Income tax return form for TY23: KTBA urges FBR to remove technical glitches, irregularities

KARACHI: Karachi Tax Bar Association (KTBA) has requested the Federal Board of Revenue (FBR) to remove technical glitches and illegalities in the Income tax returns forms for the tax year 2023.

In July 2023, FBR issued the Income Tax Return forms for the Association of Persons (AOPs), individuals, and companies. However, the KTBA is of the view that they contain errors and mistakes that could hinder the timely filing of tax returns, rendering the effort to issue the forms on time pointless.

Among the technical glitches identified by KTBA in the return forms, one notable problem is the lack of highlighting changes made in the Return. The FBR issued a Draft Return for Tax Year 2023 with only seven days for stakeholders’ consultation to identify irregularities. However, these changes were not clearly highlighted, making it difficult for taxpayers and their consultants to track and compare the income tax returns for the current and previous years effectively.

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Moreover, a column for the adjustment of brought-forward capital losses under the head of capital gains is missing, leading to incorrect tax calculations on capital gains. This discrepancy could result in taxpayers paying incorrect amounts of taxes on their capital gains.

KTBA also highlighted the errors in the tax calculation on profit/ yield on certain financial instruments, such as Bahbood Certificates, Pensioner’s Benefit Account, and Shuhada Family Welfare Account, calculating the incorrect tax on profit.

Another significant issue is the erroneous calculation of depreciation. The Proviso to the sub-section 2 of section 22 of the Income Tax Ordinance, 2001, which allows a full-year depreciation deduction in the year of acquiring an asset, was omitted through the Finance Act, 2022. However, the Return of Income still restricts depreciation to 50 percent, causing discrepancies in the tax calculations for asset depreciation.

KTBA has called for necessary amendments to address these issues in the return forms. These proposed amendments include providing options to clearly identify the nature and substance of adjustments in the Wealth Reconciliation Statement, displaying the primary information of bank accounts on the face of the Wealth Statement, and including mandatory information related to tax deductions at source on the face of the Return.

KTBA also suggested the introduction of an auto-generated PSID for the Capital Value Tax on Foreign Assets, similar to the facility for generating PSID for income tax payments. Additionally, they proposed that the Statement of Assets and Liabilities and the Wealth Reconciliation Statement should be automatically imported from the previous year’s return to streamline the filing process.

Furthermore, the attributes tab should be made available in the printed version of the Return to avoid confusion during compliance.

KTBA requested the FBR to address these issues promptly and ensure the tax return forms for 2023 are error-free before reissuing them. It is vital to provide taxpayers with ample time for compliance as per the statutory requirements after resolving the identified problems.

With the deadline for filing tax returns approaching, the FBR’s prompt action is essential to ensure a smooth and efficient tax filing process for taxpayers and consultants alike.

Copyright Business Recorder, 2023