FBR chief urges Senate body to abolish 7th Schedule of ITO, bring banks into normal tax regime applicable to companies

ISLAMABAD: Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial, Thursday, strongly recommended Senate Standing Committee on Finance to abolish Seventh Schedule (Banking Schedule) of the Income Tax Ordinance 2001 and bring banks into normal tax regime applicable to companies.

The FBR chairman expressed serious concern over special tax treatment to the banking companies. “Banking Schedule must be abolished from the income tax law”, Rashid Mahmood said.

He stated that the banks should be treated like any other company. “Why the banks be given totally different tax treatment as compared to other registered companies”, the FBR chairman questioned.

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“Tax laws cannot be dictated to the government by any particular sector”, the FBR chairman criticised. In 2007, this schedule was inserted in the Income Tax Ordinance 2001, which needs to be deleted, the FBR chairman said.

Langrial stated that the banks are engaged in business and why we are applying different tax laws on banks. Seventh Schedule (Banking Schedule) of the Income Tax Ordinance should not remain part of the tax law and it should be abolished from the Income Tax Ordinance. Banks should not be given different tax treatment, the FBR chairman said.

While review of the Finance Bill (2025-26) on Thursday, the taxation issue of banking sector was discussed in detail at the Senate Standing Committee on Finance and Revenue, under the chairmanship of Senator Saleem Mandviwalla.

FBR Member Inland Revenue (Operations) Hamid Atiq Sarver was specially invited to explain banking related amendments in the Finance Bill (2025-26).

When Mandviwalla asked the Securities and Exchange Commission of Pakistan (SECP) chairman about the legal status of banks, Akif Saeed informed the committee that the banks are registered like any other company.

The FBR Member Inland Revenue (Operations) explained in detail all legal and technical amendments relating to the banking schedule of the Income Tax Ordinance 2001.

Later, amendments were approved by the committee.

Chairman of the committee Saleem Mandviwalla questioned the performance of the anomaly committees constituted by the FBR. The FBR has formed two anomaly committees to identify and remove the technical and legal anomalies in the Finance Bill 2025.

Mandviwalla stated that the anomaly committees have failed to address the issues raised by the business community. The anomaly committees do not rectify errors in tax laws. The FBR chairman responded that this year we are bound due to IMF programme.

The chairman of the committee also recommended deletion of Special Economic Zone (SEZ) Act, keeping in view government policy for not granting or extending tax exemptions. Some SEZs are fully operational and some are partially working. What is the fate of the SEZ after withdrawal of tax exemptions, he raised question. The government should terminate SEZ Act as it has become redundant in the absence of new tax exemptions.

The FBR is not giving new exemptions and it would create problems for the new SEZs. Therefore, the law should be abolished. The government should refrain from giving fresh approvals to the SEZs, he added.

On the proposal of the FBR for three years limit on audit of a taxpayer, Mandviwalla noted with concern that it is a general practice of the FBR to conduct multiple audits of taxpayers even in cases where simple explanation is required. A school of Islamabad has been audited by the FBR for the last three years, he added.

Copyright Business Recorder, 2025