A tax expert has raised legal and technical objections in the draft income tax return forms for individuals, Association of Persons (AOPs) and companies for Tax Year 2011. Waheed Shahzad Butt, a renowned Lahore based tax lawyer has submitted a detailed presentation to the FBR here on Wednesday to remove ambiguities in the income tax return form for Tax year 2001.
Tax lawyer said that as per notification issued under SRO(I)/2011, certain amendments to the Income Tax Rules, 2002 have been announced wherein proposed income tax return for Companies (IT-1) and tax return for Individual/AOP (IT-2) for Tax Year 2011 have been published for the information of all persons likely to be affected. There are certain issues in the proposed tax returns, which need clarification/modification/alteration, therefore, objections/suggestions are forwarded for necessary action by the FBR.
According to the tax lawyer, there is an inadvertent omission regarding levy of surcharge in both tax returns, while earlier statement of FBR is quite self speaking: "Federal Board of Revenue (FBR) has said the imposition of 15% surcharge on the amount of payable income tax for the period 15th March, 2011 to 30th June, 2011 is applicable on all income of taxpayers whether individual, Association of Persons (AOPs), or Companies.
He said that there is a specific exemption provided under clause 126F of the 2nd Schedule to the Income Tax Ordinance, 2001. Placement of the income claimed to be exempt under such clause is inevitable, while the same is missing in the proposed tax returns. Relevant portion of said clause is reproduced for ready reference: Profits and gains derived by a taxpayer located in the most affected and moderately affected areas of Khyber Pakhtunkhwa, FATA and PATA for a period of three years starting from the tax year 2010: Provided that this concession shall not be available to the manufacturers and suppliers of cement, sugar, beverages and cigarettes;
TAX RETURN FOR COMPANIES IT-1:
In company tax return IT-1 following issues needs modification/alteration:-
1) Under serial No 162 following narration is irrelevant:
--- [35 divided by 34 multiply by 37(a)(i) or 37(b)(i) or 37(c)(i), as the case may be]
2) Under serial No 162 while computing the difference of tax payable at Column number 5 the narration for extracting difference of minimum tax chargeable is not correct:
Incorrect narration on tax return - [Higher of (ii) of (iii)]
At serial number (ii) proportionate chargeable income has been placed and at serial number (iii) proportionate tax has been placed, therefore, comparison of income with tax is apparently a mistake of inadvertence.
3) Under serial No 162 following narration needs alteration:-
--- 6% of the receipts of services rendered subject to deduction of tax at source.
There are other rates of income tax deduction against payments made on account of services rendered/provided. It is 1% under clause 45A of the Second Schedule to the Income Tax Ordinance, 2001 while other is 2% under Division III of Part III of the First Schedule to the Income Tax Ordinance, 2001.
Mere mentioning of 6% rate of tax deduction creates a wrong impression that services chargeable to tax @6% shall only falls under the minimum tax regime, he said.
RETURN FOR INDIVIDUAL/AOP IT-2:
In tax return IT-2 following issues needs modification/alteration:-
1) Under serial No 36 while computing the difference of tax payable at column number 5 the narration for extracting difference of minimum tax chargeable is not correct:
Incorrect narration on return - [Higher of (ii) of (iii)]
At serial number (ii) proportionate chargeable income has been placed and at serial number (iii) proportionate tax has been placed, therefore, comparison of income with tax is a mistake. It should be [Higher of (iii) or (iv)] instead of above mentioned inadvertent narration.
2) Under serial No 36 following narration also needs alteration:-
--- 6% of the receipts of services rendered subject to deduction of tax at source.
There are other rates of tax deductions against payment made on account of services rendered/provided. It is 1% under clause 45A of the Second Schedule to the Income Tax Ordinance, 2001 while other is 2% under Division III of Part III of the First Schedule to the Income Tax Ordinance, 2001.
Mere mentioning of 6% rate of tax deduction creates a wrong impression that services chargeable to tax @6% shall only falls under the minimum tax regime.
3) Under serial No 39 following narration need modification:-
[40(iv) minus 39, if greater than zero, else zero]
4) At serial NO 59 Transport Services Rendered has been placed into FINAL TAX regime. Apparently the same is not correctly placed in the return. Said services are liable to withholding tax u/s 153(1)(b) of the Income Tax Ordinance, 2001 at the rates prescribed under Division III of Part III of the First Schedule to the Income Tax Ordinance, 2001, therefore, the same shall not fall under FINAL TAX regime instead these services are also falls under Minimum tax regime under section 153(1)(b) read with section 153(6) of the Income Tax Ordinance, 2001. Waheed Shahzad Butt has requested the FBR to consider the aforementioned suggestions while finalising the tax returns for Tax Year 2011.