Cos must submit returns on withholding tax twice

Companies, cooperatives and non-governmental organizations (NGOs) may now have to submit withholding tax returns twice a year, mandatorily, under a new fiscal regime.
The deducting authorities on the withholding tax, known as tax at source, will also face audit from the upcoming fiscal year (FY) 2016-17 by the taxmen as per strict provisions incorporated into the Finance Bill 2016.
In case of failure in deduction of tax or deduction at lower rate or failure in depositing the amount, the deducting authorities may have to take the liability for the tax supposed to be deducted and deposited with the government exchequer.
They also have to pay 2.0 per cent additional tax on the payable amount, says the finance bill that tries to plug the loopholes that help drain out due revenues and contribute to target shortfalls.
Talking to the FE a senior tax official said the proposed provision in the income tax law will check irregularities in tax collection in this sector that contribute 57 per cent of the total tax-revenue collection.
Currently, 250,000 public and private entities are responsible for deducting withholding tax.
The tax official said pay-roll tax, deducted at source by the employers from salaries of employees, contributes only 4.0 per cent to 5.0 per cent to total tax collected at source.
"There is huge potential to boost collection of withholding tax. Enforcement of the proposed tax measure will help the tax authority collect a substantial amount of tax from salaried persons," he said.
The Finance Bill 2016 that accompanies the national budget just placed in parliament holds a provision of bringing discipline in collection of withholding tax.
According to the income tax law, three authorities are bound to deduct the withholding tax and submit tax returns. It is mandatory for companies, cooperative societies and non-governmental organizations to submit the withholding tax returns to the taxmen.  
"….every person, being a company or a co-operative society or a non-government organization registered with NGO affairs bureau, shall file or cause to be filed, with the deputy commissioner of taxes under whose jurisdiction he is an assessee, a return tax deducted or collected under the provisions of chapter VII of this ordinance," the finance bill reads.
The tax returns should be submitted twice a year. First returns will have to be submitted by 31 January of the year in which the deduction or collection was made. A second return will have to be submitted by 31 July of the next year following the year in which the deduction or collection was made, according to the finance bill.
However, the deputy commissioner of taxes (DCT) is empowered to extend the last date for tax return by 15 days.
The withholding tax returns can be filed both manually or electronically from the tax authority.
DCT, with the approval of the National Board of Revenue (NBR), will select a number of returns on withholding tax for audit.
The tax officials will monitor compliance of the companies on deduction of withholding tax, proper depository of the tax, issuance of certificates etc.
The withholding tax returns will have to be audited within four years of the submission.
"No return shall be selected for audit after the expiry of four years from the end of the years in which the return was filed," the finance bill says.
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