Provincial governments start taking steps towards agriculture income tax collection

August 20, 2012:  Provincial governments have started implementing the ””harmonisation of agriculture income tax policy in the provinces”” under which government of Khyber Pakhtunkhwa (KPK) collected information on agriculture income from the Federal Board of Revenue (FBR) and served tax demand notices on persons who have declared agriculture income in their tax returns.

Sources told Business Recorder here on Sunday that in line with the decision taken by all four provincial Finance Secretaries in this regard, the provincial governments started taking steps for collecting agricultural income tax at local level.

Tax demand notices, it is learnt, have been served on the basis of information provided by FBR on Agriculture Income. The information provided by Income lax Department on agriculture income, after district-wise segregation, has been forwarded to respective districts for calculating Agriculture Income Tax (AIT) and serving of tax demands.

In KPK, some persons have moved to civil courts for cancellation of notices on the pretext that notices can only be issued to the owners of 50 acres and 100 acres of irrigated or non-irrigated lands, respectively. Some persons have come up with an argument that they do not have landed property, which has not been taken into account as they have declared Agriculture Income in the Income Tax return. Despite all of these problems the demand notices are being followed and the progress will be made, towards recovery of Agriculture Income Tax from such land owners.

Besides, the provincial government of KPK has taken other steps in this regard as well. Firstly, a notification has been issued to make it mandatory for owners and cultivators of 121/2 acres or more of cultivated irrigated land, 25 acres of cultivated non-irrigated land or mature orchard having net income more than Rs100,000 to self-assess their Agriculture Income and file Agricultural Income Tax (AIT) Returns. As a result of aforesaid notification cultivators have also been brought into the tax net and the number of taxpayers increased from 112 to 4,799, which is a significant achievements.

After issuance of notification by the Board of Revenue (BoR) KPK, cultivators have also been brought into the tax net and the number of taxpayers has increased from 112 A.I. Taxpayers in 4 districts of Peshawar, Charsadda, Mardan and Dera Ismail Khan to 4,799 in 14 districts ie, 10 additional districts.

Secondly, the comprehensive instructions have been issued for various activities from crop inspection, assessment of AIT, filing of return and issuing of tax demand and their implementation will take some time.

Thirdly, the strengthening and capacity buildings of Revenue Staff have to be done to achieve the objective. The provincial government on its own tried to engage a firm for the purpose which met with little success as the required expertise in ascertaining net agriculture income and scrutinising AIT returns is not available in the market, sources said.

Fourthly, comprehensive instructions have been circulated amongst the Commissioners and District Revenue Officer detailing processes and timelines for various activities from crop inspections, assessment of AIT, filing of returns, and issuing of tax demands. As instructions were issued one month ago, their dissemination among the revenue officials and implementation will take some time. It is expected that the timelines indicated in the instructions may not be met during the first year.

During the last meeting of the provincial Finance Secretaries, it was requested by the provincial governments that the federal government/ FBR may extend capacity-building of revenue staff for scrutinising AIT returns and maintaining data of AIT payers. This was followed by written request but no such activity initiated by the Federal Government as yet. The provincial government of KPK reiterated its request and would like to raise the issue in the next meeting of provincial finance secretaries. In addition the FBR may also extend advice regarding creation of AIT units in selected districts, human resource and equipment/ software required.

Sources said that the requisite information, as decided in the previous provincial finance secretaries meetings, has already been provided by the FBR to all the provinces. The provincial government of Punjab was of the view that on the basis of information provided by the taxpayers in income tax returns, the provinces can pursue the agriculture income tax evaders.

Background of the issue revealed that in KPK the current system of assessment and demand of Agriculture Income Tax was looked into detail to identify reasons for dismal recovery of the tax during the past four years in the province. It has been found that revenue officials devised their own mechanism for assessment which was contrary to the provisions of the Agriculture Income Tax Ordinance 2000, Agriculture Income Tax Rules 2001 (Rules), and Guidelines issued by the Board of Revenue.

In order to make assessments in accordance with the law, KPK government has issued instructions to assist the Assistant Collector in computing and collection of tax. The District Kanungo assisted by head Clerk Revenue shall prepare lists of all owners, as defined in Section 2(m) of Agriculture Income Tax Ordinance 2000, having cultivated land in excess of a) 5 acres, b) 10 acres. c) 121/2 acres, and mature orchard soon after the harvest of Rabi crop annually. The list has been forwarded to the District Revenue Accountant.

The Tehsil and District Revenue Accountants shall undertake crop experiment each harvest to determine yield in accordance with Land Record Manual, which will form the basis for determining the market price of the total produce. Deductions for preceding Kharif and Rabi crops will be allowed vide Agriculture Income Tax Rules 2001 will be subtracted from the market price to ascertain the net income of the cultivator/owner during the agriculture year, sources said.

Where land is being cultivated by a tenant, the Tehsil and District Revenue Accountants (TRA/DRA) shall work out the income of owner/ landlord on the basis of his share-in-produce recorded in periodic revenue record/ khasra girdwari or the lease agreement executed between the parties, as the case may be.

Sources said that separate registers will be maintained for landowner and tenant showing year-wise details of holdings, tax assessed, and paid. The DRA will be responsible to assess tax on basis of crop estimates to determine whether taxation is to be made under rules and regulations. The owners/ cultivators of area under 121/2 acres or more of cultivated irrigated land or 25 acres of cultivated un-irrigated land having taxable agriculture income have been served with demand notice signed by DRA/ TRA through respective patwari. All owners/ cultivators of 121/2 acres or more of cultivated irrigated land, 25 acres of cultivated un-irrigated land, or of mature orchard are liable to self assess their incomes and submit agriculture income tax returns (returns).

The revenue officer in charge of Tehsil/ Sub-Tehsil will select and scrutinise 5% of the returns, at random, on the basis of income determined in accordance with given procedure to ensure correctness of the income declaration made in the return.

Where owner/tenant of 121/2 acres or more of cultivated irrigated land, or 25 acres of cultivated non-irrigated land, or of mature orchard, or person earning net income of Rs100,000 (or amount subsequently notified by government or more fails to submit return, the Revenue Officer incharge of Tehsil has served notice upon the person in accordance with Agriculture Income Tax Rules. Where the Revenue Officer determines after carrying out scrutiny or the owner/ cultivator fails to comply with the notice, he will proceed to make tax assessment. The Revenue Officer shall maintain accounts as specified in Rules, which shall in variably be examined during Tehsil inspections and commented upon by the Inspecting Officer. The DRA shall update tax collect ions and get the same reconciled from respective District Account Officer. Monthly reconciled statements will be provided to BOR by 15th of the following month.

Failure to update tax deposits, their reconciliation, or provision of reconciled statements will entail initiation of disciplinary action against the DRA concerned, sources added.


Courtesy:  BR


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