Requirement of wealth statement

Requirement of wealth statement

The Federal Board of Revenue (FBR) has recently introduced amendments to the Income Tax Ordinance, 2001, shedding light on the requirement for taxpayers to submit a wealth statement alongside their annual income return.

The updated Section 116 of the Income Tax Ordinance outlines the specifics of the wealth statement, emphasizing the need for individuals to provide a comprehensive overview of their financial position.

Section 116: Wealth Statement

1. Mandatory Submission by Individuals:

The Commissioner, through a written notice, holds the authority to demand a wealth statement from any individual taxpayer. The statement, referred to as the “wealth statement,” must be submitted in the prescribed form and verified according to the prescribed manner. The wealth statement is expected to encompass details about:

• (a) The individual taxpayer’s total assets and liabilities as of the specified date(s) in the notice.

• (b) The total assets and liabilities of the taxpayer’s spouse, minor children, and other dependents as of the specified date(s).

• (c) Assets transferred by the taxpayer to any other person during the specified period(s) in the notice, along with details of the consideration for the transfer.

• (d) The total expenditures incurred by the taxpayer, the spouse, minor children, and other dependents during the specified period(s) in the notice, including a breakdown of such expenditures.

• (e) A reconciliation statement of wealth.

2. Annual Submission with Income Return:

Every resident taxpayer who is an individual and files a return of income for any tax year is required to furnish a wealth statement and a wealth reconciliation statement for that year along with the income tax return. Additionally, every member of an association of persons is obligated to provide a wealth statement and wealth reconciliation statement for the corresponding year along with the association’s income tax return.

3. Revision of Wealth Statement:

In the event that a taxpayer discovers any omission or incorrect information in the initially furnished wealth statement, they may submit a revised wealth statement, along with the revised wealth reconciliation and reasons for the revision. This can be done at any time before receiving a notice under sub-section (9) of section 122, pertaining to the tax year in question.

4. Final Tax Regime (FTR) Requirements:

For individuals, excluding companies or associations of persons, filing statements under sub-section (4) of section 115, falling under the final tax regime (FTR), it is mandatory to file a wealth statement along with a reconciliation of the wealth statement.

These amendments aim to enhance transparency and accountability in financial reporting, providing tax authorities with a comprehensive understanding of an individual taxpayer’s financial standing. By incorporating wealth statements into the annual filing process, the FBR seeks to streamline the assessment and verification of taxpayers’ financial information, fostering a more robust taxation system in Pakistan.