ISLAMABAD: Federal Board of Revenue has observed that some taxpayers and companies are irregularly carrying forward huge losses and setting-off against the income of following tax years involving potential tax effect.
It is important to mention here that the adjustment of losses from one head against the income, profit or gains of any other head of income during the same tax year is called set-off losses. Where the loss is not fully adjusted against the income of same tax year and it is transferred to the next year, such process of transferring loss to the next tax year is known as carrying forward of loss.
Section 56 to 59 of the Income Tax Ordinance, 2001 deal with losses occurred and claimed. Federal Board of Revenue has directed to all inland field formations that they should strictly follow the provision of 56 to 59 of the income tax ordinance 2001 regarding claim of set-off and carry-forward losses.
The business losses beyond six years cannot be carried forward to the current tax year. To help in increasing of revenue, all field formations will ensure to check all relevant records including returns assessment orders available on system of Federal Board of Revenue.
Federal Board of Revenue recommended to field offices to apply timely check on assessment, collection of revenue particularly in cases where the taxpayers filed returns at loss under the system of universal self-assessment scheme.
FBR also recommended that formations should calculate and compute the working of carry forward losses with proper aging of the losses claimed by the taxpayer.
