KARACHI: The Federal Board of Revenue (FBR) on Wednesday extended the implementation of digital payment for the corporate sector for another month.
In this regard, the apex tax body issued a circular to notify the extension in time for implementation of digital payment for corporate entities.
It is the second time, the time of implementation has been extended. Previously, through a circular, the revenue body had extended the application up to November 30, 2021. The implementation of the condition was to be effective from November 1, 2021. The government through the Tax Laws (Third Amendment) Ordinance, 2021 introduced the provisions in the Income Tax Ordinance, 2001, under which corporate entities are required to make payment through digital mode.
The FBR explained the application of digital mode of payment, saying that to improve documentation, a new clause (la) was inserted in Section 21 of the Income Tax Ordinance, 2021.
Previously, the payments under a single head account exceeding Rs250,000 made by any taxpayer were required to be made through cross-cheque or cross-banking instruments, including digital payments. Through the latest amendment, the payment made by a company under a single head of account exceeding Rs250,000 other than by digital means from the business bank account of the taxpayer would not be admissible as deductions.
However, certain expenditures on account of utility bills, freight charges, travel fare, and payment of taxes and fines would continue to be admissible even though paid in cash or via traditional banking instruments, the FBR added.
The purpose behind the legislative enactment mode of transactions by the corporate sector is in the first phase; however, owing to the lack of total digital readiness by some corporate taxpayers, the corporate taxpayers are allowed to switch to this mode by November 1, 2021, which is now extended to January 1, 2022.
The FBR also explained the payment of salary through digital mode. The FBR said currently any salary paid or payable exceeding Rs25,000/month has to be made through cross-cheque or direct transfer of funds to the employee’s bank account under clause (m) of Section 21 of the Income Tax Ordinance, 2021.
“In order to bring this provision in conformity with the newly inserted clause (la), in case of payments against salary in excess of Rs25,000/month, the mode of digital payment has been added to the available modes of payments.” – TLTP