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Procedure for withholding tax agents simplified

ISLAMABAD (July 05 2005): The Central Board of Revenue (CBR) has made it mandatory for all withholding tax agents to submit quarterly and annual statements with details of tax collected or deducted. The CBR has amended Income Tax Rules 2002 through SRO 641(I)/2005 to simplify the deduction procedure for withholding tax agents.

All withholding tax agents, other than Federal and Provincial Governments, are now required to deposit the tax collected, or deducted, under any provision of the Income Tax Ordinance, 2001, to the credit of the Federal Government within seven days at the end of each fortnight. Earlier, the withholding tax agents were required to deposit the tax within seven days and 15 days of the collection or deduction under different provisions.

Under the new rules, all withholding tax agents are now required to submit quarterly and annual statements containing details of tax collected or deducted. Earlier, some of the collection or deduction of tax at source required monthly and semi-annually reporting.

The withholding tax agents are also required to give certificate of tax collected or deducted, other than salaries, on demand from the person from whom tax has been collected or deducted, in the prescribed form within seven days of the request. As a result of the above changes, the long outstanding demand of the taxpayers for simplification of the obligations of the withholding tax agents, avoidance of duplication of information and the hassle of daily depositing of the tax collected or deducted have been met.

The CBR has replaced 17 existing prescribed statements of monthly, quarterly and annual statement with a single quarterly statement; and two annual statements, one for salary and one for all other items.

Only a single form has been now prescribed for issuing the certificate of tax collected or deducted at source under any of the provisions of the Income Tax Ordinance, 2001, except from salary.

The new annual salary statement is slightly more elaborate and detailed to cater for the exemption granted to the employees, having no other source of income etc, from filing of a return of income or employer's certificate in lieu of the return of income. However, an employer has the option to delete any of the columns of the new annual salary statement that are not applicable in a particular case.

As per amended rules, the other annual statement is designed to obtain the information about the persons from whom tax has been collected or deducted for the purposes of broadening of tax base.

In the quarterly statement, summarised details of tax collected or deducted and deposited are required while emphasis is on obtaining the details about the transactions from which tax has not been collected or deducted and the reasons thereof. The purpose of the quarterly statement is to monitor the withholding agents.

The employers are now required to give the certificate of tax deducted from salary to their employees, in the prescribed form, within 45 days from the end of the financial year. Earlier, this period was 60 days. Where the employment ceases before the end of the financial year the employers are required to give the certificate of tax deducted to their employees, in the prescribed form, within 7 days of the ceasing of employment, or at the time of making the payment in final settlement, whichever is later.

All withholding tax agents are now required to give the annual certificate of tax collected or deducted, other than salary, to the persons from whom tax has been collected or deducted, in the prescribed form within 15 days from the end of the financial year or discontinuation of business etc.

In addition, some inconsistencies in the rules have also been removed. The revised rules are in force, and the quarterly and annual statements now due shall be filed in accordance with these revised rules.

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