The Federal Board of Revenue (FBR) has proposed a new relief mechanism for taxpayers who miss the income tax return filing deadline. Under the proposed changes, late filers may be allowed to join the Active Taxpayers’ List (ATL) without paying the applicable surcharge, provided they agree not to acquire property for a period of six months.
The proposal has been introduced through draft amendments to the Income Tax Rules, 2002, issued under SRO 1690. The FBR has invited stakeholders and other interested parties to submit their feedback within one week.
How the Proposed Relief Would Work
Under the proposed Rule 81B, a taxpayer who files an income tax return after the prescribed deadline could seek inclusion in the ATL without paying the late-filing surcharge.
To qualify, the taxpayer would need to submit an electronic undertaking through the FBR’s Inland Revenue Information System (IRIS).
The undertaking would essentially commit the taxpayer to refraining from purchasing or otherwise acquiring an ownership or beneficial interest in any property for six months.
The six-month period would begin from the date on which IRIS electronically acknowledges the taxpayer’s undertaking through the proposed Form ATL-U.
FBR to Monitor Property Acquisitions
The proposed arrangement would not simply rely on the taxpayer’s declaration. FBR would have the authority to verify whether the undertaking has been followed.
For this purpose, the tax authority could use information available under the Income Tax Ordinance as well as data obtained from government departments, property registries, financial institutions, regulatory bodies and other lawful sources.
This means taxpayers taking advantage of the proposed concession could potentially face verification during the six-month restriction period.
What Happens If Property Is Acquired?
If FBR determines that a taxpayer acquired property during the restricted period, the taxpayer would first be given an opportunity to explain their position electronically.
If, after considering the taxpayer’s response, FBR establishes that the undertaking was breached, the special ATL benefit would be cancelled from the date of the violation.
The taxpayer would then be dealt with under the existing rules applicable to late filers, including the applicable surcharge requirements.
Information Required in Form ATL-U
The proposed Form ATL-U would contain essential details to establish the taxpayer’s identity and filing status.
These details are expected to include:
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Taxpayer’s name
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CNIC or NTN
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Relevant tax year
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Date on which the income tax return was filed
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IRIS acknowledgement or reference number
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Date on which the undertaking was submitted
The electronic form would provide FBR with a record of the taxpayer’s commitment and allow the authority to determine when the six-month restriction begins.
What the Proposal Means for Late Filers
The proposed measure could provide a useful alternative for taxpayers who missed the return-filing deadline but need ATL status for their financial activities.
However, the benefit would come with an important limitation. Anyone opting for the surcharge-free route would need to carefully consider their plans for purchasing or acquiring property during the following six months.
For taxpayers who expect to buy a house, plot, commercial property or another form of real estate during this period, accepting the proposed undertaking could carry significant consequences if the acquisition is considered a breach.
Proposal Still Awaiting Final Approval
It is important to note that the proposed arrangement is not yet a finalized rule. FBR has issued the draft amendments and requested feedback from stakeholders.
The final provisions could therefore be changed before they become effective.
For now, the proposal represents an attempt by FBR to offer late filers a route to ATL inclusion without the prescribed surcharge, while using a temporary restriction on property acquisition as a compliance condition.
Taxpayers should therefore wait for the final notification and carefully review the applicable rules before relying on the proposed concession.