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Business income: taxpayers must maintain books of account for 6 years

The Federal Board of Revenue (FBR) has made it mandatory for the taxpayers, earning income from business, to maintain books of account, documents and records for a period of six years as compared to existing five years. The FBR has amended Income Tax Rules, 2002 through an S.R.O. 1149(I)/2015 issued here on Wednesday. Through this amendment, the books of account, documents and records would be maintained for six years after the end of the tax year to which they relate.

However, the condition of maintaining books of accounts for six years shall not apply where any proceeding under the Income Tax Ordinance is pending before any authority or court the taxpayer shall maintain the record till final decision of the proceedings. Under rule 29 of the said rules, every taxpayer deriving income chargeable under the head "Income from business" shall maintain proper books of account, documents and records with respect to (a) all sums of money received and expended by the taxpayer and the matters in respect of which the receipt and expenditure takes place; (b) all sales and purchases of goods and all services provided and obtained by the taxpayer; (c) all assets of the taxpayer; (d) all liabilities of the taxpayer; and (e) in case of a taxpayer engaged in assembly, production, processing, manufacturing, mining or like activities, all items of cost relating to the utilisation of materials, labour and other inputs. If a taxpayer uses fiscal electronic cash register or computerised accounting software, it may issue cash memo/invoice/receipt generated by the electronic cash register or computer. Duplicate copies and electronic or computer records of the cash memo/invoice/receipt/patient-slip to be issued under this chapter, shall be retained by the taxpayer and form part of the records to be maintained under this chapter.

Under the new rules, every taxpayer, other than companies, deriving income chargeable under the head "Income from business" shall issue and maintain the following minimum books of account, documents and records: Taxpayers with business income up to Rs 500,000 and new taxpayers deriving income from business. Taxpayers with business income exceeding Rs 500,000 and wholesalers, distributors, dealers and commission agents. Through revised rules, the FBR has also omitted the rule 39 pertaining to the statement in lieu of Return of income and rule 35 relating to the employer's certificate in lieu of return of income. The FBR has also amended the prescribed form of appeal to the Commissioner (Appeals).

Following is the text of the SRO issued here on Wednesday: S.R.O.1218(1)/2015.- in exercise of the powers conferred by sub-section (1) of section 237 of the Income Tax Ordinance, 2001 (XLIX of 2001), the Federal Board of Revenue is pleased to direct that the following further amendments shall be made in the Income Tax Rules, 2002, the same having been previously published vide Notification No S.R.O. 1149(I)/20I5, dated the 23rd November, 2015 as required by sub-section (3) of the said section, namely:

In the aforesaid Rules,?

(1) in rule 13, in sub-rule (3), in sub clause (b), for the full stop at the end, a colon shall be substituted and thereafter the following explanation shall be added, namely:-

"Explanation.- The terms gross receipt means net off receipts or turnover of Sales Tax or EFD paid.";

(2) in rule 13L, in sub-rule (1), in clause (d), sub-clause (d) shall be re-numbered as sub-clause (iii);

(3) in rule 19G,?

(i) for the words "Income Tax Enforcement", occurring for the first time, the words "Inland Revenue" shall be substituted; and

(ii) the words "Income Tax Enforcement", occurring for the second time, shall be omitted;

(4) in rule 29,?

(i) in sub-rule (4), for the word "five", the word "six", shall be substituted; and

(ii) after sub-rule (4), the following new sub-rule shall be added, namely.- "(5) The provision of sub-rule (4) shall not apply where any proceeding under the Ordinance is pending before any authority or court the taxpayer shall maintain the record till final decision of the proceedings.";

(5) in rule 30,?

(a) in sub-rule (1),-

(i) for the figure "200,000", the figure "500,000" shall be substituted; and

(ii) in clause (a), in sub-clause (i), after the word "number", the words "or CNIC" shall be inserted; and

(b) in sub-rule (2), for the figure "200,000", the figure "500,000" shall be substituted;

(6) rules 35 and 39 shall be omitted;

(7) in Division IV of Part II of Chapter IX, in the marginal note,?

(i) the words "Annual and" shall be omitted; and

(ii) for the word "statements". the word "statement "shall be substituted;

(8) in rule 44,?

(a) sub-rule (1) shall be omitted; and

(b) in sub rule (2), after the word "furnish", the word "or e-file" shall be inserted, and thereafter for the words "within twenty days of the end of each month", the words "by the 15th day of the month following the month to which withholding tax pertains" shall be substituted; and

(c) in sub-rule (4),?

(i) for the word "statements", the word "statement" shall be substituted;

(ii) the brackets, figure and word "(1) or" shall be omitted; and

(iii) after the word "aforesaid", the words "amended" shall be omitted;

(9) in rule 72, for the words "taxation officer", the words "officer of Inland Revenue" shall be substituted;

(10) in rule 73, in sub-rule (2C), after the word "return", the words "and withholding tax statements" shall be inserted;

(11) in rule 74, in sub-rule (2), for the word "Regional", the word "Chief" shall be substituted;

(12) in rule 76,?

(a) after the entry "National Tax Number of Appellant", the expression

"or CNIC shall be added;

(b) the entry "Any other for appeals for AY 2002-2003"shall be omitted; and

(c) under heading "TAX ASSESSED",?

(i) in serial (b), for the words "Additional Tax", the words "Default Surcharge" shall be substituted;

(ii) serial (d) shall be omitted;

(iii) in serial (j), the word "Disputed" shall be omitted and after the word "Demand", the expression "u/s 137 (2)" shall be inserted;

(13) in rule 85, in the marginal note, for the words "Director General", the words "Chief Commissioner" shall be substituted;

(14) in rules 87, 88, 89 and 90, for the words "Director General", wherever occurring, the words "Chief Commissioner", shall be substituted;

(15) in rule 122, in sub-rule (f), for the words "Income Tax", the words "Inland Revenue" shall be substituted;

(16) in rule 132, in the proviso, after the word "Commissioner" occurring for the first time, the words "of income tax" shall be omitted;

(17) in rule 136, in sub-rule (3), for the words "Income Tax", occurring at the end, the word "Inland Revenue" shall be substituted;

(18) in rule 157, in the marginal note, the words "of Income Tax" shall be omitted; " shall be added; " shall be omitted; and

(19) in rule 158, in sub-rule (2), for the words "Income Tax", occurring at the end, the words "Inland Revenue" shall be substituted;

(20) in rule 183, in sub-rule (5), for the words "Income Tax", occurring at the end, the words "Inland Revenue" shall be substituted;

(21) in rule 186, for the words "Income Tax", occurring at the end, the words "Inland Revenue" shall be substituted;

(22) in rule 194, in sub-rule (1),-

(a) in clause (a), for the words "Director General", the words "Chief Commissioner" shall be substituted; and

(b) in clause (b), for the words "taxation officer", the words "officer of Inland Revenue" shall be substituted;

(23) in rule 211,?

(a) in sub-rule (1), after the word and comma "To,", for the words "Income Tax", the words "Inland Revenue" shall be substituted; and

(b) in sub-rule (2), in clause (g), for the words " or Commissioner of Income Tax", the word "Commissioner" shall be substituted and thereafter in the first and second proviso, for the words "Director General", the words "Chief Commissioner" shall be substituted;

(24) in rule 213, in sub-rule (2), in clause (d), for the words "Director General", the words "Chief Commissioner" shall be substituted;

(25) in rule 218, in sub-rules (1) and (2), for the words "Director General", wherever occurring, the words "Chief Commissioner" shall be substituted;

(26) in rule 220A,?

(a) in the marginal note, for the expression "sub-clause (3) of clause (58) of Part I of the Second Schedule", the expression "clause (c) of sub section (2) of section 100C of the Ordinance" shall be substituted;

(b) in sub-rule (1),?

(i) for the words "Regional Commissioner of Income Tax", the words "Chief Commissioner" shall be substituted;

(ii) for the expression "sub-clause (3) of clause (58) of Part I of the Second Schedule", the expression "clause (c) of sub section (2) of section 100C of the Ordinance" shall be substituted;

(iii) in sub-rule (a), for the words "Regional Commissioner of Income Tax", the words "Chief Commissioner" shall be substituted; and

(iv) in sub-rule (b), in clause (vi), in first and second proviso, for the words "Director General", the words "Chief Commissioner" shall be substituted;

(c) in sub-rules (2), (3), (4), (7) and (9), for the words "Regional Commissioner of Income Tax" and "Regional Commissioner", wherever occurring, the words "Chief Commissioner" shall be substituted;

(d) sub- rule (10), shall be omitted;

(e) in Form-1, for the expression "clause (58) of Second Schedule to", wherever occurring, the expression "clause (c) of sub section (2) of section 100C of" shall be substituted; and

(f) for the word "Regional Commissioner of Income Tax", the words "Chief Commissioner of Inland Revenue" shall be substituted;

(27) in rule 220B, in sub-rule (9), for the words "Direct Taxes", the words "Inland Revenue" shall be substituted;

(28) in rule 226, in sub-rule (2), in clause (e) and in rule 229, in sub-rule (1), for the words "Income Tax", the words "Inland Revenue" shall be substituted;

(29) in rule 231A,?

(a) in sub-rule (2), in clause (b), for the words and brackets "(Direct Taxes)", the words and brackets "(Inland Revenue)" shall be substituted;

(b) in sub-rule (3), the word "of Income Tax" shall be omitted; and

(c) in sub-rule (6), the word "of Income Tax" shall be omitted;

(30) in rule 231B, in application form, in ANNEXURE, Serial (3) and (4) shall be omitted;

(31) in rule 231C, for the words, "Director General", "Income Tax Department" and "officer of income tax", wherever occurring, the words, "Chief Commissioner", "Inland Revenue Department" and "officer of the Inland Revenue" shall be substituted respectively;

(32) in rule 231D, in ANNEXURE, for the words "Commissioner of Income Tax", the words "Commissioner of Inland revenue" shall be substituted.

Copyright Business Recorder, 2015