Tax experts claim that the Federal Board of Revenue (FBR) cannot impose penalties on the new “Late Filers” category after the fact, as introduced by the Finance Act 2024. This move has been considered unconstitutional.

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According to the experts, some taxpayers have challenged this decision in the Lahore High Court (LHC). They claim that since they are listed as Active Taxpayers, they should only need to pay advance tax at 3% under section 236K of the Income Tax Ordinance, 2001. However, the FBR is demanding a higher rate of 6% without legal grounds.

The LHC has taken note of this issue and has asked the tax department to provide a response. Experts, including Farhan Tariq from FB Consultants, explained that the “Late Filers” category, introduced in the Finance Act 2024, should only apply from July 1, 2024, and cannot be executed retroactively. Implementing this law with retroactive effect would be illegal and subject to legal challenge.

The Finance Act 2024 adds a third category of “Late Filers” to the tax system. Previously, taxpayers were classified as Filers or Non-Filers. The new category imposes higher tax rates on those who file their returns after the due dates, aiming to facilitate timely tax filing.

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