Section 114A of Income Tax Ordinance, 2001 mandates the requirement that every taxpayer declare to the Commissioner the bank account used for business transactions.
Updated up to June 30, 2021, this amendment seeks to enhance visibility into business finances, promoting accountability and a more thorough tax administration system.
In a move geared towards bolstering transparency and ensuring a comprehensive overview of taxpayers’ financial activities, the Finance Act, 2021 has introduced an amendment to the Income Tax Ordinance, 2001 through Section 114A.
The amended Section 114A reads: “Business bank account.— (1) Every taxpayer shall declare to the Commissioner the bank account utilized by the taxpayer for business transactions.
(2) Business bank account shall be declared through the original or modified registration form prescribed under section 181.”
This provision places a clear obligation on every taxpayer to disclose the specific bank account employed for conducting business transactions. The objective is to provide tax authorities with a more detailed insight into the financial activities associated with the taxpayer’s business operations.
The requirement to declare a business bank account is not an isolated process but is integrated into the broader framework of tax registration. According to the ordinance, taxpayers are to declare their business bank account either through the original registration form or a modified version as prescribed under Section 181.
This amendment is expected to significantly enhance the transparency of business-related financial transactions, enabling tax authorities to cross-reference declared income with actual financial activities. The integration of this requirement into the registration process streamlines the declaration of business bank accounts, ensuring that it becomes an inherent part of a taxpayer’s obligations.
Industry experts have noted that this amendment aligns with global trends where tax administrations are increasingly leveraging technology and data to monitor and verify taxpayer compliance. By mandating the declaration of business bank accounts, tax authorities can more effectively track financial activities and reduce the potential for underreporting or evasion.
However, some concerns have been raised about the practical implementation of this requirement. Small businesses, in particular, may find the additional administrative burden challenging. The government is expected to provide clear guidance and support to facilitate compliance, especially for businesses with limited resources.
The introduction of Section 114A into the Income Tax Ordinance, 2001 marks a proactive step towards enhancing financial transparency in tax matters. By making it mandatory for taxpayers to declare their business bank accounts, the amendment contributes to a more robust and accountable tax administration system in Pakistan. As tax authorities continue to modernize their processes, this requirement reflects a commitment to leveraging technology for more effective monitoring and enforcement of tax compliance.