Excessive tax deducted from non-filers


To practically facilitate the non-filers and encourage documentation, Section 169 of the Income Tax Ordinance, 2001 has been proposed to be amended through Finance Bill 2016 to allow adjustment of excessive tax deducted from non-filers.

It is learned that the proposed amendment is in line with the order passed by the Lahore High Court (LHC) wherein LHC ordered for adjustment of extra tax deducted by applying rates of non-filer to a petitioner. This amendment will ultimately encourage non-filers to become filer by filing their tax returns.

LHC’s order came in response to petition filed by a tax lawyer Waheed Shahzad Butt challenging the collection of enhanced rates of income tax by treating his status as Non-Filer (Inactive) on the Active Taxpayer List ie. ‘ATL’ issued by FBR. Later on the Federal Government proposed a vital amendment in the law and a new sub section (4) has been proposed to be inducted in Section 169 of the Income Tax Ordinance, 2001 which states “Where the tax collected or deducted is final tax under any provision of the Ordinance and separate rates for filer and non-filer have been prescribed for the said tax, the final tax shall be the tax rate for filer and the excess tax deducted or collected on account of higher rate of non-filer shall be adjustable,” it added.

When contacted tax lawyer Waheed Butt told this correspondent that proposed amendment in the income tax law shall practically facilitate the non-filers and encourage them to become filer by filing tax returns and claiming adjustment of extra tax deducted due to difference in rates prescribed for filer and non-filer separately. ATL has become more important after the amendments made in the Ordinance through the Finance Act, 2015 under which the gap of withholding tax rates had been widened for income tax return filers and non-filers.

Primary condition for becoming a Filer in terms of Ordinance deals with income tax matters is that the taxpayer’s name should appear in the “ATL”. Section 2(23A) of the Ordinance deals with this issue which reads as “Filer” means a taxpayer whose name appears in the active taxpayers’ list issued by the Board from time to time or is holder of a taxpayer’s card. This means that only the taxpayers’ whose name appears in ATL would be considered as “filers” and all other taxpayers shall be treated as Non-Filer.

Tax lawyer further added that in the light of provisions of Section 114 & 118 of the Ordinance read with Rule 73 of Income Tax Rules, 2002, there are many cases where the taxpayers have filed their income tax returns manually, as they were not legally obliged to submit the income tax return online/electronically. However, even then their names are not appearing in the ATL.

Federal Government ultimately realises the genuine problems faced by many taxpayers and to remove the hardship, a vital amendment in the Income Tax Ordinance, 2001 has been introduced through Finance Bill 2016 wherein a new Sub-section (4) has been proposed to be inducted in Section 169 which will ultimately encourage non-filers to become filer by filing their tax returns and in that eventuality the tax collected or deducted which is final tax under different provision of the Ordinance having separate rates for filer and non-filer, shall not be treated as final. In the light of proposed amendment excess income tax deducted or collected on account of higher rate for a person who is non-filer at the time of business transaction shall be adjustable and also refundable, lawyer added. –Business Recorder

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