The National Board of Revenue (NBR) has issued guidelines for auditing suspect tax files, including of those who do not deposit monthly house-rent income above Tk 25,000 through banking channel.
Field-level tax officials would go by the guidelines for auditing both individual and corporate tax files submitted under the universal self-assessment system in 2015-16 tax year.
The NBR recently sent the audit guidebooks to the tax offices across the country for action.
According to the income tax law, house-owners have to receive their monthly house rent through banking channel if it exceeds Tk 25,000. However, there is no specific mechanism yet to trace the householders to find out whether they are receiving the rent through banking channel or not.
Under the guidelines, taxpayers may come under auditing for any inconsistency in claiming expenditure from household income.
For salary income, showing excess income of a salaried person as tax-free fund, inconsistencies in income, assets and liabilities, irregularities in gratuity fund etc may come under the recheck.
Tax officials can select tax files of corporate taxpayers in case of not submitting withholding tax return under section 75A or inconsistencies in profit loss accounts or manufacturing trading account with the tax at source in the several withholding tax returns.
Tax returns may be selected for audit for not submitting computation sheet, which is mandatory, with the company return or if the submitted computation sheet has any inconsistency with the assessment of the net income.
Other criteria for audit selection are: claiming excessive expenditure above the ceiling set according to the income tax ordinance 1984, section 30, or excessive depreciation without having supportive documents, showing turnover/sells/gain from bank interest, house rent or other income excluding business income as integrated business income with an intension to reduce the total taxable income.
Taxmen may select a corporate tax file for audit if it shows above Tk 0.5 million worth of gift or loan without bank statement, having no documents for a claim of tax-exempted income in the tax return, mismatch in declared turnover, sells gain with the bank deposits etc.
For business and professional income, the causes are no evidence in claim of interest expenditure or any loan in the balance sheet, inconsistencies in sales and bank deposits in the bank statement, excessive expenditures or depreciation, showing income not relevant in the profession etc.
In case of new taxpayers, they have to show first business and professional incomes as taxable about 25 per cent of his initial capital in the tax return and have to pay tax to avoid auditing.
However, the taxpayers may still face audit if they shift capital or part of capital to other sectors within five years of business.
The audit guidelines have five options through which taxpayers can get relief from the auditing of the tax files.
The universal self-assessment of taxpayers who will show about 20 per cent higher income than that of the previous year could not be selected for auditing if they: (a) submit evidence in support of tax-exempted income with the tax return, (b) submit bank statement or account statement in case of loan above Tk 0.5 million, (c) no gain in the tax return, (d) no reduced income as per section 44 of the income tax ordinance, and (e) no tax rebate or refund created.
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