The Federal Board of Revenue (FBR) has the authority to impose fine or imprisonment up to one year on withholding agents who failed to collect/deduct tax or unable to pay the deducted tax under the provisions of the Income Tax Ordinance 2001.
An FBR Guide for the taxpayers issued on Tuesday revealed that the Income Tax Ordinance, 2001 took ample care for non-compliance of the provisions of law relating to withholding taxes and filing of monthly and annual statements of tax collected and deducted.
The non-deduction of tax would be considered as an offensive under the income tax provisions, which might result in imprisonment for a term not exceeding one year. In case of tax at source, the following expenditures are not allowed as deduction for the purpose of computing income: salary, rent, brokerage or commission, profit on debt, payment to non-resident and payment for services or fee.
The person responsible for collecting or deducting the tax at source as a withholding agent is personally liable for the amount of tax not collected or deducted and payable/recoverable as if it is due under an assessment order under the Ordinance.
Similarly, the tax collected or deducted, if not paid, is also payable/recoverable as if it is due under an assessment order under the Income Tax ordinance, 2001 personally from the person responsible to collect or deduct the tax at source as a withholding agent.
In addition to the principal amount of the tax to be collected or deducted at source by the withholding agent, a further tax "additional tax" is also payable/recoverable at the rate of 12 percent per annum on the amount of tax not collected or deducted or having collected or deducted not paid computed for the period commencing on the date the amount was required to be collected or deducted and ending on the date on which it is paid.
The guide pointed out that any person who, without reasonable excuse, failed to pay the tax would tantamount to committing an offence punishable on conviction with a fine or imprisonment for a term not exceeding one year, or both.
Penalty for failure to furnish statements of tax collected or deducted, if the default of not furnishing the statements continues even after the imposition of a penalty of Rs 2,000, an additional penalty of Rs 200 for each day would be levied. Any person responsible for collection or deduction of tax at source as a withholding agent, without reasonable excuse, fails to furnish, within the time allowed is liable for a penalty of Rs 2,000.
Every withholding agent (person obliged to collect or deduct tax at source) wherever required by the Commissioner, is obliged to furnish a reconciliation of the amounts mentioned in the annual and monthly statements with the amounts mentioned in the return of income, statements, related annexures and other documents submitted from time to time, the guide added.