KTBA highlights glitches, lacunas in income tax return forms

KARACHI: Karachi Tax Bar Association (KTBA) on Friday pointed out glitches and lacunas in income tax return forms which resulted in difficulties in filing tax returns for tax year 2019

The tax bar wrote a letter to the chairman of Federal Board of Revenue (FBR) regarding its previous communication on August 27, 2019 about the draft income tax return forms for for individuals and AOPs for the tax year 2019 were issued on August 23rd, 2019 through SRO 951 of 2019.

Through our above letter we communicated our serious concern as to the shortage of time period allowed in terms of number of days, for going through the entire SRO which contained 56 pages of returns of income and their annexures, which were only seven days and that too were issued in the evening of Friday followed by Saturday and Sunday, the next days.

The shortage of time was coupled with the fundamental drawback, which was also duly highlighted in our above referred correspondence that the return forms were neither issued in offline/demo mode, with the formulas, nor in the Excel format, at the least, so as to enable the user to have any clue as to what changes have actually been made.

“This, you [FBR chairman] would appreciate can only be done by feeding the data in the forms so as to evaluate whether the form is correctly performing the computation/ working out the income and the tax liability.”

It is an admitted norm that where suggestions are genuinely intended to be solicited, these are facilitated not only in terms of ample time but in the right desired format as well, which the Bar and its members have been deprived of completely this year.

The forms were not rolled out either in Excel form or on the IRIS till the last day.

Despite our genuine request what came out as a startling fact that the Draft Returns were finalized on the eve of September 02, 2019 through SRO 979 of 2019, without any modicum of change, let alone any suggestion.

Up till now since the issuance of the forms, more than seventeen (17) days have been passed on and it is now not a much unknown fact that return forms are filled with glitches and lacunas, which are factually deterring any bona fide filing of a tax return by an individual, whether Salaried or Business; resident or a non-resident.

Needless to mention that Individuals constitute the largest class of tax filers out of 2.5 million club of taxpayers.

Few of these flaws are being narrated hereunder for your necessary attention as filing of tax returns has been seriously jeopardized by these anomalies:

i. Statement of Final Taxation for Individuals, Salaried Individuals and AOPs is not accompanied with Wealth Statement, which is a separate requirement under Section 116 of the Income Tax Ordinance, 2001;

ii. Non-residents are not required to file Wealth Statement. On the other hand, the IRIS is invalidating their filing at the portal without a Wealth Statement;

iii. The IRIS is also asking for details of Personal Expenses in cases of Non-resident, without which the return cannot be submitted.

iv. Tax Return of a Salaried Individual contains only Reconciliation of Wealth without any details of assets/ Wealth Statement which is not in accordance with Section 116 of the Ordinance;

v. In the Wealth Reconciliation which is accompanied with the Tax return, the detail from the last year Amnesty is being included in the inflows of the total. All those who filed Asset Declaration last year are now unable to file return as of now.

vi. Person who is required to file statement under Section 115(4) of the Ordinance has no option left to file Wealth Statement as no separate tab is appearing in IRIS module.

vii. There is a single field/ column for foreign income only contrary to the requirements of section 103(8) read with section104 of the Ordinance that provides computation of foreign income/ loss and adjustment and carry forward of losses;

viii. There is no option to declare foreign income with their respective heads of income and instead only figure sums it all which does not give the fair picture of the foreign income;

ix. Tax on income from Bahbood Certificates/ Pensioners Benefit account is not being properly worked out.

x. There is no provision for adjustment or claim of capital loss in return form after NCCPL issues the annual certificate

Besides the above lacunas, what needs emphasis here is that legal and permissible time period for filing a return is 90 days under section 118 of the Ordinance, while on the contrary, only 27 days have been given here between September 2nd and September 30, 2019.

The tax bar said that the obnoxious condition imposed on them September 5, 2019 vide C.No.2(I)Cond./I.Tax/2018 dated September 05, 2019 whereby the instruction was given to the Commissioners to ensure the payment of due tax before allowing any extension.

“It means the taxpayer has to pay for the income tax first if one has to apply for extension, beyond the dead line of September 30th, 2019 which he should not be needed to beg for in the first place. It is not only a disgrace to a bonafide taxpayer to succumb to an unwarranted condition of tax payment but also tantamounts to make him suffer through the encroachment in his legal space under the Ordinance, which allows him necessary time period to file his return of income with respect and without getting his legal right vitiated. It need not to be emphasized that the Commissioner is otherwise independently empowered to grant extension to a taxpayer in terms of section 119(3) of the Ordinance if such a request is made to him without regard to any instructions from the Board.”

At the same time, the bar is cognizant of the fact the FBR’s campaign to increase the number of returns/ compliant taxpayers should not be sabotaged merely on the ground of short time period given firstly to understand the forms and again to file the returns of income.

It is, therefore, all befitting that the due number of days, which are ninety (90) from the issuance date of the final return forms are allowed to the taxpayers and is not compromised on any pretext.

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