Tax collection from schools on tuition fee has reached a record high during the fiscal year 2017-18. The figure reached a whopping Rs 3.84 Billion, which is 24% higher than the tax collected in FY17 which was Rs 3.1 Billion.
The Federal board of revenue confirmed the figures on Thursday. FBR mentioned that the increase in tuition fee and proper monitoring of tax collection resulted in the increase. Educational institutes are required to deduct withholding tax at the rate of 5% if the annual fee surpasses Rs 200,000.
This was made possible because of the Financial act which was introduced in 2013. The purpose of that act was to bring well-off people who can afford higher tuition fees for their children’s education into the tax bracket. The tax is flexible for the taxpayer who file annual income tax.
The withholding tax on the school fee is only applicable on Pakistani residents. The tax exempts non-Pakistani or foreigners from this tax if they provide their passport which states that their stay in the country is only limited to 180 days. Furthermore, these foreigners are required to submit a certificate stating that they have no income in Pakistan and all of their remittances are coming from overseas means via the official banks.
The FBR informed that the revenue body has obtained sufficient data on potential taxpayers and educational institutes. One source said, “The FBR was also tightening the noose around affluent people who had sent their children abroad for educational purpose”.
The source further informed that banks and financial institutions are responsible for collecting the education-related expenses abroad. These ‘education-related expenses’ include:
- Education related expenses
- Tuition fee
- Boarding and lodging expenses
- Expense related to learning from a foreign university
- Expense attributable to foreign education