Candidates contesting upcoming elections who come in the category of tax defaulters include; non-National Tax Number (NTN) holders liable to file income tax returns, NTN-holders not filing returns, return filers not filing wealth statements and cases where tax demand is recoverable under Income Tax Ordinance 2001.
Sources told Business Recorder here on Friday that the Election Commission of Pakistan (ECP) could disqualify the election contestants on the basis of tax defaults, which would be communicated by the Federal Board of Revenue (FBR) to the ECP. There are different dimensions of tax defaults under Section 114 and Section 116 of the Income Tax Ordinance 2001.
If any of the contesting candidates fall in this category, he either does not exist on the FBR's 'NTN Master Index' or he is not filing income tax returns. Non-filers of income tax return/wealth statements automatically fall in the category of defaulters. Therefore, contesting candidates for upcoming elections would be considered tax defaulters if they are non-NTN holders, but liable to file returns or non-filers of income tax returns and wealth statements and where tax demand is recoverable against the contesting candidates.
There is no need to determine whether a contesting candidate is a tax defaulter or not, as Sections 114 and 116 of the 2001 Ordinance are clear on the issue. Under Section 114, different categories of persons are required to file returns, including NTN holders. Thus, it is mandatory for persons specified in Section 114 of the Ordinance 2001 to file returns. The non-filing of returns is a default. Similarly, non-filing of wealth statements under Section 116 is also a default.
The first scenario is that the contesting candidate is not a taxpayer, but he is liable to file return under Section 114 of the Income Tax Ordinance 2001. In such a situation, the contesting candidate has committed a tax default. The second situation is that the contesting candidate is NTN holder and liable to file return but not filing tax return. This is also a tax default.
The third scenario is that the NTN holder is filing return but not filing wealth statement. The non-filing of wealth statement is also a default under Section 116 (2) of the Ordinance 2001. Fourthly, it is also a tax default case where tax demand is recoverable, but not paid by the contesting candidate. Sources said that in the above mentioned situations the tax default is crystal clear and well established.
Under Section 114 of the Ordinance 2001, following persons are required to furnish a return of income for a tax year, namely: Every company; every person (other than a company) whose taxable income for the year exceeds the maximum amount that is not chargeable to tax under this Ordinance for the year; any non-profit organisation; any welfare institution; owns immovable property with a land area of 250 square yards or more or owns any flat located in areas falling within the municipal limits existing immediately before the commencement of Local Government laws in the provinces; or areas in a Cantonment; or the Islamabad Capital Territory; owns immovable property with a land area of 500 square yards or more located in a rating area; owns a flat having covered area of 2000 square feet or more located in a rating area; owns a motor vehicle having engine capacity above 1000cc; has obtained National Tax Number; holder of commercial or industrial connection of electricity where the amount of annual bill exceeds Rs 1 million and other categories of persons specified in Section 114 of the Ordinance 2001.
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