‘Defective’ form may create problems for taxpayers & FBR

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VIASOHAIL SARFRAZ
SOURCEBusiness Recorder
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ISLAMABAD: The Income Tax Return form for Tax Year 2018 placed on the FBR web-portal with built-in tax computation formulas apparently having ‘grossly understated taxpayer’s due tax liability,’ which may lead to significant loss of revenue, creating problems for both taxpayers and Federal Board of Revenue (FBR).

In this regard a leading tax lawyer has filed a representation with the FBR to take immediate notice of the situation.

Apparently, the FBR Information Technology (IT) Wing has totally failed to completely work out and verify the tax computation formulas in the electronic return, creating serious issues for the compliant taxpayers.

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A Lahore-based tax lawyer Waheed Shahzad Butt told Business Recorder that Income Tax Return form for Tax Year 2018 (Return of Income for a person deriving income only from salary and other sources where salary is more than 50% of income filed voluntarily for complete year) placed on the FBR web-portal “IRIS” with built-in tax computation formulas, apparently having skipped the most important portion of income earned by the taxpayer falls under the category of “Professionals” where part/portion of income is liable to be taxed under Minimum Tax Regime. Waheed further added that income tax deducted by the “payers” under Section 153(1)(b) of the Income Tax Ordinance, 2001 is to be treated as MINIMUM TAX in the hands of recipients taxpayers. Taxpayers falls under the category of SERVICE provider having income chargeable to tax under Section 153(1)(b) of the Income Tax Ordinance, 2001 shall be chargeable to tax at least at Minimum Tax Regime @ 10% and income tax already deducted under Section 153(1)(b) @ 10% shall be treated as Minimum Tax liability in the hands of recipient taxpayer (On receipts effected from Persons defined as Prescribed Persons). Meaning thereby if income tax liability computed against net income arising out of such RECEIPTS exceeds the quantum of tax already deducted u/s 153(1)(b), then a TAXPAYER shall pay the difference of income tax at the time of submission of annual income tax return to the Government of Pakistan (FBR), otherwise, the tax already deducted @ 10% shall be treated as minimum tax liability against such professional receipts and there will be NO REFUND against such tax deduction.

It is neither adjustable against any other income (including salary) liable to tax under normal tax regime nor it is refundable even there is loss against professional income portion.

Representation to FBR states “Perusal of the income tax return devised by the FBR reflects very strange situation, it grossly understated taxpayer’s due tax liability,’ which may lead to significant loss of revenue, creating problems for both taxpayers and FBR. Reason for the said omission is very simple because prima facie while devising the annual income tax return for a taxpayer deriving income from salary and other sources where salary is more than 50% of income, FBR’s IT wing has skipped to cater the portion of income as well as tax deducted at source, which is liable to be taxed under Minimum Tax Regime, tax expert analyzed.

It is primarily the duty of the FBR functionaries to collect legitimate revenue from the taxpayers of the country which is legally due, therefore, aforementioned intentional / unintentional negligence on the part of some support staff of FBR’s IT Wing is forwarded to safeguard the interest of taxpayers & National Exchequer and to avoid futile litigation amongst the taxpayers & Government of Pakistan (FBR), Waheed added.

(This news/article originally appeared in Business Recorder on October 1st, 2018)

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