ISLAMABAD: Karachi Tax Bar Association (KTBA) Wednesday conveyed to the Federal Board of Revenue (FBR) that the income tax return form was still "defective/incomplete" and incorrect computational issues in the return still persisted.
According to a communication of the KTBA to the FBR here on Wednesday, during a recent meeting with the FBR, it was assured to the delegation of the KTBA that the computational issues along with other issues raised by the KTBA would be resolved within one week i.e. the decided timeline.
However, regrettably the incorrect computational issues still persist and tax advisers are facing severe difficulties and are in extreme pressure because of the two main situations, which are: First, they cannot file the returns on the forms presently available on the IRIS, with wrong formulas, calculating erroneous tax.
Second, the resurgence of the currently ongoing, since past many days, the dangerous life threatening "second wave" of the Covid-19, which has not only gripped the taxpayers but has also affected the members of the KTBA in particular, and tax consultants in general and their staff.
"In Karachi, we have reports of our members and their staffs are being affected by Covld-19 and these numbers are getting significant day by day (even the vice president of KTBA has tested positive). Once any of our members or their staff are diagnosed Covid-19 positive, the whole office is into self-isolation and the office is closed", the KTBA reported.
Although tax advisers/experts are still working very hard during these extraordinary extreme and testing time, however, due to non-removal of irritants and rising Covid-19 cases, they are unable to file returns of income, which could transpire in low number of returns that have been filed till date.
The return of income is still defective and incomplete as certain fields are missing to-date.
The KTBA is of the firm view that 90 days' time prescribed in Section 118 to file return will not start until all defects in the return of income are completely removed, and the return is error free and taken to have been finalised.
To incorporate/correct certain fields/errors, appropriate rules need to be amended, which can only be made through a notification as required under Section 237(3) of the Income Tax Ordinance.
The PM had rolled-out a construction package from tax year 2020 and onwards, enabling them to file the returns on the basis of fixed tax as per Eleventh Schedule.
However, surprisingly, the return of income does not cater for those who opt for the said package/scheme.
Therefore, it is earnestly requested to either incorporate such provision in the return of income and/or issue a simplified return of income/statement for those who fall under Section 100D of the Ordinance, it said.
In the cases of foreign income and working of tax thereupon, it is submitted that under every head of (foreign) income, the IRIS is straight away calculating tax applicable for business income (for all the heads of foreign income).
In case of salary income, assuming salary amount in both cases to be at Rs5,000,000, the computation of tax on domestic salary and foreign salary are both showing different tax amount, hence, the taxpayers and tax advisers for their clients are unable to file the return of income.
In the case of domestic property income, deductions allowable under the law are not only being rightly shown by the IRIS and computing tax quite correctly, whereas, for the case of foreign property income the same features are missing and tax is being calculated on the gross amount which is incorrect and unlawful.
During the meeting, it was discussed and rightly agreed that working of tax liability in the cases of yield from Behbud Certificates, Pensioners Benefit Account, and Shuhada Family Welfare Account, cannot, as per law, exceed 10 percent of their yields.
However, till today, the working of the tax liability on such yields is still being incorrectly worked out.
The KTBA highlighted that there is paradigm change or shift in cases of commercial importers especially and all those cases which till tax year 2019 were failing under Final Tax Regime and from current Tax Year (I.e. tax year 2020) they fall under the Normal Tax Regime and the tax deducted, on import, is now liable to be treated as Minimum Tax.
In this regard, it was decided that the FBR would issue clarification of tax treatment vis-à-vis filling-up of return form where commercial importers have Opening Stock for the Tax Year 2020 because of the reason that on the opening stock, tax during the tax year 2019 has already been paid, and the tax so paid, is final tax and no further tax is required to be paid on such imports/stocks. Currently, there are two situations in which such return could be filed.
However, in the absence of clarification from the FBR, we anticipate that in future notices from the tax offices would be issued and there could be chaos.
There are many other situations, which are still missing from the return of income, making the return defective and not workable. It included incorrect working of tax in the cases of CNG stations; column for tax deducted U/s 233A of the Ordinance is still missing; column for tax deducted under Section 236W of the Ordinance is still missing; small company rate of tax issue is still unresolved; column for Capital Gain on disposal of securities pertaining to mutual fund and 10 percent REIT as per Section 37A is still missing; working of Alternate Corporate Tax vis-à-vis minimum tax is still incorrect. It is noticed that when the printout of the return is taken out, all of a sudden, now the figures appearing in all the columns are being printed without any commas in between, while the same are being displayed properly, while reading online, the KTBA added.
Copyright Business Recorder, 2020
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