FBR advised to fix glitches for smooth filing of income tax returns

FBR advised to fix glitches for smooth filing of income tax returns

Pakistan Tax Bar Association (PTBA) has urged the Federal Board of Revenue (FBR) to fix glitches in Iris portal for smooth return filing for tax year 2022.

In a letter sent to FBR chairman, the PTBA advised that the taxpayers should be provided the statutory period of clear 90 days for submission of their income tax returns from the day the Iris – the portal – is error free.

READ MORE: Tax Return becomes invalid on depriving refund adjustment: PTBA

The apex tax bar stated that the matter regarding filing of income tax returns for tax year 2022, it endorsed the observations about system errors / glitches highlighted by the regional affiliated bars, including Karachi Tax Bar Association (KTBA).

“Till to date the present IT team has failed in providing the efficient, user friendly and hassle free IT system in professional manners,” it added.

The PTBA informed the FBR chairman that as per law the taxpayer is entitled to claim adjustment of his previous refunds against tax liability for the current tax year but the relevant column for adjustment of refund has illegally been locked, which is against the fundamental rights and present scheme of law under the Income Tax Ordinance, 2001.

Similarly, the draft of manual return of income for the individuals and Association of Persons (AOPs) for the Tax Year 2022 was issued as late as on August 26, 2022, whereas the final SRO 1733(I)/2022 was issued on September 13, 2022. “It means only 17 days have been allowed to file the manual returns, which is insufficient as provided under the law,” the PTBA pointed out.

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It further pointed out that the income tax return form introduced for SMEs sector has been issued on the IRIS system without sharing a draft, which is mandatory under the law. “The simplified return for SME uploaded without issuing the draft return, the same may lead to illegality,” the PTBA said and suggested that issue draft following by final return should be issued to meet with the requirement of the law.

The PTBA said that the IRIS portal is calculating incorrect normal as well as initial depreciation allowance on purchase of plant and machinery against the provision of Section 23 read with the Part II of Third Schedule of the Income Tax Ordinance, 2001.

The IRIS portal is calculating incorrect/excess tax liability on gain on sale of immovable properties in violation of Section 37(1A) of the Income Tax Ordinance, 2001.

It is noted that rate of tax collection under section 153(I)(c) for individuals and AOPs contractors is 7 per cent, which is minimum tax. “In the relevant part of return for working of attributable income neither there is any row having rate at 7 per cent rate of tax nor the system is allowing credit to the said deduction.

Presently, IRIS portal is calculating the incorrect tax liability on income covered under Section 153 of the Ordinance, on the basis of fixed/predefined wrong formulas due to which the taxpayers are bound to pay high tax instead of their actual tax liability, which is against the spirit of self-declaration and present scheme of law. “De-freezing of attribution and enabling the taxpayers to enter correct figures/data to filed their return in time may resolve the issue,” the PTBA suggested.

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The apex tax bar highlighted that the IRIS portal is calculating incorrect tax at profit/yield Bahbood Certificates / Pensioner’s Benefit Account / Shuhada Family Welfare Account, whereas clause (c) of sub-section (I) of Section 39 provides that tax shall not exceed 10 per cent of such profit/yield read with clause (6) of Part-III of Second Schedule of Income Tax Ordinance, 2001.

The IRIS portal is treating normal income for the tax year 2022 instead of final income at interest/profit on debts on government securities as per clause (20( of Part III of Second Schedule of the Income Tax Ordinance, 2001, wherever, the said clause was omitted through Finance Act, 2022 and is applicable for the tax year 2023, which cannot be applicable retrospectively.

READ MORE: FBR updates salary tax card for year 2022-2023

The PTBA said that the taxpayers in general and legal fraternity in particular are facing acute hurdles in preparation of tax payment challans because response of the system in this regard is dead slow. “Most of the time it requires many attempts for preparation of the tax challan due to website issue and preparation of tax challan in single attempt is difficult and it is very common practice/issue faced by almost every taxpayer while preparing the tax challan, hence the website/system issue should be resolved immediately and sufficient time is also required for timely filing of returns.”

In cases where revised wealth statement under Section 116(3) of the Income Tax Ordinance, 2001 for the tax year 2021 resulting into change in closing balance of net wealth for the tax year 2021 has been filed, the system does not carry forward opening balance of net wealth for the tax year 2022 (showing the opening balance of original wealth statement of last year’s closing balance).

Lastly, the PTBA pointed out issue regarding the downloading of computerized payment receipt (CPR) and statement that the system shows message ‘challan/CPR does not exist’ against the valid CPR duly deposited in the national exchequer.

READ MORE: FBR issues withholding tax rates on imports for tax year 2022-2023

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