Charging 5pc tax on educational fee: FBR giving no relief to students’ parents

ISLAMABAD: Amid providing relief to everyone after outbreak of COVID-19 pandemic, the FBR has not so far given any relief to parents of students on charging 5 percent advance Withholding Tax on annual fee exceeding Rs200,000.

“The FBR has estimated to collect Rs4 billion from Withholding Tax on annual fee of over Rs200,000 during the current fiscal year 2019-20” one top official of FBR confirmed to The News here on Tuesday. The official said that the FBR was considering bringing changes in advance withholding on fee of educational institutions exceeding Rs200,000 per annum as either it would be abolished or it would be levied only on non-filers from next budget 2020-21. Currently, the parents of students have been continuously becoming victim and being fleeced by charging 5 percent tax on educational fee of over Rs200,000 at a time when every segment of the society is getting relief package in the aftermath of spread of coronavirus in Pakistan.

Under Section 236 I of Income Tax Law, during the last PML-N led government, the government had imposed 5 percent withholding tax on educational institutions over annual of Rs200,000. The educational institutions charged this 5 percent advance WHT through receipt of fee Challan as it was made part of it for payment along with other heads of fee challan. According to one fee challan shared by students’ parents with this scribe that stated, “We know this is difficult time for you and your families and many of you are struggling financially. We want you to know that we are doing our best to keep our cost low and to charge only what we need to keep the university open. Many of you have concerns about the tax amount that has appeared on your bill and we want to explain why this is coming and how it is calculated. Please know that this is not the money that we keep. This money is collected by us and then sent straight to the government as it is required by law.”

According to Income Tax Ordinance, all educational institutions are required to charge and collect advance income tax from their students and deposit it into government treasury where fee in fiscal year (July-June) exceeds Rs200,000.

One parent of an elite school stated that they received fee vouchers through email entailing advance withholding tax as part of the fee challan and he described it as unjustified. One parent of elite school Hamid Tufail said that it was advance tax and he did not have any problem with it but the real issue surfaced when these schools charged from parents but did not deposit into national kitty. So there is not to conduct audit of schools, he added.

When former FBR’s member and tax expert Shahid Hussain Asad was contacted for comments, he said that Section 236-I envisages 5% withholding tax on educational fee if annual fee is more than 2,00,000/-. This provision discourages promotion of education. Even if to be retained the limit of Rs2,00,000/- , which was fixed in 2013, should be enhanced to Rs6,00,000/- per annum that too for “ Non-Filers”, only. Rather government should give tax credit to parents who are “Filers” and spend expense on education of their children to make them useful citizens. In fact they are sharing the responsibility of the State which should provide free education to its citizens, he concluded.