Individual tax payers offered ‘amnesty’

Audit case to be abolished on payment of 25% additional tax

ISLAMABAD: Under an unannounced amnesty scheme for individual tax payers, the federal government has offered abolition of audit cases on payment of 25 per cent additional tax, besides extending the date for submission of revised tax returns for individual tax payers till December 31.

At the same time, cases of hundreds of thousands of salaried persons selected for the audit have been settled without the collection of any additional taxes, according to a notification issued by the federal government.

The word ‘amnesty’ has, however, not been used for the scheme.

According to the notification, with the amendment to the Income Tax Ordinance 2001, a new clause 214E has been added, which says that the scheme will be applicable to the taxpayers selected for the audit under the clause 214D, which had been removed from the ordinance, as well as those taxpayers who were not issued notices under section 122 of the ordinance.

The notification says that the taxpayers selected under the scheme will be able to submit their revised income tax returns till December 2018, with 25 per cent tax on top of the last tax they had paid. Moreover, those who have not paid their taxes will have to pay an amount equal to two per cent of their total turnover while those who have not even declared their turnover will have to pay Rs20,000 voluntarily as fine.

According to a senior officer of the Federal Board of Revenue (FBR), section 214D had been introduced to the Finance Act of the Income Tax Ordinance 2001 in the year 2015 for an automated selection of those who have submitted their tax returns after the due date for audit. Under this clause, 1.22 million individual taxpayers had been selected for audit in three years since then, he added.

The official said that hundreds of thousands of audit cases, selected through lucky draws annually, were already pending with the FBR’s Audit Department. And the addition of a large number of cases pertaining to those who submitted their tax returns after the due date had added to the bureau’s workload, he added.



For the same reason, the previous government had – while unveiling its last budget for the fiscal year 2018-19 – removed section 214D from the income tax ordinance, but the cases of individual taxpayers selected during the last three years were still causing problems for the FBR and for which a summary had been submitted to the caretaker set-up, according to the FBR official. The summary had been agreed upon in principle, but then there was no progress, he added.

In view of an unprecedented increase in the number of pending audit cases, section 214D has been removed from the income tax ordinance in the current federal budget, but the cases that have been previously identified have exceeded a million and the FBR’s audit department does not have the necessary human resources to handle them.

According to sources, in the prevailing conditions, the incumbent government – through its supplementary budget and Finance Amendment Act 2018 – has introduced a scheme to end the pending audit cases and a gazette notification in this regard has also been issued.

According to the scheme, audit cases involving hundreds of thousands of salaried persons would be exempt from any additional tax payments. Salaried individuals who are given exemption would also not need to submit any reviewed tax returns. However, the salaried individuals having any agricultural income, property income, capital gains or profit on debit and dividends must submit reviewed tax returns by December 31, 2018 and pay an additional 25 per cent tax in order to relieve themselves of the audit process.

Those who have not paid any tax earlier can relieve themselves of the audit on payment of an amount equivalent to 2 per cent of their turnover. And those who have not even declared their turnover would have to pay an additional fine up to Rs20,000.