The Federal Board of Revenue (FBR) cannot legally impose penalties on taxpayers classified under the newly introduced “Late Filers” category, according to tax experts. This category, created through the Finance Act 2024, is argued to be unconstitutional if applied retrospectively. Several taxpayers have already approached the Lahore High Court (LHC) to challenge this move by the FBR. They argue that since their status remains Active in the Active Taxpayers List, they should only be required to deposit an advance tax at the rate of 3% under section 236K of the Income Tax Ordinance, 2001. However, the tax department is pressuring them to pay the enhanced rate of 6% without legal basis.
Before the LHC, it was argued that this action contradicts existing law and is therefore unjustifiable. The court has since issued notices to the tax department, asking them to respond.
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Tax experts, including Farhan Tariq from FB Consultants, have noted that the “Late Filers” category will officially take effect on July 1, 2024. Consequently, enforcing the law retrospectively would be illegal and is likely to be contested in court.
Previously, taxpayers were categorized into two groups: Filers and Non-Filers. The new category of “Late Filers” applies to those who submit their tax returns after the due date, making them subject to higher tax rates on transactions involving immovable property. This measure aims to encourage timely filing of tax returns.
