Karachi, September 9, 2023 – The Federal Board of Revenue (FBR) has reminded taxpayers of the mandatory requirement to retain records for the past six years for audit purposes.
This directive is in accordance with Section 174 of the Income Tax Ordinance, 2001.
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Under Section 174, the following provisions are outlined:
Maintenance of Records: Unless otherwise authorized by the Commissioner, every taxpayer is obligated to maintain accounts, documents, and records in Pakistan, as prescribed.
Disallowance or Reduction: The Commissioner may disallow or reduce a taxpayer’s claim for a deduction if the taxpayer, without reasonable cause, cannot provide a receipt or other record or evidence of the transaction or circumstances related to the deduction claim.
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Retention Period: The accounts and documents required to be maintained under this section should be retained for six years after the end of the tax year to which they relate. However, if any proceeding is pending before any authority or court, the taxpayer must keep the records until the final decision of the proceedings. This includes proceedings for assessment, amendment of assessment, appeal, revision, reference, petition, or prosecution, as well as proceedings before an Alternative Dispute Resolution Committee. The limitation on record retention does not apply to records related to income, assets, expenses, or transactions falling under clause (ii) of sub-section (2) of section 111.
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Definition of Deduction: In this context, “deduction” refers to any amount debited to trading accounts, manufacturing accounts, receipts and expenses accounts, or profit and loss accounts.
Electronic Tax Register: The Commissioner may require any person to install and use an Electronic Tax Register of the type and description as prescribed. This is for the purpose of storing and accessing information related to any transaction that impacts the tax liability of the taxpayer.
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It’s important for taxpayers to be aware of these requirements and ensure that they maintain their records in compliance with the law to facilitate any potential audits or assessments by tax authorities.
