The total number of income tax returns filed and wealth statements would witness a massive rise by the deadline of November 30, 2013 following mandatory filing of wealth statement and returns by salaried class, parliamentarians, federal/provincial government employees and persons registered with chambers of commerce and industry or trade or business associations through Finance Act 2013.
Sources told Business Recorder on Monday that the number of return filers stood at 1.8 million last year - a number that would increase manifold as a result of major changes in Section 114 of the Income Tax Ordinance 2001. Those who own vehicles above 1000cc as well as those who own property with a land area of 250 square yards would also have to file their income tax returns and wealth statements as per Section 114 irrespective of the source of their income. Thus all parliamentarians, including those whose source of income is agriculture which is constitutionally exempt from payment of income tax, would have to now file returns.
The question arises whether the Federal Board of Revenue has the capacity to handle such a large number of income tax return filers and wealth statements? Recently, majority of the notices issued to potential taxpayers under broadening the tax base exercise were returned to FBR due to incomplete addresses or non-availability of persons on the declared address.
Experts said prior to Finance Act, 2013 a salaried individual with an income under the head 'Salary' where the salary income was above Rs 400,000 but below Rs 500,000 was not required to file returns as the Annual Statement of deduction of Income tax from salary filed by the employer was treated as a return of income furnished by the taxpayer under section 114. Through Finance Act, 2013 filing of income tax return has been made mandatory for such salaried individuals.
They further said that the threshold for filing of return has been curtailed to Rs 500,000 from Rs one million, in the case of a person who is the holder of commercial or industrial connection of electricity. Now a person 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 has to file income tax returns.
Keeping in view the basic threshold of Rs 400,000, a technical correction has been made to provide that every individual whose income under the head 'Income from business' exceeds Rs 300,000 but does not exceed Rs 400,000 in a tax year is also required to furnish return of income for the tax year, they said.
Prior to Finance Act, 2013 any person who furnished a return discovered any omission or wrong statement therein could have filed a revised return subject to the conditions that it was accompanied by the revised accounts or revised audited accounts, and the reasons for revision of return in writing, duly signed by the taxpayer. Now this would require obtaining approval of the Commissioner in writing for revision of return.
Under Finance Act, 2013 every resident being an individual or member of an AOP filing of return of income, or statement under sub-section (4) of section 115 shall also file wealth statement along with reconciliation of wealth statement. This mandatory filing of wealth statement has been made effective from the Tax Year 2013 onwards. Moreover where a person having furnished a wealth statement, intends to furnish a revised wealth statement such person shall also file the revised wealth reconciliation and the reasons for filing revised wealth statement.
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