The Federal Board of Revenue has directed the banks and financial institutions to disclose complete information of the accountholders in the Monthly Withholding Statement to whom profit on debt has been paid. In this regard, the FBR has issued an income tax circular here on Thursday to rescind its Circular No 13 of 1991.
According to the circular, the withholding agents including banks and financial institutions, will accordingly be required to disclose the stipulated information in the Monthly Withholding Tax Statements (and through the challan of payment at the time of deposit of tax deducted from payment of profit on debt) mandated to be furnished under Section 160 and 165 of the Income Tax Ordinance, 2001. Where tax is not deducted as required under the Income Tax Ordinance, 2001, it is also obligatory to provide similar details and the basis of non-deduction of tax.
The information required from banks or financial institutions in respect of a specific person will continue to be governed under Section 176 of the Income Tax Ordinance, 2001 by the Commissioner or his delegates under approval of the Commissioner. The Commissioner is empowered in requisitioning from the banks or financial institutions, information in respect of a specific person, on the basis of CNIC in case of an account or accounts of an individual or joint account or accounts of the individuals or NTN/Registration No/Name in ease of other entities like, Companies. Partnerships, NPOs/Trusts, etc. For the purposes of Section 176 of the Income Tax Ordinance, 2001, the availability/provision of the exact bank account No is thus no more a requisite in the presence of information about the CNIC.
These instructions shall come into force with immediate effect, and all previous instructions issued earlier on the subject, in particular vide Circular No 13 of 1991 dated June 30, 1991, hereby cease to apply, FBR added. The FBR said that till now the withholding of tax on ''profit on debt'' at the operational level, was being governed by Circular No, 13. of 1991, and various other subsequent instructions handed out in this regard, which had primarily been issued to explain the implementation mechanism of sub-section (2A) of Section 50 of the (repealed) Income Tax Ordinance, 1979.
The promulgation of the Income Tax Ordinance, 2001, necessitates issuance of a new set of instructions on the subject, Accordingly, Circular No 13 of 1991 is hereby rescinded. The FBR said that the deduction of tax at source from payment of ''profit on debt'' and the allied reporting requirements are governed by Section 151, 152 and 165 of the Income Tax Ordinance, 2001, as well as Rule 43, and 44 of the Income fax Rules, 2002, and Part VIII of Second Schedule to the Income Tax Rules, 2002.
The FBR further said that the reporting requirements for the withholding agents (persons obliged to deduct tax from payment of profit on debt) are governed by section 165 of the Income Tax Ordinance, 2001 read with rule 44 of the Income Tax Rules, 2002. according to the said Section and the Rule, such withholding agents are obliged to furnish Monthly Withholding Tax Statements in the format prescribed under Rule 44(2) of the Income Tax Rules, 2002 and divulging therein the following formation in respect of each person to whom profit on debt has been paid or credited to his account, including those from whom tax has not been deducted on account of any (claim of) exemption: CNIC OR NTN, Name, Address, Date of payment, Gross amount of profit on debt paid or credited to account, Rate of tax deducted, Amount of tax deducted, Amount of tax deposited in Government Treasury, Date of deposit of tax in Government Treasury, Computerised Payment Receipt Number of tax deposited and Reasons for not deducting the tax (ie, relevant provision of Law or number, date and name of the issuing authority of exemption certificate).
The tax deducted from payment of profit on debt has to be deposited in accordance with the provisions of Section 160 of the Income Tax Ordinance read with Rule 43 of the Income Tax Rules, 2002, which require that the tax deducted has to be deposited in State Bank of Pakistan or National Bank of Pakistan within 7 days from the end of each week ending on every Saturday.
It is mandatory to provide the following information through challan of payment at the time of deposit of the tax deducted: Particulars of the withholding agent: National Tax Number (NIN) or Free Tax Number (FIN) and name and address. Particulars of the person from whom tax has been deducted: National Tax Number (NTN) or Computerised National Identity Card Number (CNIC) or Passport No (in case of non-residents); & Name and address. Particulars of the transaction from which tax has been deducted: Nature of transaction (Profit on Debt), Section of the Income Tax Ordinance. 2001 under which tax has been deducted (Section 151 or 152), Gross amount of the profit on debt on which tax has been deducted & Amount of tax deducted.
At the option of the withholding agent: A separate tax payment in respect of each person from whom tax has been collected or deducted can be made or A combined payment in respect of all persons from whom tax has been deducted can be made, in which case the particulars and details of the transaction in respect of each person from whom tax has been deducted are to be separately stated. In case of manual tax payment deposit slip form (Challan) a maximum of ten persons can be accommodated and in case of computerised tax payment deposit slip particulars of any number of recipients may be recorded.
Although, the existing governing legal regime is not much different from that provided under the (repealed) Income Tax Ordinance, 1979, yet in order to keep the compliance cost of the banking sector at a reduced level in view of the manual nature of their working, FBR through Circular No 13 of 1991 (Para 8), had provided a specific special waiver to the banks from providing detailed particulars of the account-holders from whom tax was being withheld. However, in view of the amendments to Section 165 of the Income Tax Ordinance, 2001 introduced through the Finance Act, 2011, providing of the detailed information in respect of each account-holder from whom taxes are withheld /deducted is mandatory in order to determine the amount and category of transaction to ascertain nature of withholding liability, ascertain the application of correct rate of tax deduction, allow credit to individual taxpayers whose tax has been deducted & collected and arrive at overall correct tax liability of each taxpayer from all sources under all heads of income, FBR added.
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