FBR reduces penalty rates for late filers

KARACHI: The Federal Board of Revenue (FBR) has introduced different reduced rates of penalty on filing of income tax returns after due date, sources said on Thursday.

The sources said the reduced rate of penalty amount would be available to late filers of income tax returns for next three months after the due date. However, full amount of penalty will be applicable in case the return filed four months after the due date. According to the sources, a late filer will be subject to pay 25 percent of the full penalty amount in case he files the return within one month after the due date. The rate of penalty will be reduced to half in case an individual or a company files income tax return two months after the due date.

Similarly, the penalty amount will be 75 percent of the total amount on a person or a company that files income tax return within three months after the due date.

The penalty for late filing of income tax returns has been prescribed under Section 182 of Income Tax Ordinance, 2001. According to this, such person will pay a penalty equal to 0.1 percent of the tax payable in respect of that tax year for each day of default subject to a maximum penalty of 50 percent of the tax payable provided that if the penalty worked out is less than Rs40,000 or no tax is payable for that tax year such person will pay a penalty of forty thousand rupees. According to the ordinance, if 75 percent of the income is from salary and the amount of income under salary is less than Rs5 million, the minimum amount of penalty will be Rs5,000.

The sources said another amendment has been made under this sector of the Income Tax Ordinance, 2001 under which if taxable income is up to Rs800,000, the minimum amount of penalty will be Rs5,000.

They said the changes have been made to encourage filing their returns even after expiry of due date. The reduced rate of penalty has been introduced to attract persons/corporate entities to file their returns and avoid stern action of the tax authorities.

For the tax year 2020, the FBR refused to extend the last date for filing income tax returns beyond December 8, 2020 for salaried class, businesses and corporate entities falling in the special tax year.

The FBR also made it clear that inclusion of taxpayers’ names in ATL would only be possible after payment of surcharge. It means if a taxpayer files return after the due date he would become a return filer but not an active taxpayer.

The surcharge fee for inclusion in ATL is Rs20,000 for corporate taxpayers, Rs10,000 in case of association of persons and Rs1,000 for individual taxpayers.