issued a National Tax Number, shall display his National Tax Number at a conspicuous place at every place of his business.

  • Income Tax Ordinance 2001: Commissioner can take assistance of police, civil armed forces to conduct audit

    Income Tax Ordinance 2001: Commissioner can take assistance of police, civil armed forces to conduct audit

    KARACHI: A commissioner of Inland Revenue (IR) can take assistance of government authorities, police and civil armed forces to conduct audit of taxpayers.

    According to updated Income Tax Ordinance, 2001 recently issued by the Federal Board of Revenue (FBR), Section 178 explained the powers of Commissioner IR.

    Section 178: Assistance to Commissioner

    “Every Officer of Customs, Provincial Excise and Taxation, District Coordination Officer, District Officers including District Officer – Revenue, the Police and the Civil Armed Forces is empowered and required to assist the Commissioner in the discharge of the Commissioner’s functions under this Ordinance.”

    The Section 177 of the Ordinance explains the powers of Commissioner to call for any record of taxpayer for conducting audit.

    177: Audit.—

    Sub-Section (1): The Commissioner may call for any record or documents including books of accounts maintained under this Ordinance or any there law for the time being in force for conducting audit of the income tax affairs of the person and where such record or documents have been kept on electronic data, the person shall allow access to the Commissioner or the officer authorized by the Commissioner for use of machine and software on which such data is kept and the Commissioner or the officer may have access to the required information and data and duly attested hard copies of such information or data for the purpose of investigation and proceedings under this Ordinance in respect of such person or any other person:

    Provided that—

    (a) the Commissioner may, after recording reasons in writing call for record or documents including books of accounts of the taxpayer; and

    (b) the reasons shall be communicated to the taxpayer while calling record or documents including books of accounts of the taxpayer:

    Provided further that the Commissioner shall not call for record or documents of the taxpayer after expiry of six years from the end of the tax year to which they relate.

    Sub-Section (2): After obtaining the record of a person under sub-section (1) or where necessary record is not maintained, the Commissioner shall conduct an audit of the income tax affairs (including examination of accounts and records, enquiry into expenditure, assets and liabilities) of that person or any other person and may call for such other information and documents as he may deem appropriate.

    Sub-Sections (3) (4) and (5) omitted

    Sub-Section (6): After completion of the audit, the Commissioner may, if considered necessary, after obtaining taxpayer’s explanation on all the issues raised in the audit, amend the assessment under sub-section (1) or sub-section (4) of section 122, as the case may be.

    Sub-Section (7): The fact that a person has been audited in a year shall not preclude the person from being audited again in the next and following years where there are reasonable grounds for such audits.

    Sub-Section (8): The Board may appoint a firm of Chartered Accountants as defined under the Chartered Accountants Ordinance, 1961 (X of 1961) or a firm of Cost and Management Accountants as defined under the Cost and Management Accountants Act, 1966 (XIV of 1966), or a firm of Cost and Management Accountants as defined under the Cost and Management Accountants Act, 1966 (XIV of 1966) to conduct an audit of the income tax affairs of any person or classes of persons and the scope of such audit shall be as determined by the Board or the Commissioner on a case to case basis.

    Sub-Section (9): Any person employed by a firm referred to in sub-section (8) may be authorized by the Commissioner, in writing, to exercise the powers in sections 175 and 176 for the purposes of conducting an audit under that sub-section.

    Sub-Section (10): Notwithstanding anything contained in sub-sections (2) and (6) where a person fails to produce before the Commissioner or a firm of Chartered Accountants or a firm of Cost and Management Accountants appointed by the Board or the Commissioner under sub-section (8) to conduct an audit, any accounts, documents and records, required to be maintained under section 174 or any other relevant document, electronically kept record, electronic machine or any other evidence that may be required by the Commissioner or the firm of Chartered Accountants or the firm of Cost and Management Accountants for the purpose of audit or determination of income and tax due thereon, the Commissioner may proceed to make best judgment assessment under section 121 of this Ordinance and the assessment treated to have been made on the basis of return or revised return filed by the taxpayer shall be of no legal effect.

    Explanation.— For the removal of doubt, it is declared that the powers of the Commissioner under this section are independent of the powers of the Board under section 214C and nothing contained in section 214C restricts the powers of the Commissioner to call for the record or documents including books of accounts of a taxpayer for audit and to conduct audit under this section.

    Sub-Section (11): The Board may appoint as many special audit panels as may be necessary, comprising two or more members from the following:—

    (a) an officer or officers of Inland Revenue;

    (b) a firm of chartered accountants as defined under the Chartered Accountants Ordinance, 1961 (X of 1961);

    (c) a firm of cost and management accountants as defined under the Cost and Management Accountants Act, 1966 (XIV of 1966); or

    (d) any other person including a foreign expert or specialist as directed by the Board, to conduct an audit, including a forensic audit, of the income tax affairs of any person or classes of persons and the scope of such audit shall be as determined by the Board or the Commissioner on case-to-case basis.

    (e) a tax audit expert deployed under an audit assistance programme of an international tax organization or a tax authority outside Pakistan:

    Provided that in case the member is not an officer of Inland Revenue, the person shall only be included as a member in the special audit panel if an agreement of confidentiality has been entered into between the Board and the person, international tax organization or a tax authority, as the case may be.

    Sub-Section (12): Special audit panel under sub-section (1) shall be headed by a Chairman who shall be an officer of Inland Revenue.

    Sub-Section (13): Powers under sections 175 and 176 for the purposes of conducting an audit under sub-section (11), shall only be exercised by an officer or officers of Inland Revenue, who are member or members of the special audit panel, and authorized by the Commissioner.

    Sub-Section (14): Notwithstanding anything contained in sub-sections (2) and(6), where a person fails to produce before the Commissioner or a special audit panel under sub-section (11) to conduct an audit, any accounts, documents and records, required to be maintained under section 174 or any other relevant document, electronically kept record, electronic machine or any other evidence that may be required by the Commissioner or the panel, the Commissioner may proceed to make best judgment assessment under section 121 and the assessment treated to have been made on the basis of return or revised return filed by the taxpayer shall be of no legal effect.

    Sub-Section (15): If any one member of the special audit panel, other than the Chairman, is absent from conducting an audit, the proceedings of the audit may continue, and the audit conducted by the special audit panel shall not be invalid or be called in question merely on the ground of such absence.

    Sub-Section (16): Functions performed by an officer or officers of Inland Revenue as members of the special audit panel, for conducting audit, shall be treated to have been performed by special audit panel.

    Sub-Section (17): The Board may prescribe the mode and manner of constitution, procedure and working of the special audit panel.

  • Income Tax Ordinance 2001: Commissioner IR has court powers for production of taxpayers’ record

    Income Tax Ordinance 2001: Commissioner IR has court powers for production of taxpayers’ record

    KARACHI: The tax laws have empowered Commissioner of Inland to act as a court under the Code of Civil Procedure for compelling production of records of any person.

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  • Income Tax Ordinance 2001: Tax officials’ power to enter premises without notice

    Income Tax Ordinance 2001: Tax officials’ power to enter premises without notice

    KARACHI: Tax officials have immense powers to enter any premises for the purpose of audit of a taxpayer or survey of a potential taxpayer.

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