A new requirement under Schedule (Chha), Rule 15 of the Withholding Tax Rules 2024 mandates every employer to submit a statement to the tax circle each year containing information about their employees’ individual tax return filings.
This obligation ensures that companies are keeping track of which employees have met their tax filing responsibilities and are reporting this to the income tax authority accordingly.
What Do Employees Need to Submit?
Each April, every employee subject to mandatory tax filing must provide the following to their employer:
- Taxpayer’s Identification Number (TIN);
- Date of filing the income tax return;
- Serial number issued by the income tax authority upon submission.
As you’re aware, the individual taxpayer’s return submission deadline is 30 November. Once eligible employees file their returns, they should promptly furnish the related information to their employer.
Employer’s Responsibility: Statement Submission in April
Upon collecting the information from employees, the person responsible for disbursing salaries must prepare and submit a statement to the tax office in the prescribed format. This must be done every year in April.
The statement includes:
- Employee’s name, designation, and TIN;
- Date of tax return submission;
- Serial number received from the tax office after submission.
Important Exception: This statement is not required for payments made by the Government.
What to Consider Before Preparing Schedule (Chha)?
You may already be familiar with Schedule (Cha), which records total salary payments during the year, regardless of taxability. But Schedule (Chha) applies only to those employees required to file tax returns mandatorily.
This distinction is crucial. Schedule (Chha) excludes non-taxable salary earners and focuses only on those whose salary qualifies for income tax.
Pre-Filing Compliance Checklist for Employers
Before preparing the Schedule (Chha) statement, employers must ensure the following key obligations are met:
Deduction of Tax at Source
The first and most important step is deducting tax at source (TDS) from employee salaries. Since this statement concerns taxable salary earners, their payments must reflect applicable deductions.
As per Section 86, the salary-paying authority must deduct tax at the average rate at the time of payment to each employee.
Every taxable employee must have their TDS calculated separately. So, employers are advised to build a simple Excel sheet for:
- Determining taxable income;
- Calculating average tax rate;
- Computing monthly TDS.
This tool will save significant time and reduce the chance of errors.
Let’s emphasize the importance of proper deduction and deposit:
Under Section 55, any salary payment made without proper deduction and deposit becomes inadmissible as an expense.
This inadmissible amount will be added back to the company’s taxable income and taxed at 27.5%, potentially creating a large financial liability.
So the compliance sequence is:
- Calculate and deduct TDS correctly;
- Deposit the deducted amount to the government treasury;
- Collect employee tax filing information;
- Prepare and file the Schedule (Chha) statement.
Where to Find the Format?
The prescribed format for Schedule (Chha) is outlined under Rule 15 of the Withholding Tax Rules 2024.
It consists of an eight-column table requiring:
- Employee identification and filing details;
- Dates and serial numbers from the return acknowledgment.
This format is relatively simple compared to other compliance statements (such as under Schedule (Cha). You can convert the table into an Excel sheet and reuse it annually—just update the employee data, and your statement will be ready.
How to Prepare the Statement Efficiently
Here’s the most practical approach:
- Collect acknowledgment receipts from employees by 15th April;
- These receipts contain TIN, filing date, and serial number;
- Use your Excel format to populate the columns accurately;
- Review and finalize the statement by 30 April.
By securing acknowledgment copies early, you’ll prevent last-minute chaos and make sure no employee is excluded.
Submit on Time to Avoid Penalties
Failure to file the statement under Schedule (Chha) without a valid reason may result in penalties imposed by the Deputy Commissioner of Taxes (DCT) as per Section 266.
The penalty structure is:
- 10% of last assessed tax or BDT 5,000, whichever is higher;
- Plus BDT 1,000 for each month (or part thereof) of continued default.
So, if the company overlooks this filing, the financial consequence can be serious.
Final Tips for Smooth Compliance
- Send internal emails to all employees on 1st April, reminding them to submit tax acknowledgment copies;
- For larger organizations, build in buffer time to manage volume;
- Validate TDS calculations to ensure salaries are taxed properly before April;
- Use Excel automation to streamline both TDS and Schedule (Chha) preparation.