Tenth Schedule enforces income tax return filing

KARACHI: The Tenth Schedule introduced to Income Tax Ordinance, 2001 has proved its importance as it compelled people for filing their income tax returns.

The importance of this schedule can be proved as return filing witnessed record high of 2.71 million for tax year 2018. This schedule will remain productive for tax year 2019 and onward for forcing people making financial transactions to file their returns.

“The newly introduced Tenth Schedule, which envisages the entire path to be adopted by the Inland Revenue Department to enforce the persons who make financial transactions yet choose not to file their returns of income,” officials of Federal Board of Revenue (FBR) said.

They said that prior to Finance Act, 2019, a concept of non-filer existed in the Ordinance whereby higher tax rates of withholding were prescribed for persons who were non-filers. Such non-filers could claim adjustment of the higher tax collected at the time of filing of income tax returns.

“The aim was to compel the non-filers to file their returns of income. However, it was observed that the non-filers, even though subjected to higher withholding rates, still had a propensity not to file their returns.”

This proved detrimental to the exercise of expansion or tax base. This was due to the absence of an explicit provision specifying a standard procedure for action against such persons.

Through the Finance Act, 2019, the concept of Non-Filers was done away with and a new concept regarding persons not appearing in the active taxpayers’ list was introduced. The officials said that this concept was a major paradigm shift from the erstwhile non-filer higher tax regime in that it not only penalized those persons not appearing in the ATL but also introduced an effective mechanism for enforcing returns from such persons.

In this regard, a new section 100BA has been introduced which provides that collection or deduction of advance income tax, computation of income and tax payable thereon should be determined in accordance with the rules in the newly introduced the Tenth Schedule.

Under this schedule persons whose names are not appearing in the ATL will be subjected to hundred percent increased rate of tax.

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