Lecture 40 Income from other sources and Income Tax Returns

Income from other source Unexplained investments. Sec unexplained income or assets Where a)A person has made an investment, b)Any amount credited to person’s books of account, c)A person has incurred expenditure.

 Sub Sec. 1 of Sec 111 does not also apply to any unexplained amount relating to a period beyond preceding five tax years. Income from other source Unexplained investments. Sec. III unexplained income or assets

But no reasonable explanation offered regarding sources of fund –the amount as (a), (b) and (c) above shall be included in person’s income chargeable to tax.  Sub Sec. 1 of Sec. 111 does not apply to any amount of Foreign Exchange remitted from outside Pakistan through normal banking channels that is encashed into Pak. Rupees by a scheduled Bank and encashment certificate from such bank is produced to that effect.

Income from other source Immune (Exempted) Investments/Income  Private foreign Currency Accounts  Three years Foreign Currency Bearer Certificates.  Rupees withdrawn or assets created out of: –Withdrawal from US Dollar Bearer Certificates. –Withdrawal from F.C. Accounts. –Encashment of foreign exchange bearer certificates.

Income from other source Admissible Deductions: 1)Expenditure incurred to derive income chargeable to tax. 2)A person receiving any profit on debt chargeable to tax under the head Income from Other Sources’ shall be allowed a deduction for any Zakat paid by the person at the time the profit is paid to the person, deducted at the time of making payment of profit. 3)Depreciation allowed as deduction.

Income Tax Return

Tax Return: Return is Prescribed document for submission of taxable income by taxpayer. Specimens of Return to be submitted by different taxpayers are designed by CBR under Income Tax Rules, 2002.

Income Tax Return Persons required to File returns a) Every Company: Every person (other than company) whose taxable income exceeds the initial threshold as provided under the ordinance. (However, companies to submit return & pay minimum tax even in case of 0.50% of annual turn over ).

Income Tax Return Persons required to File returns: Contd…. b) Every Person Charged to tax for any two preceding years. Claims loss that is carried forward. Owns immovable property, with a land area of 250 Sq. yards or more in municipal limits, cantonment and CDA.

Income Tax Return A return of income shall be: a) prescribed form along with required documents. b) fully state all relevant particulars or information as specified in the form of return, including a declaration of the records kept by the taxpayer; and

Income Tax Return c) Shall be signed by the person, being an individual, or the person’s representative where section 172 applies.

Income Tax Return  A return of income can also be filed electronically. (e- filing of return)

Income Tax Return Returns on Notice by Commissioner:  The Commissioner may, by notice in writing, require a person, or a person’s representative, as the case may be, to furnish a return of income by the date specified in the notice for a period of less than 12 month, where- a)The person has died; b)The person has become bankrupt or gone into liquidation; c)The person is about to leave Pakistan permanently.

Income Tax Return  The commissioner may require any person to file a return of income, if in the opinion of the commissioner, a person is required to file a return for a tax year but he failed to do so. The person on whom the notice is served shall file return within 30 days from the date of service of notice.  In case of any omission by a tax payer, a revised return can be filed within 5 years of the date that the original return was furnished.

Person Not Required to File Tax Return  Section 115 grants immunity to salaried person in lieu of filing a return as outlined below:  Salary certificate from employer sufficient in lieu of return. Other Exceptions: Sec-115  Widow.  Orphan below age of 25 years.  Disabled person or  In case of ownership of immovable property, a non- resident person.

Further Exceptions All person subject to final tax regime/PTR u/s5, 6, 7, 113A, 148, 153, 154, 156, 156A, 233 or 235(5) shall furnish to CIT a statement showing such particulars relating to person’s income for tax year in such form and verified in such manner as may be prescribed. Income Tax Return

 Filing of Wealth Statement (Sec. 116) The Commissioner may, by notice in writing, require any person to furnish, on the date specified in the notice, a statement (hereinafter referred to as the “wealth statement”) in the prescribed form and verified in the prescribed manner giving particulars of – a) The person’s total assets and liabilities as on the date or dates specified in such notice;

Income Tax Return  Filing of Wealth Statement (Sec. 116) Contd… b) The total assets and liabilities of the person’s spouse, minor children and other dependents as on the date or dates specified in such notice; c) Any assets transferred by the person to any other person during the period or periods specified in such notice and the consideration for the transfer; and

Filing of Wealth Statement (Sec. 116): Contd.. d) The total expenditures incurred by the person, and the person’s spouse, minor children, and other dependents during the period or periods specified in the notice and the details of such expenditures. Income Tax Return

Filing of Wealth Statement (Sec. 116): Contd..  Every resident taxpayer filing a return of income for any tax year (whose last declared or assessed income, is five hundred thousand rupees or more) shall furnish a wealth statement for that year along with such return. Income Tax Return

Filing of Wealth Statement (Sec. 116): Contd..  Where a person, who has furnished a wealth statement, discovers any omission or wrong statement therein, he may, without prejudice to any liability incurred by him under any provision of this Ordinance, furnish a revised wealth statement at any time before an assessment, for the tax year to which it relates, is made under Sub Sec (1). Income Tax Return

Sec. 117 Discontinuance of Business: Return to be filed within 15days of discontinuance. Income Tax Return

 Where NTN is not already registered/allotted/issued ---taxpayer shall apply on prescribed form for NTN at the time of furnishing return of income. Provision of Revised Tax Return: A person may furnish Revised Return within five years of the date when the original return was furnished. Income Tax Return