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ISLAMABAD: The Federal Board of Revenue (FBR) has tightened the penalty regime for the non-filers of the income tax returns through the Tax Laws (Third Amendment) Ordinance, 2021.

Through the Tax Laws (Third Amendment) Ordinance, 2021, three changes have been made in the penalty regime: (i); penalty for non-filers increased to Rs1,000 per day of default; (ii); penalty provisions regarding unspecified offences to be omitted, and (iii) provisions regarding prosecution for disclosure to be omitted. Tax lawyer Waheed Shahzad Butt told Business Recorder that the penalty provisions shall always be interpreted as a strong deterrence against defaulters, present change in penalty provisions shall ultimately fetch good positive results in timely filing of tax return, and increasing the number of tax filers.

Referring to the penalty for non-filers increased to Rs1,000 per day of default, Butt added that per day thousand means if it is late by three months, the penalty shall be Rs90,000.

According to a tax expert, Ashfaq Tola, the serial no 1 of table in subsection (1) of section 182 provides for penalty for non-filing of return of income within time.

Before promulgation of the new Ordinance, the penalties were: 0.1 percent of tax payable for each day of default; maximum - 50 percent of tax payable; minimum penalty would be Rs5,000 if 75 percent or more is salary income and salary is less than Rs5 million; or taxable income is up to Rs800,000 or Rs40,000 in other cases.

The ordinance has now revised the penalties as under: Higher of 0.1 percent of the tax payable for each day of default or Rs1,000 per day: Maximum - 200 percent of tax payable and minimum Rs10,000 if 75 percent or more is salary income or Rs50,000 in other cases.

The serial no 14 of table to subsection (1) of section 182 of the Income Tax Ordinance 2001 provides for penalty of Rs5,000 or three percent of the amount tax involved, whichever is higher, for contravention of any of the provision of the Income Tax Ordinance for which no penalty has specifically been provided under Section 182.

Copyright Business Recorder, 2021

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