How to Deduct Tax of Persons not Appearing on ATL?

Tenth Schedule Explains the rules for Tax Rates for persons not appearing on ATL

Rules for Persons Not Appearing in the Active Taxpayers’ List

The Process for Withholding Agents:

Here’s a breakdown of the steps a withholding agent should take when dealing with someone not listed as an active taxpayer:

  1. Exemption Assessment: The withholding agent first needs to determine if the individual, despite not being on the active list, qualifies for exemption from filing a tax return under specific sections (114 or 1) of the Income Tax Ordinance.

  2. Notification to Commissioner (if applicable):

    • If the withholding agent believes the person is exempt, they must electronically notify the Commissioner (tax authority) with details about the individual and the transaction.
    • This notification includes the individual’s name, ID (CNIC or NTN), address, transaction details (nature and amount), and the reason for believing they are exempt.
  3. Commissioner’s Response: The Commissioner has 30 days to respond to the notification:

    • Acceptance: If the Commissioner agrees with the withholding agent’s assessment of exemption, no further action is required.
    • Tax Deduction Order: If the Commissioner believes the individual should file a return, they can order the withholding agent to collect tax at the source.
    • No Response: If no response is received within 30 days, the Commissioner’s silence is considered acceptance of the withholding agent’s assessment. This means no tax needs to be collected.

This table summarizes the rate of tax deduction or collection applicable to individuals not included in the Active Taxpayers’ List (ATL).

ProvisionDescriptionRate for Non-ATL Individuals
Where tax is to be collected or deductedIncreased by 100% of the standard rate
Section 231BTax collected on motor vehicleIncreased by 200% of the rate specified in the First Schedule
Section 236KTax collected on sale of immovable property
Fair Market Value <= Rs. 50 million12%
Fair Market Value > Rs. 50 million but <= Rs. 100 million16%
Fair Market Value > Rs. 100 million20%
Other SectionsIncreased rates apply, see below table

Additional Tax Rates for Specific Transactions (Non-ATL Individuals):

151Yield or profit on debt35%
236CSale or transfer of immovable property10%
236GSale to distributors, dealers, or wholesalers (excluding fertilizer)2%
236HSale to retailers2.5%

Tax Rates for Purchase of Immovable Property

This table outlines the tax rates applicable to the fair market value of immovable property under Section 236K of the Income Tax Ordinance, 2001 (ITO 2001):

S. No.Fair Market Value of Immovable PropertyTax Rate
1Up to Rs. 50 million6%
2Over Rs. 50 million but not exceeding Rs. 100 million7%
3Over Rs. 100 million8%
  • This rule does not apply to taxpayers who have filed income tax returns by the due date for the past three (3) consecutive tax years preceding the year in question.

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