KARACHI: The Federal Board of Revenue (FBR) on Monday deferred the mandatory digital payment system for corporate entities till January 31, 2022.

The FBR issued a circular for the extension in time for the implementation of digital payment for corporate entities. It is the third time the revenue board has extended the time of implementation. Previously, the FBR extended the date up to December 31, 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 crossed cheque or crossed 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 this legislative enactment is mode of transactions by the corporate sector in the first phase. However, due 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 February 1, 2022.

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