Advance Tax on functions and gatherings under section 236D of the Income Tax Ordinance, 2001. [Division XI of Part IV of First Schedule]
Advance Tax on Functions and Gatherings under section 236D: As per section 236D of the Income Tax Ordinance, 2001 owners, lease holders, managers or operators of marriage halls, marquees, hotels, restaurants, commercial lawns, clubs, community places or any other place used for such businesses are mandated to collect 5% tax on the total amount of the bill from a person arranging or holding a function in a marriage hall, marquee, hotel, restaurant, commercial lawn, club, a community place etc.
Such function(s) may include a wedding related event, seminar, workshop, session, exhibition, concert, show, party or any other such gathering.
The persons specified in the foregoing paragraph are also obliged to collect 5% advance tax from a person arranging or holding functions as delineated in the aforementioned paragraph in instances where food, service or any other facility is provided by any other person. The tax collected under section 236D of the Ordinance is adjustable in nature.
Prior to Finance Act, 2018 the advance tax to be collected on marriage functions under section 236D of the Ordinance was 5%. An amendment has been introduced in Division XI of Part IV of the First Schedule through the Finance Act, 2018 whereby the advance tax collected on marriage functions under section 236D of the Ordinance shall be the higher of 5% of the total amount of the bill or Rs.20,000/- per marriage function in cities which are provincial or divisional headquarters comprising Islamabad, Lahore, Multan, Faisalabad, Rawalpindi, Gujranwala, Bahawalpur, Sargodha, Sahiwal, Sheikhupura, Dera Ghazi Khan, Karachi, Hyderabad, Sukkur, Thatta, Larkana, Mirpur Khas, Nawabshah, Peshawar, Mardan, Abbottabad, Kohat, Dera Ismail Khan, Quetta, Sibi, LoraLai, Khuzdar, Dera Murad Jamali and Turbat. For the remaining cities in Pakistan the rate of tax to be collected on marriage functions under section 236D of the Income Tax Ordinance, 2001 shall be the higher of 5% of the total amount of bill of the marriage function or Rs.10,000/-per marriage function.
The aforementioned amendment in Division XI of Part IV of the First Schedule through Finance Act, 2018 has rationalized withholding tax rates on the basis of cities and in no way increases the liability or the obligation of the persons arranging or holding marriage functions as the tax collected is an advance tax and is adjustable against a person’s normal tax liability at the end of the tax year.