Salaried individuals require keeping tax certificate for six years

Salaried individuals require keeping tax certificate for six years

The Federal Board of Revenue (FBR) has issued a reminder to salaried individuals, emphasizing the necessity of retaining tax and salary certificates for a minimum of six years for assessment and audit purposes.

The directive is in accordance with the Income Tax Rules, 2002, as updated on September 08, 2020, requiring taxpayers to maintain comprehensive tax records to ensure compliance with tax regulations.

Under these rules, different categories of taxpayers are mandated to retain specific documents for at least six years, ensuring transparency and facilitating any potential tax assessments or audits. The FBR has outlined the following requirements for various income sources:

1. Taxpayers deriving income from Salary:

• Salaried individuals must maintain a salary certificate indicating the amount of salary and tax deducted from it.

2. Taxpayers deriving income from Property:

• (a) Tenancy agreement, if executed.

• (b) Tenancy termination agreement, if executed.

• (c) Receipts for the amount of rent received.

• (d) Evidence of deductions claimed, including premium paid for building insurance, local rates, taxes, charges, ground rent, profit/interest or share in rent on borrowed money, expenditure on rent collection, legal services, and unpaid rent.

3. Taxpayers deriving income from Capital Gains:

• (a) Evidence of the cost of acquiring the capital asset.

• (b) Evidence of deductions for any other costs claimed.

• (c) Evidence regarding the consideration received on the disposal of the capital asset.

4. Taxpayers deriving income from Other Sources:

• (a) Dividends:

• Dividend warrants.

• (b) Royalty:

• Royalty agreement.

• (c) Profit on Debt:

• (i) Evidence and details of profit-yielding debt.

• (ii) Evidence of profit on debt and tax deducted, such as a certificate in the prescribed form or a bank account statement.

• (iii) Evidence of Zakat deducted, if applicable.

• (d) Ground Rent, Rent from Sub-Lease, Lease Income, and Consideration for Vacating Possession:

• (i) Lease agreement.

• (ii) Lease termination agreement.

• (e) Annuity or Pension:

• Evidence of the amount received.

• (f) Prize Money on Bonds, Raffles, Lotteries, or Crossword Puzzles:

• Evidence of income and tax deducted, such as a certificate in the prescribed form.

• (g) Provision Use or Exploitation of Property:

• Agreement.

• (h) Loan, Advance, Deposit, or Gift:

• Evidence of the mode of receipt, such as a crossed cheque or through a banking channel.

• (i) General:

• Evidence of deductions for any other claimed expenditure.

The FBR’s directive underscores the importance of maintaining meticulous records to ensure compliance with tax regulations and facilitate a transparent and accountable tax system. Salaried individuals and other taxpayers are encouraged to adhere to these guidelines to streamline the assessment and audit processes while contributing to the overall integrity of the taxation framework.