Thursday, November 10, 2016

What are the benefits of filing your tax return in time with FBR in Pakistan?




Following are the benefits of filing your tax return in time in Pakistan:
1.       In case you are doing business in Pakistan or earning taxable salary income or under the income tax law require to file your return, it will prevent you from any penalty or additional tax if you file your tax return within the stipulated time. Following persons are required to file their tax returns in Pakistan:

Who is required to file income tax return in Pakistan?
(a)        every company;]
(ab)       every person (other than a company) whose taxable income for the year exceeds Rs.400,000
(ac)        any non-profit organization or any welfare institution
 (b)      any person not covered by above categories but:

(i)       has been charged to tax in respect of any of the two preceding tax years;

(ii)      claims a loss carried forward under this Ordinance for a tax year;           

(iii)    owns immovable property with a land area of two hundred and fifty square yards or more or owns any flat located in areas falling within the municipal limits existing immediately before the commencement of Local Government laws in the provinces; or areas in a Cantonment; or the Islamabad Capital Territory

(iv)       owns immoveable property with a land area of five hundred square yards or more located in a rating area;]
(v)        owns a flat having covered area of two thousand square feet or more located in a rating area;]
(vi)       owns a motor vehicle having engine capacity above 1000 CC;
                                (vii)         has obtained National Tax Number
(viii)     is the holder of commercial or industrial connection of electricity where the amount of annual bill exceeds rupees five hundred thousand or
(ix) is a resident 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.]
2.                       Every individual whose income under the head ‘Income from business’ exceeds rupees three hundred thousand but does not exceed rupees four hundred thousand in a tax year is also required to furnish return of income from the tax year.
If you fall in any of the above category, you are legally bound to submit your tax return. In case the return is not submitted or submitted after the due date, the following penalties shall be chargeable.
Such person shall pay a penalty equal to 0.1% of the tax payable in respect of that tax year for each day of default subject to a maximum penalty of 50% of the tax payable provided that if the penalty worked out as aforesaid is less than twenty thousand rupees or no tax is payable for that tax year such person shall pay a penalty of twenty thousand rupees.
By filing your tax return, you not only protect yourself from levy of any penalty but also get the following benefits:
The capital gain tax on disposal of shares and securities shall be chargeable under the reduced rates as tabulated below:
Tax at import stage will be higher in the case of non-filer importer:

Rate of dividend in respect of non-filer will be 20% as against 12.5% in respect of filer taxpayer.
Rate of dividend in respect of non-filer will be 20% as against 12.5% in respect of filer taxpayer.

In case of supplies the rate for filer taxpayer is 4.5% and in case of non-filer tax is deductible @ 6.5%. For companies the rate shall be 4% and 6% respectively in cases of filer and non-filer.
The rate of tax to be deducted from a payment on services under section 153(1)(b) shall be —
            (i)    in the case of transport services, two per cent of the gross amount payable; or
                        (ii)         in the case of rendering of or providing of services, —
                                   
(a) in case of a company, 8% of the gross amount payable, if the company is a filer and 12% if the company is anon-filer; and
(b)   in any other case, 10% of the gross amount payable, if the person is a filer and 15% if the person is a non-filer;
(a)     in respect of persons making payments to electronic and print media for advertising services,—
(i) in case of a filer, [1.5%] of the gross amount payable; and
(ii) in case of a non-filer, 12% of the gross amount payable, if the non-filer is a company and 15% if the non-filer is other than a company;”;]
         (3) The rate of tax to be deducted from a payment on account of contractual services referred to in clause (c) of sub-section (1) of section 153 shall be

                                (i) 10% of the gross amount payable in case of sportspersons;
(ii) in case of a company, 7% of the gross amount payable, if the company is a filer and 10% if the company is a non-filer; and
(iii) in any other case, 7.5% of the gross amount payable, if the person is a filer and 10% if the person is a non-filer.
(1)      The rate of tax to be deducted under section 156 on a prize on prize bond or cross-word puzzle shall be [15]% of the gross amount paid [for filers and 20% of the gross amount paid for non-filers].

(2) The rate of tax to be deducted under section 156 on winnings from a raffle, lottery, prize on winning a quiz, prize offered by a company for promotion of sale, shall be 20% of the gross amount paid.
        Rate of collection of tax on petroleum products under section 156A shall be [12] of the amount of payment for filers and 15% for non-filers”.
The rate of tax deducted on brokerage and commission shall be:
Rate of token tax in the case of motor vehicles:
(4)           where the motor vehicle tax is collected in lump sum,
Cash withdrawal from a bank

The Rate of tax to be deducted under section 231A shall be 0.3]% of the cash amount withdrawn for filers and “0.6” % of the cash amount withdrawn, for non filers].

 [Division VIA
Advance tax on Transactions in Bank

The rate of tax to be deducted under section 231AA shall be at the rate of 0.3% of the transaction [“for filers and 0.6% for non-filers.

Sunday, October 2, 2016

Your tax Calendar for annual return for tax year 2016

1.    Last date for filing of annual income tax return:
a.    For salaried persons the last date is 30.08.2016 as per Income Tax Act 2001.
b.    For individuals (other than salaried persons) and Association of persons (AOPS) the last date is 30.09.2016
c.    For companies having closing date of accounts as a Calendar year (ending on 31st of December) the last date is 30.09.2016.
d.    Most of the companies having closing date of accounts as financial year (ending on 30th day of June) the last date of filing of annual income tax return is 31st December 2016.
All the salaried persons, AOPs corporate cases and other individuals having business, rental income above Rs.500,000 have to submit their return by using online system of FBR. No manual return of such persons shall be admissible.
It is important to mention here that in the immediately preceding tax year i.e. tax year 2015 the last date for filing of income tax return was extended many a times and till the end of April 2016 the taxpayers were at liberty to file income tax returns without penalty.
The Commissioner Inland Revenue has the powers to give extension up to 15 days on the specific request and under special circumstances.
The IRIS system introduced by FBR for filing of return suffered many technical problems and extreme link problem which made it very difficult for the taxpayers to submit the returns and pay their taxes.
The FBR is requested ensure that this year the system of Efiling tax returns for tax year 2016 (2015-2016) would function smoothly enabling the taxpayers to efile their tax returns amicably without any difficulty/problem.
How to revise the tax return
You can revise the return within two months after filing the original return without seeking any approval/permission. After lapse of two months you have to apply before the Commissioner Inland Revenue to revise the return.
What if the tax return is not submitted within due time
Where no tax is payable a penalty of Rs.20,000
Where some tax is payable the minimum penalty is 0.1% of tax payable or Rs.25,000 whichever is higher.
Calendar for Sales Tax Returns
1.    The last date for e-filing of sales tax return and Annexures is as under:
2.    For e-filing Annexure-C the last date of efiling is 10th day of each month. This is to facilitate the taxpayers to claim input tax correctly and to avoid any entry of incorrect data. This is very positive development on the part of FBR to facilitate the taxpayers.
3.    The taxpayers should pay their sales tax due by 15th of day month.
4.    The taxpayers can e-file their returns by 18th of each month.
In  case of non-submission of return by the due date a fine of Rs.100 for each day of default and after default of 15 days, a penalty of Rs.5,000 shall be charged. Penalty for non-payment of sales tax by the due date is Rs.500 for each day of default and if default continues for more than 10 days the penalty shall be Rs.10,000 or 5% of the tax payable but not paid, whichever is earlier.
Calendar for e-filing of withholding statements
After person registered with sales tax, an AOP or a company is bound to submit withholding income tax return on monthly basis. The last date for filing of withholding statement u/s 165 of the Income Tax Ordinance 2001. The penalty for late filing of withholding statement is a penalty of Rs. 2500 for each day of default subject to a minimum penalty of  ten thousand rupees.
How to submit monthly sales tax return in Pakistan with e.fbr.
In Pakistan the method of filing of sales tax returns is different for the persons engaged in the following categories of businesses:
1.    Retail/whole sale
2.    Manufacturer
3.    Importer
4.    Exporter
5.    Persons engaged in zero rated sectors e.g. manufacturer of footwear, textile products, sports goods.

Tuesday, September 6, 2016

Details/documents required - Transactions on which tax is deducted and credit of which could be claimed

In order to submit income tax return as a business individual or AOP you may need following documents/details:
  1. In case you enjoy normal income of sales, purchases, you have to prepare your trading account comprising, gross sales, gross purchases (exclusive of sales tax), opening/closing stock and other direct and indirect expenses details. Special care should be given while mentioning opening stock in your trading account which is the closing stock of the previous year. In case you mention some other figure, there is a probability that your case will be selected for audit.
  2. In the equity folder please mention the details of your balance sheet. The data should comprise the machinery, figure, capital employed trade debtors/creditors. Figure of capital should (in normal circumstances) be less than the closing stock.
  3. If you are registered with sales tax as well one should have to mention his sales and purchases as per sales tax record, otherwise F.B.R. will issue you a notice indicating the discrepancies and you will be asked to reconcile the difference.
  4. You have to provide complete details of salaries paid during the year. These should be in consonance with the data declared in the withholding statements u/s 149, if you are obliged to e-file the same.
  5. Detail of rent paid during the year. In case rent is over Rs.150,000 you were required to deduct tax on the same otherwise the department can disallow the expense claimed on this account if the landlord is single.
6. Details of all other business expenses e.g. conveyance, communication, office supplies, lease charges, interest on business loan etc should be provide.
7. You should be in possession of copies of electricity, telephone/mobile phone certificates and bills of other utilities of business premises as well as of residence so that the expenses under these heads could be mentioned and you may know how much tax is deducted on your electricity bill and telephone/mobile bill.
8. In case of imports please mention the figure of imports under Final tax regime if the same are not consumed for self manufacturing.
9. In case tax is deducted on supplies/services or on contracts, a deduction certificate from the relevant institute/(s) should be made available to ascertain the figures and tax deduction details.
10. Please mention the detail of interest on business loan paid/financial charges paid on leased assets etc.
10. In order to fill in your wealth statement detail of any sort of loan as on 30.06.2015.
11. Bank statements of all the bank accounts maintained personally or in the name of business should be obtained from the banks. You have to mention the end balances as on 30.06.2015 in your wealth statement.
12. Certificate from banks regarding tax deduction on banking transactions/cash withdrawals as well as profits earned on bank deposits should be obtained to claim tax credits.
13. In case you have made any local or foreign trip, please keep the copy of air ticket in tact which contains the amount of income tax deduction which you can claim while submitting your income tax return
14. In case any investment is made in the shares of the company or mutual fund, detail of the same along with details of profits on sale of shares earned during the year please mention the same in the relevant column of “Final/Fixed/minimum tax” folder.
15. Any cash or capital dividend received should be mentioned in “Final/Fixed/Minimum tax” folder.
16. Detail of any function/gathering arranged in a marriage hall etc. along with invoice thereof so that credit of tax deducted may be claimed.
17. Tax is deducted by the educational institutions if the fee is more than Rs.200,000 per annum.
Following details
18. In case of purchase or sale of any vehicle during the year, copy of registration book/amount of consideration received.
19. Documents relating to any immovable or movable property acquired/sold during the year.
20. Detail of motor vehicles in your name e.g. make, engine capacity, year of acquisition, cost of acquisition and registration No.
21. Detail of token tax paid during the period 01.07.2014 to 30.06.2015
22. In case you have acquired any movable or immovable property on lease, the installments paid during the period 01.07.2014 to 30.06.2015.
23. Detail of any other income e.g.
a. Income from property (gross rent, tax deduction on rent [if any], property tax paid, insurance premium paid.
b. Details of profits earned on bank deposits/saving certificates etc. The following details should be provided:
i. Bank account No.
ii. Nature of deposits/saving certificates
iii. Gross profit earned during the year.
iv. Tax deductions made by the banks/National Savings
24. Detail of any foreign remittances received during the year.
25. Complete details of household expenses;
a. Gross amount of electricity bills
b. Gross amount of gas bills
c. Gross amount of telephone bills
d. Water bills
e. Insurance premium paid
f. Expenses on education of children.
g. Donation/zakat paid.
h. If you have joined any club detail of club fee.
i. In case any contribution in expenses is made by any other person, his/her NTN, name and amount contributed by him should be indicated.
26. Detail of any other income earned/gift/remittances received during the year.
27. In case of a withholding agents, copies of monthly withholding statements u/s 165/149.

Importance of electronic filing instead of manual return?

Previously, the taxpayers who submitted their income tax returns manually, as per policy of FBR, faced problems while paying token tax, vehicle registration fee, or making any banking transaction etc, as their returns were not entered in the electronic system by FBR officials. Due to this neglect of FBR officials the name of the taxpayers were not appearing in the Active Taxpayers List and the taxpayers who have filed their returns had to pay enhanced tax which was to be charged on the persons who had not filed their tax returns. So in the interest of taxpayers, it is advisable that all taxpayers should e-file the returns online.
In order to e-file online returns of taxpayers, who are not registered with FBR earlier, one has to obtain get himself e-enrolled with FBR using the following link.

Procedure for e-filing income tax return 2016

Procedure is very simple. The important thing is that you should have at least one mobile SIM in your name. After completing the procedure within five minutes you will receive your password and pincode while username will be your CNIC No. Save the password/pincode in your mobile and email to use the same in future for filing of income tax return for tax year 2016.
So in order to avoid any penalties/default surcharge for late submission of return it is advisable that you should e-file your return today without wastage of time as online system of FBR i.e. IRIS is not reliable and gone down time and again and create hassles for the users.

Getting ready to filing your tax return




How to submit/efile income tax return online for 2014, 2015 & 2016 as business individual/AOP

Introduction

Easy guide for submitting income tax return and wealth statement for tax years 2014, 2015 and 2016 with FBR. Who is required to file income tax return and how to fill in the return is explained here.





How to file Income Tax Return for Tax years 2014 and 2015

Business individuals having net income of less than Rs.500,000 can file returns mannually, while all other individuals, Association of persons (AOPs) and companies are required to e-file their income tax returns and manual returns are no more acceptable. All individuals registered with Sales Tax are also required to e-file their returns. Tax returns for tax year 2016 can be filed by using the internet portal of FBR of iris . For the individuals having income less than Rs.500,000 can download return form from FBR website and after filling in the date submit the same in the local office of FBR.
For business/salaried individuals and AOPs the deadline for submission of return is 30th September 2016 which will be extended as is done all the years before.

Saturday, November 14, 2015

Reduction in Minimum Tax Rates on services of certain companies - Presidential order regarding clause (94) and section 153 - Overview

As a result of Presidential Ordinance dated 31.10.2015 new clause (94) is inserted in Part-IV of Second Schedule to the Income Tax Ordinance. Salient features of this Ordinance are as under:
1.       As per clause (94), provisions of section 153(3)(b) will not applicable for tax year 2016 in respect of companies which are engaged in the following service:
                                                        I.            Freight forwarding services.
                                                      II.            Air cargo services.
                                                    III.            Courier services.
                                                    IV.            Manpower out sourcing services.
                                                      V.            Hotel services.
                                                    VI.            Security guard services.
                                                  VII.            Software development services.
                                                VIII.            Tracking services.
                                                    IX.            Advertising services (other than print or electronic media).
                                                      X.            Share registrar services.
                                                    XI.            Engineering services.
                                                  XII.            Car rental services.
In the proviso it is narrated that such companies should be filer and has to furnish an undertaking to the concerned Commissioner to effect that it will produce audited accounts within 30 days from the date of filing of income tax return for tax year 2016. This undertaking is required to be filed by 15th November 2015.
Provisions of section 153(3)(b) provides that tax deducted on services shall be minimum tax. As per provisions of section 153(1)(b) read with Division III of Part III of the First Schedule to the Income Tax Ordinance 2001 the rate of tax deduction in respect of services are prescribed as under:
            (i)    in the case of transport services, two per cent of the gross        amount payable; or

                        (ii)         in the case of rendering of or providing of services, —
                                   
(a) in case of a company, 8% of the gross amount payable,if the company is a filer and 12% if the company is anon-filer; and

(b)   in any other case, 10% of the gross amount payable, If the person is a filer and 15% if the person is a non-filer;

(a)     in respect of persons making payments to electronic and print media for advertising services,—

(i) in case of a filer, 1% of the gross amountpayable; and

(ii) in case of a non-filer, 12% of the gross amount payable, if the non-filer is a company and 15% ifthe non-filer is other than a company;”;
Combined reading of above provision of law indicates that tax deduction rates should be the same in respect of companies engaged in the services mentioned above unless and until they obtain an exemption certificate from the Commissioner concerned.
For availing the benefit that their minimum tax rate for tax year 2016 should not increase from 2% of the gross turnover, the companies engaged in the above services have to be filer and should submit an undertaking by 15th day of November 2015 that they are ready to submit their audited accounts to the concerned Commissioner within 30 days of filing of return.
By promulgation of above Ordinance though no change is made in tax deduction rates, the companies liability is restricted to 2% subject to the conditions mentioned above. This means that in case such a company does not apply for exemption in terms of proviso [sub-section (4A)] the tax deduction shall be 8% as against their actual liability of 2%. In such a case newly sub-clauses of clause (b) of sub-section 3 of section 153 would be applicable, which provide that excess amount of tax deducted/paid shall be adjustable against next five years’ tax liability.
In case a company engaged in the above services intends that tax deduction rates @ 8% shall not apply in its case, the company has to file application for exemption conditions of which are:
1.       The company falls within the categories mentioned in clause (94).
2.       The minimum period of certificate should be three months
3.       The company has to pay 2% advance tax of the total turnover of the corresponding period of preceding tax year.
Example 1
A company filed its income tax return for 2016 declaring turnover of Rs.1000. It had filed undertaking for availing benefit of reduced minimum tax @ 2% and hence its minimum liability comes to Rs. 20 whereas rate of tax deduction at source was 8% as it had not applied for exemption certificate. It tax was deducted at Rs.80 resulting into excess payment/refund which could be adjusted against tax liability of the next five years.
Example 2
B company intends to get exemption certificate for the first quarter. In the first quarter of preceding year the turnover was Rs.2,000,000. In such a case, the company has to pay advance tax of Rs.40,000[2,000,000 x 2%]. Suppose, a company intends to get exemption certificate for the whole year and turnover for the preceding tax year i.e. tax year 2015 was Rs.50,000,000 in such a case the company has to pay advance tax of Rs.1,000,000.
Example 3
C company did not file undertaking regarding presentation of audited accounts before the Commissioner concerned, in such a case the company shall not be eligible for benefits of minimum tax rate of 2%. Its tax deducted @ 8% shall be minimum tax.
Note
1.       Time allowed for filing of undertaking i.e. 15th day of November 2015 is very short.

2.       It will open another gateway of corruption in FBR