Requirement of filing income tax return by persons in a tax year has been unveiled by the Federal Board of Revenue (FBR).
In a bid to provide clarity to taxpayers, the Federal Board of Revenue (FBR) has issued details on Section 114 of the Income Tax Ordinance, 2001, outlining the individuals and entities required to file income returns for a given tax year. The FBR’s communication, based on the updates introduced through the Finance Act, 2021, aims to ensure that taxpayers are well-informed about their obligations under the ordinance.
Understanding Section 114: Who Needs to File Income Returns
Section 114 establishes the criteria for individuals and entities obligated to submit a return of income for a specific tax year. The categories include:
1. Companies (Subsection 1(a)):
• Every company is required to furnish a return of income.
2. Individuals and Non-Companies (Subsection 1(ab)):
• Any person (other than a company) whose taxable income for the year exceeds the maximum non-taxable amount specified under the ordinance.
• Non-profit organizations, as defined in clause (36) of section 2.
3. Final Taxation Entities (Subsection 1(ae)):
• Individuals or entities whose income for the year is subject to final taxation under any provision of the ordinance.
4. Additional Criteria for Individuals (Subsection 1(b)):
• Individuals not covered by the above categories, who meet any of the following criteria:
• Charged to tax in any of the two preceding tax years.
• Claims a loss carried forward under the ordinance.
• Owns specified immovable property or flat.
• Owns a motor vehicle above 1000 CC.
• Holds a commercial or industrial connection of electricity with an annual bill exceeding rupees five hundred thousand.
• Is a resident person registered with specified associations or professional bodies.
• Is a resident individual required to file a foreign income and assets statement under section 116A.
5. Persons Notified by the Board (Subsection 1(c)):
• Persons or classes of persons notified by the Board with the approval of the Minister in-charge.
6. Special Provision for Individuals (Subsection 1A):
• Every individual whose income from business exceeds rupees three hundred thousand but does not exceed rupees four hundred thousand in a tax year is also required to file a return of income.
Return Filing Procedure (Subsection 2):
• The return of income shall be in the prescribed form, accompanied by annexures, statements, or documents as specified by the Board.
• It should fully state all relevant particulars, including a declaration of records kept by the taxpayer.
• The return must be signed by the individual or their representative.
• It should be accompanied by evidence of payment of due tax, a wealth statement, and a foreign income and assets statement if required.
Electronic Filing (Subsection 2A):
• Returns filed electronically on specified media shall be deemed valid. The Board may issue rules for determining eligibility and e-intermediaries’ roles in transmitting electronic data.
Commissioner’s Notice (Subsections 3 and 4):
• The Commissioner may issue notices requiring a person to furnish a return within a specified period.
• Failure to file a return despite such notice may result in penalties.
Revision of Return (Subsections 6 and 6A):
• Taxpayers may file a revised return under specified conditions, accompanied by revised accounts and reasons for the revision.
• A voluntary deposit of tax with a revised return may exempt the taxpayer from penalties.
The communication concludes with a disclaimer, emphasizing that the provided information is for reference, and PkRevenue.com is not responsible for any errors or omissions. It encourages taxpayers to stay informed and seek professional advice for compliance with the Income Tax Ordinance.