Section 71 of the Income Tax Ordinance, 2001 sets forth the requirement that every amount considered for taxation purposes must be in Pakistani Rupees (PKR).
This provision, crucial for maintaining consistency in financial reporting, is detailed in the text of Section 71, as issued by the Federal Board of Revenue (FBR) and updated up to June 30, 2021.
The specific wording of Section 71 is as follows:
71. Currency conversion. — (1) Every amount taken into account under this Ordinance shall be in Rupees.
(2) Where an amount is in a currency other than rupees, the amount shall be converted to the Rupee at the State Bank of Pakistan rate applying between the foreign currency and the Rupee on the date the amount is taken into account for the purposes of this Ordinance.
This section elucidates that for the purposes of the Income Tax Ordinance, 2001, any amount considered or taken into account must be denominated in Pakistani Rupees. The provision underlines the importance of standardizing the currency used in financial transactions and assessments, preventing discrepancies that may arise from using different currencies.
Furthermore, Section 71 addresses scenarios where an amount is originally in a currency other than Pakistani Rupees. In such cases, the ordinance mandates that the amount be converted to PKR at the State Bank of Pakistan rate applicable between the foreign currency and the Rupee on the date the amount is taken into account for taxation purposes.
This currency conversion clause ensures that foreign currency transactions are accurately reflected in the national currency, allowing for a seamless and consistent approach to tax assessments. It also minimizes the potential for manipulation or misrepresentation that may arise when dealing with multiple currencies.
While Section 71 sets a clear guideline for currency conversion, taxpayers are advised to stay informed about any updates or amendments to tax regulations. The Income Tax Ordinance, 2001, as updated up to June 30, 2021, incorporates amendments introduced through the Finance Act, 2021. Staying abreast of any changes is essential for compliance and accurate financial reporting.
As part of the disclaimer issued by Team PkRevenue.com, it is important to note that while efforts are made to provide the correct version of the text, the team is not responsible for any error or omission. Taxpayers are encouraged to consult with financial professionals for a comprehensive understanding of currency conversion implications in their specific circumstances.
Section 71 serves as a pivotal component in maintaining the integrity of tax assessments by standardizing the currency used and ensuring accurate conversions when dealing with foreign currencies. This provision aligns with global financial reporting standards and contributes to a transparent and consistent taxation framework.
