Filing of Monthly Withholding Tax Statements

Filing of Statements of Tax Collected or Deducted by Taxpayers

Every company being a withholding agent has to, as per law, deduct and deposit taxes into government treasury. Filing of Monthly Withholding Tax Statements is mandatory for registered organizations acting as withholding agents in Pakistan.

Moreover, when a withholding agent deducts and deposits the withholding taxes in Pakistan, it also have to report it to the Government (Federal Board of Revenue) through FBR’s Web Portal on perpetual frequency.

Normally there are 2 types of monthly statements of tax collection or deduction that need to be filed.

Statements under section 165 of the Income Tax Ordinance

The tax deducted/ collected on payments made on account of goods and services. The tax deduced on sections other than section 149 of the Income Tax Ordinance, 2001. These deductions are reported via statement u/s 165 of the Income Tax Ordinance, 2001.

Statement under section 149 of the Income Tax Ordinance, 2001

When employer pays its employees/ staff their remuneration by the way of salary income, bonus, benefits and others then tax is deducted u/s 149 of the Income tax Ordinance, 2001.

Rule 44: of Income Tax Rules, 2002 Annual Statement of Tax Collected or Deducted

(2) Pursuant to sub-section (2) of section 165, a person responsible for collecting or deducting tax under Division II or Division III of Part V of Chapter X of the Ordinance or under Chapter XII of the Ordinance shall furnish or e-file a monthly statement by the 15th day of the month following the month to which withholding tax pertains as set out in part X of the Second Schedule to these rules.

(3) The statement referred to in sub-rule (2) shall be accompanied by the evidence of deposit of tax collected or deducted to the credit of the Federal Government.

(4) A person required to furnish the statement under sub-rule (2) shall, wherever required by the Commissioner, furnish a reconciliation of the amounts mentioned in the aforesaid monthly statements with the amounts mentioned in the return of income, statements, related annexes and other documents submitted from time to time. 

Now it is compulsory to issue notice under Rule 44(4) of Income Tax Rules, 2002 for initiating proceedings u/s 161 of Income Tax Ordinance, 2001.

(5) Pursuant to sub-section (6), a person responsible for deducting tax under section 149 shall furnish or e-file annual statement by the 31st day of the month of July after the end of a financial year in the form set out in Part IX of the Second Schedule to these rules. 

Fines/ Penalties on Non Filing of Monthly Withholding Tax Statements

There are certain penalties imposed when a withholding not deducts tax or if deducts and not files monthly statements of tax collected or deducted under rule 44 of the Income Tax Ordinance, 2001.

These penalties range from fixed amounts and variable amounts depending upon the nature of offence.

Following are the fines/ penalties imposed on non-compliance of certain monthly filing of statements of tax collection or deduction as per Income Tax Ordinance, 2001.

Section 182 | Offences and Penalties relating to Filing of Monthly Withholding Tax Statements

Any person who commits any offence specified in column (2) of the Table below shall, in addition to and not in derogation of any punishment to which he may be liable under this Ordinance or any other law, be liable to the penalty mentioned against that offence in column (3) thereof:

S.No	Offences	Penalties	Section of the Ordinance to which offence has Reference
(1)	(2)	(3)	(4)
1A.	Where any person fails to furnish a statement as required under section 115, 165, or 165A, 165A or 165B within the due date.	Such person shall pay a penalty of Rs. 2500 for each day of default subject to a minimum penalty of ten thousand rupees.	115, 165 and 165A, 165A and 165B
1AAA.	Where any person fails to furnish wealth statement or wealth reconciliation statement.	Such person shall pay a penalty of 0.1% of the taxable income per week or Rs.20,000 whichever is higher.	114, 115 and 116

 

The penalty of not Filing of Monthly Withholding Tax Statements in time is Rupees 2,500 per day for each day of default and the minimum penalty in this case is Rupees 10,000.

Section 162: Recovery of tax from the person from whom tax was not collected or deducted

• Where a person fails to collect tax as required under Division II of this Part or Chapter XII or deduct tax from a payment as required under Division III of this Part or Chapter XII, the Commissioner may pass an order to that effect and recover the amount not collected or deducted from the person from whom the tax should have been collected or to whom the payment was made.
• The recovery of tax under sub-section (1) does not absolve the person who failed to deduct tax as required under Division III of this Part or Chapter XII from any other legal action in relation to the failure, or from a charge of default surcharge or the disallowance of a deduction for the expense to which the failure relates, as provided for under this Ordinance.

Section 205: Default Surcharge

Default surcharge at a rate equal to  12 per cent per annum on the tax, penalty or other amount unpaid computed for the period commencing on the date on which the tax, penalty or other amount was due and ending on the date on which it was paid:

Any default surcharge paid by a person under sub-section (1) shall be refunded to the extent that the tax, penalty or other amount to which it relates is held not to be payable.

A person who fails to collect tax or fails to pay an amount of tax collected or deducted as required under section 160 on or before the due date for payment shall be liable for default surcharge at a rate equal to 12 per cent per annum on the amount unpaid 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 was paid to the Commissioner.

Call us at +92 321 8408828 to learn Filing of Monthly Withholding Tax Statements or let us file statements under section 165 and 149 of the Income tax Ordinance, 2001.

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