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CBR notifies new income tax return forms

ISLAMABAD (July 23 2005): To encourage voluntary compliance by the business community, the Central Board of Revenue (CBR) has notified new income tax return forms, statements and annexes for the tax year 2005.

Habib Fakhruddin, Member (Facilitation and Tax Education) and official spokesman of CBR, said on Friday that CBR has issued SRO 732(I)/2005 for issuance of new forms for facilitation of the business community.

These forms will be used for submitting returns and statements due by September 30, 2005, covering income year starting from July, 2004, and ending June, 2005.

He said that mainly these forms remain unchanged, except for the changes necessitated by the amendments in the law and evaluation of the returns etc submitted for the tax year 2004.

However, the aspect of facilitation of the taxpayers has been further taken care by giving detailed instructions at the back of each form, statement and annex.

Fakhruddin said that CBR has also issued taxpayers facilitation guide which explains the obligations and liabilities of the taxpayers for filing of returns.

It may be reminded that to facilitate the salaried taxpayers, a major change in law has been made.

An individual having income exclusively from “salary” and no claims for any deductions from income, no tax reductions (other than salaried taxpayer tax reduction or a teacher or researcher tax reduction) or credits, etc, is no more required to file the employer's certificate in lieu of return of income, if his/her employer has filed the annual statement of income tax deducted from salary, he said.

Member Facilitation and Tax Education pointed out that another important change is that an individual and an association of persons is no more required to file a return of income only for the reason of being owner of a motor vehicle, subscriber of telephone or mobile phone, undertaking foreign travel or member of a club.

Outlining the details of the new forms, Fakhruddin said that separate return forms for each category of taxpayers make them more user-specific and user-friendly.

THESE ARE BRIEFLY EXPLAINED AS FOLLOWS: R1 Return of total income is for companies; R2 Return of total income is for associations of persons and non-salaried individuals; R3 Employer's certificate in lieu of return of income is a dual-purpose certificate issued by the employer; R4 Attachment to employer's certificate is for individuals having income from salary as well other sources or claims for deductions, reductions and credits, etc; R5 Statement of final taxation is for taxpayers having transactions that are subject to final taxation only and are not required to file Form R1, R2, R3, R4 or R6.

R6` Statement of final taxation for retailers is for individuals and association of persons having turnover up to Rs 5,000,000 from sale of goods to general public for consumption and opting for tax at the rate of 0.75 percent of their turnover.

He explained that only the following documents/evidences are required to be attached with these forms: Applicable annexes; evidence of deduction of expenditure on personal medical services; evidence of payment of advance tax; tax collected or deducted at source; tax paid with the return; wealth statement (applicable to resident individual, if declared or last assessed income is Rs 500,000 or more); evidence of payment of foreign tax (applicable where there is foreign source income); copies of audited financial statement (applicable to companies only).

The applicable return form, out of the six mentioned above, is to be accompanied with applicable annexes. The purpose of introducing the annexes is to guide taxpayers in understanding their rights and obligations; standardise the format of obtaining the information from the taxpayers, which they are already submitting to achieve the objectives of automation.

These annexes will also assist taxpayers in computing their income under different heads by identifying the components of the income and deductions etc; determining applicable tax rebates and tax credits by identifying all the admissible rebates and credits; claiming the taxes already paid in advance or by way of collection or deduction of tax at source and making “Self Assessment” for a correct and faithful declaration of income etc.

THE FOLLOWING ANNEXES ARE PRESCRIBED:

— Annex I for particulars of directors of company or members of an association of persons.

— Annex IIA (applies to an individual or an association of persons) for summary of business results in lieu of income statement (manufacturing, trading and profit and loss account; or income and expenditure account; or receipt and payment account).

— Annex IIB (applies to a company) for details of business income (Income Statement – manufacturing, trading and profit and loss account; or income and expenditure account; or receipt and payment account).

— Annex IIC (applies to a company) for item-wise details as to the nature of adjustments made in book profits/(losses) to arrive at business income/(loss) in accordance with the provisions of the Income Tax Ordinance, 2001.

— Annex IID for adjustment of brought forward business losses, un-absorbed depreciation, initial allowance and amortisation and losses of subsidiary and carry forward of the same. This annex is also for details of un-absorbed depreciation and business losses brought forward and/or carry forward.

— Annex IIE for details of depreciation, initial allowance and amortisation for the year.

— Annex IIF for details of gain or loss on disposal of depreciable assets and intangibles.

— Annex IIG for details of bifurcation of income/loss from business attributable to sales/receipts, etc, subject to final Taxation.

— Annex III for details of the share income from association of persons and the particulars of the association of persons in which member/partner.

— Annex IV for details and computation of income from property.

— Annex V for details and computation of capital gains.

— Annex VI for details and computation of income from other sources.

— Annex VII for details and computation of foreign source income.

— Annex VIII for details and computation of claims of tax reductions, tax credits and tax averaging.

— Annex IX for details and computation of claim of separate taxation of retirement benefits, arrears of salary or profit on debts relating to prior years derived from investment in National Saving Schemes including Defence Savings Certificates.

— Annex X for details of claim of advance tax paid, adjustable tax collected or deducted at source and prior years refunds due.

— Annex XI is for taxpayers who have income subject to final taxation as well as income subject to normal taxation. This is in lieu of R5 – Statement of Final Taxation.

— Annex XII (applies to a company) for furnishing certain key information listed in the annex. This annex is compulsory for every company.

All income tax return forms, statements and annexes are priced and sold by approved private printers through their outlets in Income Tax Offices. These forms and annexes can also be downloaded from CBR website www.cbr.gov.pk or photo copied. However, it should be ensured that the paper used is of white colour, legal size (81/2″ X 14″), at least 90 grams and from one side only, Fakhruddin said.

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