FBR fixes provident, gratuity funds tax exemption issues

KARACHI: Federal Board of Revenue (FBR) has directed offices of Inland Revenue to issue income tax exemption certificates to provident/gratuity funds after validating genuine requests in a bid to facilitate taxpayers, officials said on Saturday.

Sources in Inland Revenue said the FBR issued these directives in response to taxpayers’ complaints that tax offices were refusing to grant income tax exemption against gratuity and provident funds.

According to officials, FBR has been deeply concerned over the treatment being given by some field formations to the requests for exemption certificates under section 159/150/151 of the Income Tax Ordinance, 2001.

The FBR said the taxpayers had pointed out the exemption granted to the funds prior to tax year 2013, due to which the tax offices were not entertaining their requests.

Further, the tax offices were asking the taxpayers to move fresh applications for recognition of the funds on the pretext that the fact of their approval was not available/evident in the FBR’s system IRIS.

The FBR said that exemption requests of recognised provident/gratuity funds could not be refused. Therefore, the revenue body directed the tax offices to process the exemption certificate requests of all the provident/gratuity

funds that produce evidence of recognition under the relevant rules framed under the Income Tax Ordinance, 2001 or repealed law Income Tax Ordinance, 1979.

“Further, asking for fresh applications for recognition merely on the pretext that such recognition is not available on the system is not a valid excuse,” the FBR directed.

However, the FBR cautioned the tax offices saying: “Mere issuance of exemption certificate under section 159 of the Income Tax Ordinance, 2001 does not foreclose the possibility of reviewing/recalling such action in case it is later on discovered that the taxpayer produced some incorrect/invalid or wrong evidence for obtaining the favour”.