FBR suspends withholding tax audit of NSCs

The Federal Board of Revenue (FBR) has temporarily discontinued withholding tax audit of the National Saving Centres (NSCs) across the country. Sources told Business Recorder here on Sunday that the issue of withholding tax audit of the NSCs was discussed threadbare during the last Chief Commissioners conference.
The FBR will take up the issue of the withholding tax audit of NSCs with the concerned directorate for continuation of the audit of the NSCs. The concerned directorate had objected the audit of each and every branch of the NSCs, whereas, the FBR will go for system audit of the NSCs for verification of the withholding tax payments.
According to the FBR, 'Directorate General of Broadening of Tax Base' made a presentation regarding monitoring and audit of selected branches of banks on sample basis to ensure that taxes are properly and correctly withheld and timely deposited in the government treasury.
Such audit of banks would be an ongoing exercise to be carried out by all Large Taxpayer Units and Regional Tax Offices. During discussion on audit of banks, a point was raised by a Chief Commissioner Regional Tax Office Ansar Javed and other tax officials that an internal circular of a concerned directorate of national savings has stopped FBR from doing audit of National Saving Centres. The FBR has decided that the issue would be taken up at the level of the Board-in-Council meeting for resolution of the issue', FBR added.
When contacted, sources said that the Directorate General of Withholding Taxes had already initiated audit of the National Saving Centres to ensure proper 'deduction and collection' of the taxes on profit earned through investment made in different schemes.
Sources said that the collection of withholding tax on saving schemes profit is part of the strategy to improve overall revenue collection broadening the tax base as specified in the law. Under section 151 of the Income Tax Ordinance 2001, withholding tax deduction on profits earned on certificates and deposits made under different National Savings Schemes is part of the law. The NSCs have also to operate as withholding agents for accurate deduction of tax.
In the past, the DG Withholding Tax had compiled and provided the exact number of NSCs located within the jurisdiction of the Regional Tax Offices (RTOs) with complete location, address and telephone numbers. The offices of the NSCs do not fall within the jurisdiction of Large Taxpayer Units (LTUs).
On the recommendations of the DG Withholding Tax to ensure effective monitoring of this levy, the officials of the Enforcement Division holding the jurisdiction of section 151 (1) (a) of the Income Tax Ordinance 2001 were engaged in the audit of the NSC. This section deals with the deduction of withholding tax on saving schemes. The designated taxation officers should carry out audit of withholding tax collected by each NSC to recover the defaulted amount of last year's withholding tax. The department would also regularly watch the deposit of tax by each NSC for each month for the rest of the current fiscal. This can be done by obtaining data from the Pakistan Revenue Automation Limited (PRAL) and Data Processing Centres (DPCs) of the tax department on regular basis. The relevant taxation officers should take up the matter with the NSC, which has either not deposited tax in a month or the tax deposited appears to be less against the project figures. In this regard, the department was also collecting data regarding interest paid and tax collected on different saving schemes.
Sources said that there is a need for proper computerisation of record to make deduction on saving schemes foolproof, sources added.