Tag: Finance Act 2020

ISLAMABAD: Federal Board of Revenue (FBR) has relaxed the condition for business community by allowing deduction of cash payment up to Rs250,000 while computing business income.

According to Finance Act 2020 approved by the National Assembly amendments have been introduced to Section 21 of Income Tax Ordinance, 2001.

Section 21 of the Ordinance prescribes a list of expenditures that are not allowed as a deduction when computing Income from Business.

This includes certain expenditures that are not made through banking channels if they exceed the prescribed thresholds.

According to EY Ford Rhodes Chartered Accountants, the Finance Bill had proposed to enhance the threshold of aggregate expenditure under a single account head from Rs50 thousand to Rs250 thousand, not made through banking channels, that would be allowed as a deduction when computing Income from Business..,

Further the relaxation of a single cash transaction in the above limit has been enhanced from Rs10 thousand to Rs25 thousand.

Similarly, the threshold of salary, not paid through banking channels, has been proposed to be increased from Rs15 thousand to Rs25 thousand.

Similar to the provisions of the sales tax laws, the Bill also proposes to introduce a new Clause whereby an industrial undertaking would not be entitled to claim a deduction for any expenditure attributable to sales made to persons required to be registered but not registered under the Sales Tax Act, 1990 computed according to the following formula, namely;

(A/B) x C

Where –

A is the total amount of deductions claimed;

B is the turnover for the tax year; and

C is the total amount of sales exclusive of sales tax and federal excise duty to persons required to be registered but not registered under the Sales Tax Act, 1990 where sales equal or exceed rupees 100 million per person.

Provided that disallowance of expenditure under this Clause shall not exceed twenty percent of total deductions claimed and that the FBR may, by notification in the official Gazette, exempt persons or classes of persons from this Clause on the basis of hardship.

Another Clause is also proposed to be inserted under which any expenditure on account of utility bills in excess of prescribed limits and conditions would not be allowed as a deduction.

An attempt by a businessman to suppress sales chargeable to tax in order to reduce tax liability shall be taxed under the head of income from business, according to the Finance Act 2020 recently passed by the National Assembly.

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ISLAMABAD: Federal Board of Revenue (FBR) has given taxpayers a deadline of December 31, 2020 to complete their profile through online system otherwise their name will be removed from active taxpayers list (ATL).

The National Assembly approved the new amendment of taxpayers profiling through new section 114A to Income Tax Ordinance, 2001.

Section 114A: Taxpayer’s profile:

Sub-section 1: Subject to this ordinance, the following persons shall furnish a profile, namely:

(a) Every person applying for registration under section 181;

(b) Every person deriving income chargeable to tax under the head, “income from business”;

(c) Every person whose income is subject to final taxation;

(d) Any non-profit organization as defined in clause (36) of Section 2;

(e) Any trust or welfare institution; or

(f) Any other person prescribed by the Board [FBR].

Sub-section 2: A taxpayer’s profit:-

(a) Shall be in the prescribed form and shall be accompanied by such annexures, statements or documents as may be prescribed;

(b) Shall fully state, in the specified form and manner, the relevant particulars of –

(i) Bank accounts;

(ii) Utility connections;

(iii) Business premises including all manufacturing, storage or retail outlets operated or leased by the taxpayer;

(iv) Types of businesses; and

(v) Such other information as may be prescribed;

(c) Shall be signed by the person being an individual, or the person’s representative where section 172 applies; and

(d) Shall be filed electronically on the web as prescribed by the Board [FBR].

Sub-section 3: A taxpayer’s profile shall be furnished:-

(a) On or before the 31st day of December 2020 in case of a person registered under Section 181 before the 30the day of September, 2020; and

(b) Within ninety days registration in case of a person not registered under section 181 before the 30th day of September,2020.

Sub-Section 4: A taxpayer’s profile shall be updated within ninety days of change in any of the relevant particulars of information as mentioned in clause (b) of sub-section (2).