ByThe application to change the method of accounting is guided by Section 32(4) of the Income Tax Ordinance, 2001. According to this section:
- A person can apply in writing to the Commissioner for approval to change their accounting method.
- The Commissioner may approve the application if satisfied that the change is necessary to reflect the person’s taxable income clearly.
- Adjustments must be made to avoid omissions or duplications when transitioning between accounting methods.
Steps to Apply for Change in Accounting Method
1. Log in to the IRIS Portal
- Visit the FBR IRIS website.
- Enter your credentials to log into your account.
2. Navigate to the Applications Section
- On the dashboard, locate the “Applications” menu on the left-hand side.
- Click on Applications to open the list of available options.
3. Select the Relevant Application
- Find and select the option labeled “32(4) Application for Permission to Change in Accounting Method.”
4. Complete the Application Form
- Fill out the form with accurate details, including:
- Current accounting method (cash or accrual basis).
- Proposed accounting method.
- Reason for the requested change (e.g., better reflection of income).
- Supporting documentation, if any, to justify the change.
5. Submit the Application
- Once you have completed the form, review the information for accuracy.
- Click Submit to send your application to the Commissioner for review.
6. Follow Up on the Application Status
- Navigate to the “Outbox” section of the IRIS portal to check the status of your submitted application.
- If required, respond to any queries or provide additional documents requested by the Commissioner.
Important Notes
- The change in accounting method will only be approved if it ensures a clearer reflection of taxable income.
- After approval, you must make adjustments to avoid duplications or omissions during the transition.
- Ensure compliance with any conditions specified by the Commissioner in the approval order.
This process aligns with the legal provisions outlined in the Income Tax Ordinance, ensuring that taxpayers can adapt their accounting methods transparently and effectively.
