FBR urged to reduce penalty for defaulting in statement filing
KARACHI: Federal Board of Revenue (FBR) has been urged to reduce the amount of penalty in case of defaulting in filing statement of withholding or final tax.
Karachi Tax Bar Association (KTBA) in a communication sent to FBR Chairman stated that penalty for non-furnishing of statements under section 115, 165, 165A or 165B of the Income Tax Ordinance, 2001 within the due date prescribed under Section 182 is Rs2,500 for each day of default subject to a minimum penalty of Rs10,000.
Penalties for non/ late filing of return of income, statement of final tax, wealth statements and withholding statements are very harsh and excessive and imposition of such huge penalties may create harassment among the taxpayers.
Through the Finance Act, 2011, the expression ‘tax payable’ was declared to mean tax chargeable on the taxable income without taking into account tax payments already made by the taxpayer.
The penalties in this regard need to be rationalized since the main purpose of levying penalty is to educate the taxpayers and instill a sense of compliance rather to create huge tax demands or to achieve revenue targets through such penalties.
The quantum of penalty worked on above basis is too harsh and highly un-reasonable. In many cases, practically, the quantum of penalty is much more than the actual tax liability itself. It is recommended that penalty for failure to furnish statements u/s 115, 165, 165A or 165B should be reduced to Rs500 per day subject to a maximum penalty of Rs10,000 and in case of continuation of default after the imposition of first penalty a further penalty of Rs1,000 per day be prescribed.