Advance tax exempted on educational scholarship payment


ISLAMABAD: Federal Board of Revenue (FBR) has exempted advance tax on amount paid as scholarship to educational institutions.

The FBR issued Circular No. 03 explaining amendments made through Finance Act, 2018 to Income Tax Ordinance, 2001 said that in terms of section 236I of the Ordinance, a person preparing a fee voucher or challan was obliged to collect/charge advance tax at 5 percent from a person on the amount of fee paid to an educational institution such as schools, colleges, universities, tuition centers etc.
However, such advance tax under section 236I of the Ordinance was not to be collected in instances where annual fee was up to Rs200,000/- and in the case of a person who is a non-resident, subject to the furnishing of various documentation as enunciated in sub-section (6) of section 2361 of the Ordinance.
The FBR said in order to alleviate the hardship of persons whose educational fees are being paid through a scholarship, appropriate amendment has been made in sub-section (3) of section 236I of the Ordinance through the Finance Act, 2018 wherein it has been stipulated that advance tax under section 236I of the Ordinance shall not be collected on an amount which is paid by way of scholarship.

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