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Tax Year 2020: return may be filed on payment of penalty

ISLAMABAD: A return of income and a wealth statement can be filed now after payment of fine and penalty as prescribed in the statute.

The deadline to file income tax return for tax year 2020 was December 08, 2020. The FBR has not extended the date for filing the return of income and wealth statement despite demands from various quarters while pointing out various reasons.

A large number of individuals and other classes of taxpayers has failed to file their returns by due date. The filing of income tax return is mandatory on classes of persons as defined under Section 114 of the Income Tax Ordinance, 2001.

“Section 114. Return of income. — (1) Subject to this Ordinance, the following persons are required to furnish a return of income for a tax year, namely:–

(a) every company;

(ab) every person (other than a company) whose taxable income for the year exceeds the maximum amount that is not chargeable to tax under this Ordinance for the year;or

(ac) any non-profit organization as defined in clause (36) of section 2;

(ad) any welfare institution approved under clause (58) of Part I of the Second Schedule;

(ae) every person whose income for the year is subject to final taxation under any provision of this Ordinance;

(b) any person not covered by clause (a), (ab), (ac) or (ad) who,—

(i) has been charged to tax in respect of any of the two preceding tax years;

(ii) claims a loss carried forward under this Ordinance for a tax year;

(iii) owns immovable property with a land area of five hundred square yards or more or owns any flat located in areas falling within the municipal limits existing immediately before the commencement of Local Government laws in the provinces; or areas in a Cantonment; or the Islamabad Capital Territory;

(iv) owns immoveable property with a land area of five hundred square yards or more located in a rating area;

(v) owns a flat having covered area of two thousand square feet or more located in a rating area;

(vi) owns a motor vehicle having engine capacity above 1000 CC;

(vii) has obtained National Tax Number; or

(viii) is the holder of commercial or industrial connection of electricity where the amount of annual bill exceeds rupees five hundred thousand;

(ix) is a resident person registered with any chamber of commerce and industry or any trade or business association or any market committee or any professional body including Pakistan Engineering Council, Pakistan Medical and Dental Council, Pakistan Bar Council or any Provincial Bar Council, Institute of Chartered Accountants of Pakistan

or Institute of Cost and Management Accountants of Pakistan ; or

(x) is a resident person being an individual required to file foreign income and assets statement under section 116A.

(1A) Every individual whose income under the head ‘Income from business’ exceeds rupees three hundred thousand but does not exceed rupees four hundred thousand in a tax year is also required to furnish return of income from the tax year.”

The mentioned above classes of taxpayers except for companies are required to file annual return by September 30 and the last date for companies is December 31.

The individuals or companies required to file return by September 30, the date was extended up to December 08, 2020 for tax year 2020.

In case such persons have failed to file their return they now have to pay late filing surcharge as prescribed under Section 182 of the Income Tax Ordinance, 2001.

Under Section 182:

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

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

Provided that If seventy-five percent of the income is from salary and the amount of income under salary is less than five million Rupees, the minimum amount of penalty shall be five thousand Rupees.

Where any person fails to furnish wealth statement or wealth reconciliation statement then such person shall pay a penalty of 0.1% of the taxable income per week or Rs.100,000 whichever is higher.

The late filers will also require to pay a fee for appearance in Active Taxpayers List (ATL) for tax year 2020, which will be issued on March 01, 2021.

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

Provided that without prejudice to any other liability under this Ordinance, the person shall be included in the active taxpayer ‘ list on filing return after the due date, if the person pays surcharge at Rupees-

(i) twenty thousand in case of a company;

(ii) ten thousand in case of an association of persons;

(iii) one thousand in case of an individual.

Persons fail to comply with filing requirement can face harsh action including imprisonment.

Section 191. Prosecution for non-compliance with certain statutory obligations. —(1) Any person who, without reasonable excuse, fails to —

(a) comply with a notice under sub-section (3)and sub-section (4) of section 114 or sub-section (1) of section 116; shall commit an offence punishable on conviction with a fine or imprisonment for a term not exceeding one year, or both.

(2) If a person convicted of an offence under clause (a) of sub-section (1) fails, without reasonable excuse, to furnish the return of income or wealth statement to which the offence relates within the period specified by the Court, the person shall commit a further offence punishable on conviction with a fine not exceeding fifty thousand rupees or imprisonment for a term not exceeding two years, or both.

Section 192: Prosecution for false statement in verification. — Any person who makes a statement in any verification in any return or other document furnished under this Ordinance which is false and which the person knows or believes to be false, or does not believe to be true, the person shall commit an offence punishable on conviction with a fine upto hundred thousand rupees or imprisonment for a term not exceeding three years, or both.