In a bid to enhance clarity and transparency in tax calculations, the Federal Board of Revenue (FBR) in Pakistan has emphasized the importance of Section 67 of the Income Tax Ordinance, 2001.
This section specifically outlines the apportionment of expenditure for tax calculation purposes, providing a framework for businesses and individuals to adhere to while filing their income tax returns.
The Income Tax Ordinance, 2001, which was last updated up to June 30, 2021, incorporates amendments introduced through the Finance Act, 2021. These updates aim to align tax regulations with the evolving economic landscape and ensure a fair and effective tax regime.
Section 67 of the Income Tax Ordinance, 2001, reads as follows:
67. Apportionment of deductions.— (1) Subject to this Ordinance, where an expenditure relates to –
(a) the derivation of more than one head of income; or
(ab) derivation of income comprising of taxable income and any class of income to which sub-sections (4) and (5) of section 4 apply, or;
(b) the derivation of income chargeable to tax under a head of income and to some other purpose,
the expenditure shall be apportioned on any reasonable basis taking account of the relative nature and size of the activities to which the amount relates.
(2) The Board may make rules under section 237 for the purposes of apportioning deductions and allowances.
This section provides a clear directive on the apportionment of expenditures when they relate to multiple heads of income or serve different purposes. The FBR stresses that taxpayers should adhere to this provision when calculating their tax liabilities, ensuring a fair and accurate representation of their financial activities.
Furthermore, Section 67 empowers the Board to establish rules, under section 237, to guide the apportionment of deductions and allowances. This allows the FBR to provide additional clarity and guidance to taxpayers, promoting uniformity in the application of these provisions.
The FBR encourages businesses and individuals to carefully review and consider Section 67 while preparing their income tax returns. Adherence to this provision will not only ensure compliance with tax regulations but also contribute to a more equitable and efficient tax system.
As the country progresses towards greater economic stability and fiscal responsibility, the FBR remains committed to fostering an environment of transparency and fairness in tax administration. The clarity provided by Section 67 is expected to benefit taxpayers by providing a structured approach to the apportionment of expenditures, ultimately contributing to a more robust and equitable tax framework.
