FBR mulls four times increase in penalty on non-filers

KARACHI: The tax authority is mulling four times increase in penalty on non-filing of tax returns from the current Rs20,000 in a bid to raise number of return filers, sources said on Thursday.

The sources said the objective is to improve tax compliance. The Federal Board of Revenue (FBR) has issued more than four million national tax numbers (NTN), but it received only 1.84 million returns in tax year 2017 and more than 1.9 million for tax year 2018.

The sources said the FBR would recommend amendment into the Income Tax Ordinance 2001 in the upcoming finance bill to increase the penalty amount for non-filing of income tax returns. The FBR might recommend penalty of Rs100,000 compared to the existing Rs20,000 for failure to meet mandatory filing requirement.

The FBR might also recommend increase in penalty to Rs100,000 from existing Rs20,000 for failure in mandatory submission of wealth statement. The filing of wealth statement is mandatory before the filing of annual income tax returns. If the recommendations are approved then the aggregate penalty would be Rs200,000 in case of non-filing of returns and wealth statement.

Every company is required to file income tax returns irrespective of profit or loss under the Income Tax Ordinance 2001. Salary or business individual having taxable income is required to file income tax returns. Various taxpayer segments are mandatorily required to file income tax returns irrespective of income, which include members of bar, chambers and association, chartered accountants.

The sources said individuals who have obtained NTN are required to file income tax returns under the law. Computerised national identity card is treated as NTN if an individual having taxable income has not been issued NTN.

A FBR official said the tax authorities introduced numerous measures to force non-compliant taxpayers to fulfill their liabilities in the past. The revenue body introduced section 214D into Income Tax Ordinance 2001, through Finance Act 2015, under which individuals who failed to file their returns would be automatically selected for audit during the following tax year.

The section was, however, omitted through the Finance Supplementary (Amendment) Act 2018 over hue and cry from stakeholders after the FBR sent notices for audit and recovery of penalty.

The sources said the FBR is also considering imposing Rs50,000 as penalty on offence undefined under the income tax law. It would recommend Rs100,000 or 25 percent of

tax not withheld as penalty amount in cases where withholding agent fails to deposit withheld amount to the government kitty.