FBR estimates Rs125bln from penalties on noncompliance

KARACHI: The Federal Board of Revenue (FBR) can potentially recover more than Rs125 billion through imposing fines and penalty on late filers and non-filers of income tax returns, officials said on Saturday.

The officials in the Federal Board of Revenue (FBR) said a large segment of persons requiring filing annual income tax returns remained non-compliant. The Income Tax Ordinance 2001 explained the amount of fine and penalty on persons who failed to comply with the mandatory requirement by the due date of filing annual income tax returns. The FBR said it had issued around 1.4 million tax notices to persons who failed to file annual return of income by due date. Besides, persons who concealed assets and income in their assets or filed nil or null declarations also received notices.

The section 182 of the Income Tax Ordinance 2001 has explained the amount of fine and penalties for non-compliance of income tax return and wealth statement. According to the section, a person who failed to file the return of income will be liable to pay a penalty of Rs40,000. In case where a person derives income around 75 percent from salary that the monetary penalty will be Rs5,000. Filing a wealth statement is a mandatory requirement along with the annual return of income. The penalty for non-compliance of wealth statement is Rs100,000. The FBR officials said the amount of Rs125 billion has been estimated by calculating 1 million notices along with average amount of penalty on non-filing the income tax returns and the penal amount on non-filing of wealth statement.

They said 400,000 notices had been given margin where penal amounts might not be imposed. The officials said the FBR had not started imposing fines and penalties for late filing. However, a big amount can be recovered by invoking relevant tax laws.

The official said persons/companies that filed their returns in response to the notices would remain out of the active taxpayers list (ATL). In order to get their names on the ATL taxpayers will need to pay a surcharge. In case of a company the surcharge will be Rs20,000, Rs10,000 in case of association of persons, and Rs1,000 in case of individuals. The FBR received 2.52 million returns of income for tax year 2020 by January 30, 2021. However, as the latest weekly ATL for tax year 2019 the number of return filers reached a record high of 3.06 million. The effective enforcement may result in manifold increase in return filing. The FBR claimed that it had information about transactions of persons who are not filing their income tax returns.

As per the FBR, one million filers claim to have non-taxable income but evidence to the contrary exists. More than 3.5 million national tax number holders are required under the law to file returns but fail to do so. Around 7.4 million individuals whose withholding tax is being deducted, but they fail to file returns as required under the law. More than 50,000 of over 100,000 registered companies are not filing returns and 105,000 sales tax registered persons are also not filing their returns.