Habib Fakhruddin, FCA Senior Partner Amir Alam Khan & Co, has communicated discrepancies in the income tax returns to the FBR for necessary modification and ratification. Habib Fakhruddin said that referring to the income tax return forms for the tax year 2016 for AOP (E-filing through "Iris") notified vide SRO 792(I)/2016 dated August 25, 2016.
Following are the apparent discrepancies in the said forms:
Other sources:
1. A row for "Yield on Behbood Certificate / Pensioner's Benefit Account - Code 5003041" is not required, since an AOP can not derive such income.
2. As per "Iris" a row for "Dividend" with code "5001" is appearing, where as in the notified forms no such row is provided.
Deductible Allowances:
3. A row for "Profit on Debt etc u/s 64A" is missing. It may be mentioned that although section 64A was incorrectly inserted in Part X of Chapter III "Tax Credits" instead of Part IX of Chapter III "Deductible Allowances" of the Income Tax Ordinance, 2001 through Finance Act, 2015. However, section 64A is clear that certain profit on debt etc now qualify for straight deduction as deductible allowance from total income to arrive at taxable income. It may also be mentioned that earlier under the omitted section 64 (through Finance Act, 2015) such profit on debt qualified for tax credit.
Tax Credits:
A row for Tax Credit for "Deductable Allowance for Profit on Debt u/s 64A" with Code 93141, is not required as discussed in Para 3 above.
Adjustable Tax Regime:
4. No rows for adjustable tax deducted under section 153(1)(a) have been provided. In many cases tax is deducted under section 153(1)(a), which is not final (eg tax deducted on sale of imported goods by overlooking the provisions of section 153(5)(a)).
5. No rows for adjustable tax deducted under section 153(1)(b) have been provided.
Final / Fixed / Minimum / Average / Relevant / Reduced Rate Regime
6. A row for "Imports u/s 148 @5.5% - Code 64010061" is provided correctly in the notified forms but the same is not appearing in "Iris".
7. Rows for "Profit on Debt u/s 151 from NSC / PO Deposits - Code 64040051", "Profit on Debt u/s 151 from Bank Accounts / Deposits - Code 64040052", "Profit on Debt u/s 151 from Government Securities - Code 64040053" and "Profit on Debt u/s 151 from Others - Code 64040054" have been provided. These rows are not required since "Profit on debt" subject to deduction of tax under section 151 of the Income Tax Ordinance, 2001, effective tax year 2016 is chargeable under section 7B and the tax rate applies to the cumulative amount of such profit on debt instead of line items. Accordingly, all these rows needs to be deleted.
It may be mentioned that row "Profit on debt u/s 7B - Code 64310056" is already provided in the "Iris" as well as notified forms.
8. A row for "Payment for Services u/s 153(1)(b) @1%" is missing. This rate of 1% is applicable under clause (45A) of Part IV of 2nd Schedule.
9. Separate rows for higher rates of tax applicable on non-filers have been provided under section 148 and 153(1)(a) of the Income Tax Ordinance, 2001. This clearly indicates that section 169(4) of the Income Tax Ordinance, 2001 inserted through Finance Act, 2016 is not given retrospective effect. In fact, the said section 169(4) is a remedial provision and applies retrospectively. This needs to be considered.
However, on the above analogy:
a. Row "Commission/ Discount on petroleum products u/s 156A- Code 64090151" needs to be corrected to add "@ 12%".
b. A new row for "Commission / Discount on petroleum products u/s 156A @15%" is missing.
10. A row "Brokerage /Commission u/s 233 @15% - Code 64120080" is provided correctly in "Iris" but the said row is not appearing in the notified forms.
11. A row for "Rent of machinery and equipment u/s 236Q(2)" is missing.
12. A row "Capital Gains on Securities u/s 37A @ 2.5% - Code 64220152" is provided incorrectly in "Iris" as no such rate is applicable. It may be mentioned that in the notified forms no such row is appearing.
13. A row "Minimum tax u/s 113B on land developers - Code 64330051" is provided incorrectly in "Iris" as no such deduction procedure has been yet notified by the Federal Government. It may be mentioned that in the notified forms no such row is appearing.
Computation:
14. A row "Turnover / Tax Chargeable U/S 113 @ 0.10% - Code 923151" is provided both in "Iris" and notified forms. To the best of our understanding, no such rate exists.
15. A row "Difference of minimum tax chargeable on turnover5 U/S 113B - Code 923196" is provided incorrectly in the notified forms. However, in "Iris" no such row appears.
16. The description of row "Difference of Minimum Tax Chargeable u/s 148(8) / 153(3)(b) - Code 923192" need to be changed to "Difference of Minimum Tax Chargeable u/s 113B / 148(8) / 153(3)(b)".
Minimum Tax:
17. A row "Development and sale of plots by land - Code 64060171" is provided correctly in "Iris" but no such row is provided in the notified forms.
Option out of FTR:
18. Rows for "Imports u/s 148 @ 1.5%", "Imports u/s 148 @ 5.5%", "Imports u/s 148 @ 6.5%", "Imports u/s 148 @ 8%" and "Imports u/s 148 @ 9%" are missing.
19. Row for "Payment for Goods u/s 153(1)(a) @6.5%" is missing.
20. A row for "Commission / Discount on petroleum products u/s 156A - Code 64090151" needs to be corrected to add "@ 12%".
21. A row for "Commission / Discount on petroleum products u/s 156A @15%" is missing.
22. The row "Brokerage/ Commission u/s 233 @7.5% - Code 64120065" in the notified forms needs to be corrected as "Brokerage/ Commission u/s 233 @10% - Code 64120065", which is correctly provided in "Iris".
23. A row for "Brokerage / Commission u/s 233 @15%" is missing.
It is hoped that due consideration will be given to the mistakes pointed out and if desired the CA firm is ready to personally come and explain the above discrepancies, Habib Fakhruddin added.