KARACHI: The Federal Board of Revenue (FBR) has agreed not to use personal expenditure information as demanded in the tax returns for audit selection, but will be kept as deterrence for proper disclosure of income.

However, the FBR has put a condition that up to 20 per cent variance between income and expenditure would be accepted provided there was no mis-declaration.

Any case selected on the basis of personal expenditure would require prior approval form FBR Member Inland Revenue (IR).The understanding was reached between member FBR Inland Revenue Shahid Hussain Asad and Karachi Tax Bar Association(KTBA) in a recent meeting.

The tax bar also asked the FBR not to bring services of corporate sector under minimum tax because its impact would be much higher than net profit of any entity.

The remaining corporate sector pays one per cent turnover tax but the bar is of the opinion that six per cent minimum tax on services would be damaging.

The KTBA strongly opposed the suggestion that flood surcharge should be averaged out over a full year, 2011, to bring intoeffect its chargeability.

In support of its stand, the tax bar pointed out that the law specifically mentioned the period for the levy of flood surcharge; therefore, it could not be spread or averaged over full year 2011.

The tax bar argued that the FBR imposed flood surcharge through Income Tax Amendment Ordinance 2011 which categorically stated that the said Ordinance is applicable for three-and-a-half months period, starting from March 15 to June 30 for the tax year 2011.

And for this reason, the same had not been presented and approved by the Parliament, the bar went on to say.Therefore, the tax bar stated that the amended ordinance 2011 through Section 4A could not become part of Income Tax Ordinance 2001 and this limits its scope of chargeability of flood surcharge for a period of three-and-a-half months only.

Unlike in the past, the refund adjustment was fully allowed at the time of filing tax returns, but the FBR has now imposed a limit of Rs10,000 and the balance could only be claimed by submitting challans and would be paid after verification.

The long delay in issuing draft returns and getting approval from stakeholders this year has caused a lot of embarrassment for the FBR.

However, the member IR assured the tax bar that draft return for the tax year 2012 would be issued in January and the same would be notified before June 30, 2012.

It was also agreed upon that the FBR would make arrangement for the acceptance of manual challans by deputing concerned staff at the designated bank branches.