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The federal government has allowed ‘one-time option’ to the taxpayers to revise tax liability at 25 percent higher than the declared tax liability for closure of audit under section 214D of the Income Tax Ordinance 2001. This ‘one time option’ facility has been given through mini-budget 2018-19 presented by Asad Umar federal finance minister Tuesday.

According to details, prior to the passage of the Finance Act 2018, a person was automatically selected for audit under section 214D, if the person failed to file return of the income within the due date or within the time period extended by FBR. Taxpayers were also subjected to automatic selection for audit if tax required to be paid along with return of income on the basis of taxable income was not paid.

The concept of automatic selection for audit under section 214D of the Ordinance posed hardship for new taxpayers, desirous of coming within the fold of the tax net, who filed their income tax returns after the due date. In order to provide relief to such taxpayers and supplement efforts geared towards broadening of the tax base, section 214D of the Ordinance was omitted through the Finance Act 2018.

In order to alleviate the hardship of taxpayers who have been automatically selected for audit, the government has granted a ‘one time option’ to such taxpayers to revise their tax liability at 25% higher than their declared tax liability and communicate their option of paying 25% higher tax viz-a-viz the declared tax liability, the audit proceedings under section 214S of the Ordinance shall stand closed.

In cases where there is nil tax liability, taxpayers can avail this ‘one time option’ upon payment of tax equal to 2 percent of the turnover of the declared turnover and in case no turnover is declared, upon voluntary payment of penalty for late filing of return under section 182 of the Ordinance.

Furthermore, the aforementioned condition in respect of payment of 25 percent higher tax for closure of audit under section 214D shall not apply to persons deriving income from salary, profit on debt, house property or where income is subject to final or separate tax regime.