FTO suggests Rs1,000 cash payback for returns filing

KARACHI: To broaden the tax base, the Federal Tax Ombudsman (FTO) recommended cash back incentives for those filing their annual income tax returns, according to a report issued by the FTO office on Tuesday.

The ombudsman proposed legislation to bring those in the net, who paid more than a certain amount of withholding tax.

“There should be an incentive of Rs1,000 for filing a return, to be paid as cash payback in the bank account of the filer,” the FTO recommended for the upcoming budget 2021/2022. “This will start the process of documentation of households and their earning levels at national level.”

The FTO also recommended fixing the sunset date for return filing. The FBR should devise some system so that sunset date of filing return was not extended, the FTO recommended.

However, it said late filing should be allowed with certain incremental penalty for delay in filing per month or any part of it. In 2020, the last date of December 8 was not extended.

The FBR responded that Income Tax Return making rules have been issued. Though these were applicable for Tax Year 2022, the FBR was following this for Tax Year 2021 and return forms would be available by July 1, 2021 (to be submitted within due date without extension on last date).

The FTO also suggested measures for increasing return filing by government employees. It proposed that FBR should approach concerned authorities / establishment division, to issue binding instructions for the heads of government departments, autonomous bodies and large scale public sector organisations.

The employers should be made to obtain the certificate of filing of returns from employees falling in the tax net at the end of the last date and to link their promotion/annual increments with mandatory return filing, FTO recommended.

The FTO highlighted gaps in withholding tax on transfer of immovable properties. It said FBR was collecting advance /adjustable withholding tax on the sale and purchase of immovable property u/s 236C and 236K of Income Tax Ordinance, 2001 and Capital Value Tax (CVT) to the extent of Islamabad Capital Territory (ICT).

All the three above referred sections of law were, however, followed by an ‘explanation’ which did not adequately cover the definition of ‘persons’ (withholding agents) responsible for collecting the taxes falling under the particular sections.

Recommendation along with amendment duly drafted by the FTO office, to cover missing links, was sent to FBR for rectification in the law.