FBR receives 10,000 income tax returns in virus downturn

KARACHI: The Federal Board of Revenue (FBR) has received around 10,000 income tax returns amid the coronavirus-induced lockdown for two weeks, official data showed on Monday.

Weekly active taxpayers list (ATL) 2019 for returns filed up to April 5, 2020 showed that the FBR received around 2.6 million returns. The FBR received 2.59 million income tax returns till March 22, 2020.

Sources in FBR said people are filing income tax returns in order to avoid higher rate of withholding tax. Most parts of the country remained lockdown, which is still going on. The Sindh government imposed the lockdown on March 23 and restricted people movement and halted business activities.

The sources said though business activities are stopped, payment through online system has increased substantially. They said people have opted to file their returns online to avoid the higher rates of withholding tax.

The sources said it is mandatory for person under the law to file annual return in to avail reduced rates of withholding tax on certain transactions. However, a person is required to pay surcharge and pay late filing penalty for filing return and to appear on ATL after due date.

The sources said changes in law through Finance Act 2019 were also compelling taxpayers to file their returns. Through Finance Act, 2019, Tenth Schedule was inserted to Income Tax Ordinance, 2001 under which a person not appearing on the ATL would be liable to pay 100 percent additional withholding tax while making certain transactions.

Prior to this change, people not filing income tax returns were liable to pay enhanced rate of withholding tax. Previously, the law provides for the concept of a non-filer and stipulates higher withholding rates for the same, which were adjustable at the time of filing of income tax return.

The sources said such tax regime created a misconception that a non-filer could go scot-free by choosing not to file income tax returns. The measure was meant to increase the number of filers. However, the focus was shifted over time to raising additional revenue only.

The measure has not achieved the desired results as the regime did not provide for any legal framework to ensure filing of return by such non-filers. In order to remove the misconception, the concept and the term of ‘non-filer’ was abolished from the statute.