Karachi, September 29, 2023 – The Federal Board of Revenue (FBR) has taken a significant step in enhancing tax compliance by making the submission of a wealth statement mandatory for all income tax return filers.
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Finance Act 2020: wealth statement cannot be revised after five years
ISLAMABAD: A wealth statement cannot be revised after the expiry of five years from the date of filing of income tax return, officials at Federal Board of Revenue (FBR).
The amendment has been approved by the National Assembly by passing the Finance Act, 2020. The amendment has been introduced in sub-section 3 of Section 116 to Income Tax Ordinance, 2001.
The sources said that under Income Tax Ordinance, 2001 taxpayers had already been allowed to revise their wealth statement by providing reasons for the revision and before any notice issued by a tax office in this regard.
However, through amendment Commissioner Inland Revenue has been empowered to declare the revised wealth statement if he found any ill intention of the taxpayer.
According to the amendment: “Provided that where the commissioner is of the opinion that the revision under this sub-section is not for the purpose of correcting a bona fide omission or wrong statement, he may declare such revision as void through an order in writing after providing and opportunity of being heard.”
An explanation has also been included through amendment which said: “For the removal of doubt it is clarified that wealth statement cannot be revised after the expiry of five years from the due date of filing of return of income for the tax year.”
A taxpayer is required to file wealth statement under Section 116 along with annual income tax return by providing particulars included:
(a) the person’s total assets and liabilities as on the date or dates specified in such notice;
(b) the total assets and liabilities of the person’s spouse, minor children, and other dependents as on the date or dates specified in such notice;
(c) any assets transferred by the person to any other person during the period or periods specified in such notice and the consideration for the transfer;
(d) the total expenditures incurred by the person, and the person’s spouse, minor children, and other dependents during the period or periods specified in the notice and the details of such expenditures; and
(e) the reconciliation statement of wealth.
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Restriction imposed on revising wealth statement
KARACHI: Taxpayers have been barred from revising their wealth statement after expiry of five years.
An amendment has been proposed to Income Tax Ordinance, 2001 through Finance Bill, 2020.
According to interpretation of Finance Bill, 2020 by Deloitte Yousuf Adil Chartered Accountants, presently, revision of wealth statement is allowed without a requirement to obtain approval of the Commissioner Inland Revenue, as is otherwise required for revision of return of income.
It is now proposed that such revision of wealth statement shall be contingent upon the similar approval of the Commissioner, which shall be granted, in case of bona fide omission or misstatement.
“However, no such revision is allowed after the expiry of five years from the due date of filing of return of return of concerned tax year.”
Another amendment has been proposed regarding assessment. The chartered accountants explained that currently where a taxpayer has furnished a return of income, the Commissioner Inland Revenue shall be treated to have made an assessment of taxable income and tax due thereon equal to amounts specified in the return.
Further, such return shall be taken for all purposes to be an assessment order issued by the Commissioner.
In order to ensure accuracy of the returns filed by taxpayers, automated adjusted assessment mechanism is being proposed.
Under this mechanism, the return filed shall be subject to an automatic review and adjustment within six months of filing of return for rectification of any numerical errors or incorrect claims, losses, deductible allowances or tax credit, or wrongful carry forward of losses that are apparent from the return of income.
In this regard, a notice shall be issued to the taxpayer before the adjustments are effected in the return, which is required to be responded within 30 days of the date of notice.
Further, where no such adjustments are made within the specified period of six months, the return filed shall be deemed to have been automatically adjusted on the day the return is filed and automatic intimation through IRIS shall be forwarded to the taxpayer.
The existing provisions as to deemed assessment order will now apply to adjusted return rather than the original return filed by the taxpayer.
For the purposes of this section, the following definition are proposed to be introduced vide Finance Bill 2021:
“Arithmetical Error” includes any wrong or incorrect calculation of tax payable including any minimum or final tax payable
“An incorrect claim apparent from any information in the return” shall mean a claim, based on an entry, in the return
i. of an item, which is inconsistent with another entry of the same or some other item in such return;
ii. regarding any tax payment which is not verified from the collection system; or
iii. in respect of a deduction, where such deduction exceeds specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction.
The amended provision does not cater for situations where the tax payers have to make adjustments in the return due to inability of the online return form to cater to unique circumstances of the business of the taxpayer.
Application of this automated adjustment mechanism may create problems for the tax payers unless the online return is amended to cater for all situations that a tax payer may face in line with the provisions of law.
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Notice can be sent to any person requiring declaration of assets of spouse, minor children
A Commissioner Inland Revenue of the Federal Board of Revenue (FBR) has been vested with substantial powers under the Income Tax Ordinance, 2001, to scrutinize the asset details of individuals, including those pertaining to their families, by issuing notice.
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Wealth Statement Form: mandatory for filing along with annual return
KARACHI: Filing of wealth statement is mandatory for making annual return form valid. Taxpayers are required to file asset declaration under Section 116 of Income Tax Ordinance, 2001.
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FBR issues instructions for filing income tax returns, wealth statement
ISLAMABAD: Federal Board of Revenue (FBR) on Friday issued manual for filing income tax return and wealth statement for tax year 2019.
The FBR issued SRO 1160(I)/2019 dated September 27, 2019 to notify instructions for filing annual income returns and wealth statement.
The FBR also issued manual paper return forms for individuals. The form has been issued just three days ahead of due date.
The FBR made amendment to SRO 979(I)/2019 dated September 02, 2019 through the latest SRO.
The instructions issued for filing in return form and wealth statement, the FBR said:
The following persons are required to furnish a return of income for a tax year:
(a) Every company;
(b) Every person (other than a company) whose taxable income for the year exceeds PKR 400,000;
(c) Every non-profit organization as defined in clause (36) of section 2;
(d) Every welfare institution approved under clause (58) of Part I of the Second Schedule;
(e) Every person who has been charged to tax in respect of any of the two preceding tax years;
(f) Every person who claims a loss carried forward under this Ordinance for a tax year;
(g) Every person who owns immovable property with a land area of two hundred and fifty square yards or more or owns any flat located in areas falling within the municipal limits existing immediately before the commencement of Local Government laws in the provinces; or areas in a Cantonment; or the Islamabad Capital Territory;
(h) Every person who owns immoveable property with a land area of five hundred square yards or more located in a rating area;
(i) Every person who owns a flat having covered area of two thousand square feet or more located in a rating area;
(j) Every person who owns a motor vehicle having engine capacity above 1000 CC;
(k) Every person who has obtained National Tax Number;
(l) Every person who is the holder of commercial or industrial connection of electricity where the amount of annual bill exceeds rupees five hundred thousand;
(m) Every person who is registered with any chamber of commerce and industry or any trade or business association or any market committee or any professional body including Pakistan Engineering Council, Pakistan Medical and Dental Council, Pakistan Bar Council or any Provincial Bar Council, Institute of Chartered Accountants of Pakistan or Institute of Cost and Management Accountants of Pakistan;
(n) Every individual whose income under the head Business exceeds PKR 300,000 but does not exceed PKR 400,000 in a tax year.
(o) Every individual & AOP deriving property income exceeding Rs. 200,000
According to the general instructions, the FBR said that the following errors / omissions shall render a Return invalid & make the taxpayer a non-filer & liable to penalty under section 182(1):
(a) Return on which CNIC is missing or incorrect or invalid;
(b) Return on which mandatory fields marked by * are empty;
(c) Return which is not signed by the Taxpayer or his Representative (as defined in section 172 of the Income Tax Ordinance, 2001);
(d) Return which is not filed in the prescribed Form;
(e) Return which is not filed in the prescribed mode.
Individuals deriving income under the head Property, Capital Gains & Other Sources (excluding Salary / Business) & Income subject to fixed / final tax have to file one page Return in IT-1B Form with Annex-A, Annex-F & Wealth Statement if required to be filed.
Individuals deriving income under the head business or falling under Final Tax Regime (FTR) such as Commercial Importers, Exporters, Contractors, etc. have to file two page Return in IT-2 Form with Annex-A, Annex-B, Annex-F & Wealth Statement if required to be filed. Annex C, Annex-D & Annex-E are required only where Depreciation / Amortization, Admissible / Inadmissible Deductions & Minimum Tax Chargeable / Option out of Presumptive Tax Regime are involved.
Individuals, including members of AOPs or directors of Companies must file Wealth Statement.
Taxpayers may file Return of Total Income / Statement of Final Taxation & Wealth Statement through the following modes:
Electronically at FBR Portal (https://iris.fbr.gov.pk/infosys/public/txplogin.xhtml) which is mandatory for all Companies, AOPs, Sales Tax Registered Persons, Refund Claimants, Individuals having income under the head Salary and Individuals declaring taxable income of one million and more or turnover or receipts exceeding fifty million.
However, all others are also encouraged to electronically file Return; Manually on paper at Taxpayer Facilitation Counter of the respective Regional Tax Office. Paper Return Form can be downloaded from FBR Website http://www.fbr.gov.pk.
Taxpayers may seek guidance through the following modes:
By calling Helpline 0800 00 227, 051 111-227-227
By visiting the nearest Taxpayer Facilitation Centre (TFC), list of which can be downloaded from FBR website at http://www.fbr.gov.pk
Tax can be paid in any authorized branch of NBP & SBP at any time before filing of return. List of authorized braches of NBP & SBP can be downloaded from http://www.fbr.gov.pk.
Only Foreign Income (Not Loss) should be declared.
Only Agriculture Income (Not Loss) should be declared.
Tax Credits include Tax Credits for the following:
Share in Taxed Income from AOP;
Charitable Donations u/s 61;
Investment in Shares of Public Companies listed on a Stock Exchange in Pakistan (only for Original Allottee other than a Company) u/s 62;
Life Insurance Premium (only for Resident Individual deriving income from Salary / Business) u/s 62;
Contribution to Approved Pension Fund (only for Pakistani Individual registered with FBR / NADRA deriving income from Salary / Business) u/s 63;
Annex-E Taxpayers wanting to opt out of Final Tax Regime (FTR) u/c (56B), (56C), (56D), (56E), (56F), (56G), Part IV, Second Schedule, must file Annex-E.
Annex-F: Only Personal / Household (Non-Business) expenses should be declared.
Annex-F: Expenses borne by more than one person must be declared in total by each person.
For example, if in one family more than one member is contributing to expenses or if more than one family is living jointly & within each family more than one member is contributing to expenses, total expenses under each head must be declared by each member of each family filing his wealth statement & then contribution by other family members be deducted to arrive at own contribution.
Instructions related to Wealth Statement
If rows provided in any segment are inadequate, additional rows may be inserted.
All assets must be delared at cost, including ancillary expenses.
If an asset is acquired under a Hire Purchase Agreement, total price should be declared as asset under the appropriate head & balance payable amount should be declared as liability.
If Wealth Statement is filed for the first time, separate Reconciliation Statement must be filed for each previous year.
Equipment, Plant, Machinery (Non-Business) must be declared with description, for example, Generator, Tubewell, Harvestor, Tractor, Trolley, etc.
Assets created, whether in Pakistan or abroad, in the name of spouse(s), children & other dependents should be declared only if acquired by them with funds provided by you (Benami Assets).
A separate column for assets held outside Pakistan has been added wherein any/all assets held abroad are to be declared at cost in Pak Rupee Value.
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Filing wealth statement mandatory along with annual return for Tax Year 2019
KARACHI: The filing of wealth statement has been made mandatory for persons filing annual income tax return for tax year 2019.
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Persons not required filing income tax return, wealth statement
The Income Tax Ordinance, 2001, under Section 115, specifies classes of persons exempted from filing annual income tax returns and wealth statements for the tax year 2019.
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