All Pakistan Tax Bar Association (APTBA) has proposed to Central Board of Revenue (CBR) for taxing income from property at normal rates and not under the presumptive tax regime.
The income from property has been brought into the presumptive tax regime with effect from July 01, 2006 @ 5 percent of the gross amount of the income and APTBA in its budget proposals submitted to CBR, has pointed out that this has many hardships for the low-income group whereas it has resulted into tax benefit for those deriving higher income under this head.
It has further proposed that in sub section (2) of Section 20 for word "must' the word 'may' be inserted. The claim of depreciation, amortisation in this way will be claimed at the discretion of the taxpayers. In clause (g) of Section 21 before the word violation the word 'intentional' should be inserted as penalties/fines are to be imposed only if there is a wilful default. Moreover in clause (l) after the word 'fines' lease rentals be inserted so that the lease rentals may also be allowed to be paid in cash, as is the general practice of the market.
It is further suggested in the budget proposals that the law provides that the accounts filed with corporate returns should be audited. Similarly, there are certain sectors where the business is being controlled by a regulatory authority, eg, banking sector. SBP dictates the parameters for determination of income of the banking sector, hence, it has suggested that the income of such institutions, which are being governed by another regulatory body, the same be also accepted by the CBR. Likewise, the discretionary powers for allowing of bad debts under section 29 should be curtailed by making suitable amendments in law rather than allowing provisions as per prudential regulations. It is further proposed that in clause (v) of sub section (1) of Section 80 be deleted and trust or co-operative society etc be defined separately as an association of persons.
It has also been pointed out that the basis for taking credit in the wealth statement for unexplained income has not been clarified therefore, provisions should be inserted in the said section for the computation of income on work back method for taking credit in the wealth statement/books of accounts for explaining investment or expenditure. Regarding notice for filing of returns, it has been pointed out that notice for filing of tax returns under section 114 of the Income Tax Ordinance 2001 is being issued arbitrarily for the purposes of finishing inquiries to a taxpayer who is covered under the presumptive tax regime whereas the law protects the presumptive taxpayer not to file a normal tax return. It is suggested that in case, the commissioner has definite information against a taxpayer filing income under presumptive tax regime, only then a notice under section 114 (4) be issued. Further the provisions of this section be applied in full for the broadening of the tax base.
In case of non-compliance of notice u/s 114(4) of the Income Tax Ordinance, 2001 CIT is empowered to make best judgement assessment u/s 121(1) of the Income Tax Ordinance, 2001. It is suggested that proper opportunity should be provided to the taxpayer.
The law-abiding taxpayers should be trusted rather than those who are not paying taxes. The treatment for a tax compliant and a non-compliant should be different.