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How to Become Tax Filer in Pakistan

How to Become Tax Filer in Pakistan

Becoming a tax filer in Pakistan and listing your name in the active taxpayer’s list of the Federal Board of Revenue (FBR) has become easily accessible than in the past, where a person has to stand in queue for hours to submit his particulars of return to FBR. Now a person, whether he is a salaried individual, Partnership (AOP), company (whether private or public), the sole proprietor (Business Individual), student, Pensioner, and even overseas Pakistani, can become a tax filer without even visiting Pakistan or going to FBR.

The government of Pakistan has simplified the procedure for submitting an income tax return through its online portal so that every individual can discharge its liability and enjoy the benefits of tax filer, which are not available to non-filer.

Here, it is essential to understand the terms filer, non-filer, and Active Taxpayer list (ATL) before understanding the procedure to become a tax filer in Pakistan and the required documents for becoming a tax filer in Pakistan.

  • Filer
  • And non-filer status
  • Active Tax Payer (ATL) List

”Tax Filer is a person who files his Income Tax Return along with all requisites required by FBR in Pakistan and Taxpayer who did not file his Income Tax Return, become a non-Filer automatically.”

Tax filer and a non filer

A person has to submit his return within the time provided by FBR to list his name in the Active taxpayer list. If the person has not submitted his return timely, then there is a specific penalty defined by FBR, which you have to pay to list your name in the active taxpayer list and enjoy benefits of Filer status. If the person has paid the penalty defined by FBR, its name will be included in the ATL. However, certain other aspects need to be considered. Therefore, it is always recommended to consult an Income Tax Practioner (ITP) or Consultant.

Steps and Documents required for becoming Tax Filer:

To become a tax filer in Pakistan, you will have to submit your income tax return along with a wealth statement to FBR. You can submit your return and wealth statement online or in physical form. You must have a National Tax Number (NTN) for both submission types, and specifically for online submission of return, you must also e-enroll (Electronic Enrollment) yourself with FBR.

Manual Filing of Income Tax Return:

The procedure for manual filing of income tax returns is discussed as under;

  • Download the Income Tax Form from FBR Website.
  • Fill out Personal Particulars like:
  • Source of Income,
  • Business/ Personal Expenses,
  • Taxes and deductions, etc. for Income Tax Return
  • And Assets, Liabilities with reconciliation for Wealth Statement during the relevant Tax Year.
  • After completing the forms, sign and submit them to the relevant Department; remember to acknowledge the same.

Online Filing/E-File of Income Tax Return:

The procedure for online filing of income tax returns is discussed as under;

  • For Filing Income Tax returns, Taxpayers should have valid NTN.
  • The taxpayer registers his details with FBR to create a login on IRIS.
  • After registration with FBR, Taxpayer has access to the system for filing his Income Tax Return in FBR.
  • After the taxpayer made his login in FBR System and completes all the information required by FBR, he can submit his Income Tax Return and Wealth Statement.

Income Tax Return under the light of Income Tax Ordinance 2001:

As per Section 114 of income tax ordinance 2001, a person should file its Income Tax Return, contents of which are as follows:

Contents of income tax return

Contents of an income tax return include the following;

  1. Income earned under  the following heads:
  2. Income from Salary
  3. Income from Business
  4. Income from Property
  5. Capital Gain
  6. Income from other Sources

Here we would like to mention some examples of other income and personal expenses / Partnership / Company expenses:

“Active Tax Payer list is a list updated by FBR on every first day of March every year, containing names of persons and NTN numbers who are tax filers.”

Active taxpayer list

Other income and losses;

Other income and losses include the following;

  • Prizes and awards
  • Trusts
  • Royalty Income
  • Gift
  • Inheritance
  • Foreign Remittances
  • Any other Income received
Personal Expenses:

Personal expenses include the following;

  • Rent
  • Rates / Taxes / Charge / Cess
  • Vehicle Running / Maintenance
  • Travelling
  • Electricity
  • Water
  • Gas
  • Telephone
  • Asset Insurance / Security
  • Medical
  • Educational
  • Club
  • Functions / Gatherings
  • The donation, Zakat, Annuity, Profit on Debt, Life Insurance Premium, etc.
  • Other Personal / Household Expenses
  • Contribution in Expenses by Family Members
Wealth statement under the light of Income Tax Ordinance 2001:

Every individual resident filing a return of income for any tax year whose last declared or assessed income or the declared income for the year is five hundred thousand rupees or more shall furnish a wealth statement for that year along with return as mentioned above.

Contents of Wealth Statement:

Contents of wealth statement are:

Personal Assets:
  • Agricultural Property
  • Commercial, Industrial, Residential Property (Non-Business)
  • Business Capital
  • Equipment (Non-Business)
  • Animal (Non-Business)
  • Investment (Non-Business) (Account / Annuity / Bond / Certificate / Debenture / Deposit

/ Fund / Instrument / Policy / Share / Stock / Unit, etc.)

  • Debt (Non-Business) (Advance / Debt / Deposit / Prepayment / Receivable / Security)
  • Motor Vehicle (Non-Business)
  • Precious Possession
  • Household Effect
  • Personal Item
  • Cash (Non-Business)
  • Any Other Asset, Gold Jewelry, Prize Bonds, etc.
  • Assets in Others’ Name Spouse, Children, Parents, Brother
  • Assets held outside Pakistan
Liabilities:

Credit that may include;

  • Non-Business
  • Advance / Borrowing / Credit / Deposit / Loan / Mortgage / Overdraft / Payable)

Documents list for Filing Tax Return :

Following is the Tax checklist to collect the documents and forms to file Income Tax returns and become a filer in Pakistan

Sources of Income

All the Forms and Documents required for filing Income Tax returns and becoming a filer in Pakistan depend on the Source of income of a Person.

List of Documents required for Salaried Individual/ Employed to become filer in Pakistan is below:
  1. Tax Deduction Certificate of Financial Year (July to June)
  2. Record of tax payments made in the shape of
  • cash
  • Withdrawal,
  • Banking instruments,
  • Children School Fee,
  • Mobile and Telephones,
  • Motor Vehicle Registration
  • And Token, Purchase
  • And Sale of Property etc.
  1. Any Additional Source of Income (Rent, Bank Profits, Dividend, Prize Bonds, Foreign Income,   Capital Gain, Gift, Inheritance) if any
List of Documents required for Business Individual and Self-Employed to become Filer in Pakistan is cited as below:
  • Income records to verify amounts (Business Bank Statements and Accounts etc.)
  • Records of all expenses; cheque registers, credit card statements, Salary Expenses, Rent Expenses, Utility Expenses, Traveling, Communication Expenses, etc.
  • Office in-home information, if applicable.
  • Record of tax payments made in the shape of cash Withdrawal, Banking instruments, Electricity, Children School Fee, Mobile and Telephones, Motor Vehicle Registration and Token, Purchase, Sale of Property, etc.
  • Any Additional Source of Income (Rent, Bank Profits, Dividend, Prize Bonds, Foreign Income, Capital Gain, Gift, Inheritance if any
The list of Documents required in case of Rental Income to become Filer in Pakistan is listed below.
  • Records of income and expenses
  • Rental asset information for depreciation.
  • Record of Tax Payments made during the Financial Year July to June
  • Any Additional Source of Income (Bank Profits, Dividend, Prize Bonds, Foreign Income, Capital Gain, Pension, Gift, Inheritance if any
The list of Documents required in case of Retirement Income to become a filer in Pakistan is listed below:
  • Pension/annuity income/Retirement Benefits
  • Social security income (if any)
  • Record of Tax Payments made during the Financial Year
  • Any Additional Source of Income (Rent, Bank Profits, Dividend, Prize Bonds, Foreign Income, Capital Gain, Gift, Inheritance if any
List of Documents required in case of Savings & Investments or Dividends to become filer in Pakistan is listed down:
  • Interest, dividend income
  • Income from stocks or other property
  • Dates of acquisition, records of your cost of purchase, or another basis in property you sold
  • Expenses related to your investments
  • Record of tax payments made in the shape of cash Withdrawal, Banking instruments, Children School Fee, Mobile and Telephone, Motor Vehicle Registration and Token, Purchase, and Sale of Property, Capital Gain on Securities, Gift, Inheritance, etc
Tax Filer in Pakistan Claim Refund/adjustment of followings while Filing Income Tax Return:

The filler will receive the following claims or refunds as listed below:

  • Cash Withdrawal from Bank under section 231
  • Advance Tax on sale or transfer of immovable property under section 236 C.
  • Advance Tax on function and gatherings under section 236D.
  • Collection of Advance Tax by Educational Institutions under section 236 I
  • Advance Tax on purchase of Immoveable Property under section 236K
  • Income Tax/ Withholding Tax on Purchase, Registration, Transfer, and Token of Motor Vehicles under section 234
  • Advance Tax on Domestic Electricity Consumption under section 235A
  • Advance Tax on International Air Ticket under section 236L
  • Advance Tax on Banking Transaction other than cash under section 236P
  • Withholding Tax paid on Mobile Phone Bills under section 236(1)(a)
  • Withholding Tax on Telephone Landline Bills under section 236
  • Advance Tax on Purchase of Air Ticket under section 236B
Benefits of Becoming a Tax Filer in Pakistan:

Benefits of becoming a tax filer in Pakistan are discussed under:

An income Tax Return is mandatory to file. Individuals, Firms, and Companies filing their Income Tax Returns having Active Taxpayer status are getting all benefits from different sectors in Pakistan.

The followings are some of the benefits of becoming a Filer in Pakistan, which shows a clear picture of how an Individual, Firm, and Company are benefited after becoming a Tax Filer in Pakistan.

  • Fewer Taxes in Buying/Selling/Transfer of Immovable Property.
  • Fewer Taxes on Registration/Transfer/Token of Motor Vehicles.
  • Fewer Taxes on WHT on Cash Withdrawal from Banks.
  • No Taxes on Issuance of Banking Instruments [Cheques, Pay order, Demand Drafts, etc.] and Money Transfer.
  • Less Taxes on Bank Profits / Saving Certificates / Dividends / Commission / Prize Bonds winning etc.
  • Fewer Taxes on providing professional Services.
  • Preference for eligibility in all loan applications from Banks
  • Eligibility for obtaining government tenders, registration on corporate panels:
  • Easy Income Assessment of Individual while processing Visa Applications
  • Avoidance from Audit and Penalty of Rs. 40,000/-for non-filing of Income Tax Return

To become Filer in Pakistan

Contact us @ 0337-4009582