A penalty of Rs1,000 each day of default has been implemented from Saturday after the expiry of return filing date on October 15, 2021.

A new amendment has been made part to the Income Tax Ordinance, 2001 through Tax Laws (Third Amendment) Ordinance, 2021. The Federal Board of Revenue (FBR) issued Circular No 7 of 2021-2022 to explain the amendment.

The last date for filing the income tax return for tax year 2021 was September 30, 2021. However, the FBR through a circular extended the date by 15 days up to October 15, 2021.

Amendment in Section 182 of the Income Tax Ordinance, 2001

The FBR said that amendment has been made in Section 182 of the income Tax Ordinance , 2001.

“A person who fails to file return within due date will have to pay a penalty of higher of Rs1,000 or 0.1 per cent of tax payable for each day of default. However, the minimum penalty shall be Rs10,000 in case of individual having 75 per cent or more income from salary and Rs50,000 in other case and maximum penalty shall not exceed 200 per cent of tax payable by person.

“Furthermore, above mentioned penalties shall also be reduced by 75 per cent, 50 per cent and 25 per cent in case return is filed by the person within one, two or three months respectively after the due date.

“General penalty for contravening any provisions of the ordinance has been omitted,” the FBR added.

Special powers granted to FBR regarding action against Non filers of Income Tax Returns

The FBR also introduced other penal action of suspending mobile phones and utility connections for not appearing on Active Taxpayers List (ATL).

The FBR said that broadening of the tax base is the highest priority of the tax authorities and paramount to increase the revenue.

“To  augment the existing measures to broaden the tax net and to increase the number of return filers, a new section 114B has been inserted which empowers the FBR to issue Income Tax General Order (ITGO) in respect of persons who are not appearing on ATL but are liable to file return under the provisions of the Income Tax Ordinance, 2001.”

The FBR has also been empowered to discontinue the use of mobile phone connections, electricity connections and gas connections of the non-filers.

The FBR or the concerned commissioners are also empowered to issue orders to restore the discontinued connections in cases where the return has been filed or the person was not required to file return of income.

Before inclusion of any person in the general order, following conditions are required to be met:

(i) Notice under sub-section 4 of Section 114 has been issued;

(ii) Date of compliance of the notice under sub-section (4) of section 114 has lapsed; and

(iii) Tax return has not been filed.

Penalty for Late Filing of Annual Income Tax Returns 2021 / Penalty, for becoming Active Tax filer / Penalty for Inclusion of name in Active Taxpayer List (ATL) – Under Section 182A of Income Tax Ordinance 2001

Where a person fails to file a return of income under section 114 by the due date as specified in section 118 or by the date as extended by the Board under section 214A or extended by the Commissioner under section 119, as the case may be, such person shall—
(a) not be included in the active taxpayers’ list for the year for which return was not filed within the due date

Provided that without prejudice to any other liability under this Ordinance, the person shall be included in the active taxpayer ‘ list on filing return after the due date, if the person pays surcharge at Rupees-
(i) twenty thousand in case of a company;
(ii) ten thousand in case of an association of persons;
(iii) one thousand in case of an individual.

“Explanation. For the removal of doubt it is clarified that the provisions of this section shall apply from tax year 2018 and onwards for which the first Active Taxpayers List is to be issued on first day of March, 2019 under Income Tax Rules, 2002.; and
(b) not be allowed, for that tax year, to carry forward any loss,
(c) not be issued refund during the period the person is not included in the active taxpayers’ list; and
(d) not be entitled to additional payment for delayed refund under section 171 and the period the person is not included in the active taxpayers’ list, shall not be counted for computation of additional payment for delayed refund.