Islamabad: The government has decided to discontinue the requirement of providing a taxpayer’s profile along with income tax returns, according to media reports.
As per the exiting regulations, the taxpayers were required to update their profiles by submitting information such as utility connections, types of businesses, business locations, bank accounts, and so on, according to Section 114 A of the Income Tax Ordinance 2001. The deadline for updating the taxpayers‘ profile was December 31, 2020, which was later extended until June 30, 2021.
The government has proposed the removal of Section 114 A and the filing requirement through Finance Bill, 2020. As per the legislation, the definitions of business accounts and Small and Medium Enterprise (SMEs) have also been updated:
A business account is defined in this law as a bank account used by the taxpayer for business activities. Those who fail to declare these accounts will face penalties.
According to the Finance Bill, a Small and Medium Enterprise (SMEs) is somebody who works in manufacturing and has a company turnover of less than PKR 250 million.
The SMEs must be registered on the Small & Medium Enterprise Resource Planning (SMERP) site with the Federal Board of Revenue’s Image Recognition Integrated Systems (IRIS) or with the Small & Medium Enterprise Development Authority (SMEDA).
For taxability, SMEs are divided into two categories:
One whose turnover does not exceed PKR 100 million will be taxed at 7.5% of taxable income.
The other whose turnover is more than PKR 100 million but less than PKR 250 million will be taxed at 15% of taxable income.
Moreover, the SME can also be taxed under the Fixed Tax Regime (FTR). SMEs with a turnover of less than PKR 100 million would be taxed at 0.25% of their gross turnover under this scheme. SMEs with a turnover of more than PKR 100 million but less than PKR 250 million, will be taxed at a rate of 0.5 % of gross turnover.
Since these options once exercised cannot be revoked for three years, SMEs should select the appropriate choice when completing their returns. If the SME selects a conventional tax system and the tax payable is less than the set tax under FTR, the FBR may choose the individual for auditing using a computer ballot (Section 214 C).
Iqra holds BS in International Relations and is passionate about writing engaging content on trending real estate topics. When not working, she is either spending time with family, shopping, or discussing shows & movies.
