How can you become a tax filer in Pakistan

Overseas Pakistani as Tax filler

Overseas Pakistanis can easily become tax filers in Pakistan and file their Income Tax Returns.
A Non-Resident person being a citizen of Pakistan, normally does not have any Income Tax liability to Government of Pakistan. However, for availing the rank of Tax Filer in Pakistan, he can also file Income Tax return.
Foreign Pakistani or a non-resident Pakistani whose income is taxable in Pakistan or in other words, who are earning income in Pakistan are liable to pay Income Tax on their income earned in Pakistan.

Pakistan-sourced income

Pakistan-sourced income is meant by any income which is earned in Pakistan that is taxable regardless of its receiving. This means that if Pakistani is receiving remuneration from an employer in Pakistan then his income tax at source will most likely be deducted from his salary even if he ex-pats residing in a foreign country.
It is essential to mention that just deduction of income tax from your salary does not mean that you have become a tax filer automatically. To be acknowledged as a filer in Pakistan, you are required to be added to the Federal Board of Revenue's Active Taxpayers List.
Furthermore, suppose an ex-pat has immovable or movable assets in Pakistan, such as a house or a motor vehicle which is purchased exclusively from foreign income. In this case, there is need to prove that the money was remitted outside the country. They need to apprehend that the said transaction was carried out via proper channels and as per instructions mentioned by the State Bank of Pakistan. In 2018, FBR decided to waive off the withholding tax applicable on the withdrawals of remittances, i.e. the funds sent to the home (Pakistan) by a non-resident Pakistanis.

FBR and other concerned authorities can inquire into any taxpayer's assets and elaborate the source, if needed as per the Pakistani tax laws.

A person has to submit his return within side the time furnished through FBR to listing his name in the Active taxpayer list. If the person no longer submitted his return on time, then there may be a particular penalty described through FBR, which should be paid to enlist his name in the active taxpayer list and have advantages of Filer status. If the person has paid out the penalty described through the FBR, its name would immediately be covered in the ATL. However, specific other elements are required to be considered. Therefore, it is always encouraged to seek advice from Income Tax Practitioner (ITP) or Consultant.

Steps and Documents needed to become a Tax Filer

For becoming a tax filer in Pakistan, you are required to submit your income tax return along with a wealth statement to FBR. Return and wealth statement can also be submitted through online Portal or in physical form. In both types of submissions, You are required to have a National Tax Number (NTN), and especially in case of online submission of return, you have to e-enroll (Electronic Enrollment) yourself with the FBR.

Here you can find: how to get an NTN number and E-Enroll with FBR ( another article link)

Manual submission of Income Tax Return

The process for manual filing of income tax return is being described as follows;

Download the Form of Income Tax from FBR’s Website.
Fill the Personal contents like:
Source of Income,
Business/ Personal Expenses,
Taxes/deductions, etc. for Income Tax Return
Assets and Liabilities along with reconciliation for Wealth Statement during the respective Tax Year.
On the completion of forms, sign and proceed them to the concerned department;
Don’t forget to acknowledge the same.

Online Filing/ E-Filing of Income Tax Return

The process for online filing of income tax return is being described as follows;

A valid NTN is required in order to file Income Tax Return.
Details of a taxpayer are registered with FBR to create a login on IRIS.
On having registration with FBR, Taxpayer avails access to the FBR’s system for submitting his Income Tax Return along with Wealth Statement in FBR by completing all the information required by FBR.

Income Tax Return in the light of Income Tax Ordinance 2001

A taxpayer needs to file its Income Tax Return as per Section 114 of income tax ordinance 2001, particulars of which are mentioned as follows:

Contents of Income Tax Return

Particulars of an income tax return consisting of the following;

Income earned during the year in the following heads:
- Income from Salary
- Income from Business
- Income from Property
- Capital Gain
- Income from other Sources
Expenses incurred during the year as per the applicability of Income Tax Ordinance 2001.

Here we are going to mention here some examples of personal expenses and other income, Company / Partnership expenses.

Other income and losses

Other income and losses contains the following;

Prizes and awards
Trusts
Gift
Royalty Income
Foreign Remittances
Inheritance
Any other Income received

Personal expenses

Personal expenses contains the following;

Rent
Vehicle Running / Maintenance
Rates / Taxes / Charge / Cess
Electricity
Water
Travelling
Club
Functions / Gatherings

Gas
Telephone
Asset Insurance / Security
Educational
Medical
Other Personal / Household Expenses
Contribution in Expenses incurred by Family Members
The Zakat, donation, Life Insurance Premium, Annuity, Profit on Debt, etc.

Wealth statement in the light of Income Tax Ordinance 2001

Every resident individual submitting a return of income for a tax year who’s latest assessed or declared income or the declared income for the year is five hundred thousand rupees (Rs. 500,000) or more is also required to submit a wealth statement for that year while submitting the return as aforementioned.

Particulars of Wealth Statement

Contents of wealth statement are described as follows:

Personal Assets

A tax return can be filed in the following way;

Commercial, Industrial, Residential Property (Non-Business)
Agricultural Property
Animal (Non-Business)
Business Capital
Debt (Non-Business) ( Debt / Advance / Prepayment /Deposit / Receivable / Security)
Investment (Non-Business) (Account / Annuity / Bond / Debenture / Certificate / Deposit / Fund / Policy / Instrument / Stock / Share / Unit, etc.)
Motor Vehicle (Non-Business)
Equipment (Non-Business)
Household Effect
Precious Possession
Cash (Non-Business)
Personal Item
Assets in others' name i.e. Spouse, Children, Parents and Brother etc.
Any other asset such as Jewelry, Gold and Prize Bonds, etc.
Assets held outside Pakistan

Liabilities

Credit that may consist of;

Advance / Credit / Borrowings / Loan / Deposit / Mortgage / Payable / Overdraft) etc.
Non-Business

List of Documents for submitting Tax Return and to Becoming a Filer in Pakistan

All the required documents and forms for submitting an Income Tax Return and becoming a tax filer in Pakistan is based on the Source of income of that Person.

Here are the detailed checklists to gather the forms and documents for submitting Income Tax Return and to have a status of filer in Pakistan.

Documents list mandatory for Salaried Individual/ Employed for becoming filer in Pakistan is mentioned as follows

Certificate of Tax Deduction for Financial Year (July to June)
Detail/Evidence of tax payments made during the year in the form of
- cash
- Banking instruments,
- Withdrawals,
- Telephones and Mobiles
- Children Schooling Fee
- Registration of Motor Vehicle
- Sale of movable/immovable Property
- Purchase, Token etc
Any extra Source of Income (Rent, Dividend, Bank Profits, Foreign Income, Prize Bonds, Gift, Inheritance, Capital Gain, etc.) if any

Documents list mandatory for Business Individual and Self-Employed for becoming a Filer in Pakistan is discussed as follows

Records of Income to ensure figures in (Business Bank Statements and Accounts etc.)
Records of the expenses incurred, statements of credit card, Salaries Expense, cheques register, Expenses of Rent, Utility Expenses, Communication Expenses, Traveling, etc.
Information of Business-used assets (i.e. date, cost, placed in service, etc.) for its depreciation.
Information of office in-home, if any.
Tax payments record incurred in the form of Banking instruments, cash Withdrawal, Electricity, Mobile and Telephones, Children School Fee, Registration of Motor Vehicle, Sale of Property and Token, Purchase, etc.
Any extra Source of Income (i.e. Rent, Dividend, Bank Profits, Foreign Income, Capital Gain, Gift, Prize Bonds, and Inheritance if applicable.

Documents list mandatory in case of Rental Income for becoming tax Filer in Pakistan is mentioned as follows

Record of income and expenses
Information of Rental asset (i.e. Date, cost, placed in service, etc.) for its depreciation.
Tax Payments record incurred during the Financial Year from July to June respectively
Any extra Source of Income (i.e Dividend, Prize Bonds, Bank Profits, Capital Gain, Pension, Foreign Income, Gift, Inheritance if applicable

Documents list essential in case of Retirement Income for becoming a tax filer in Pakistan is mentioned as follows

Pension / Retirement Benefits / annuity income
Social security income (if applicable)
Tax Payments record made in the respective Financial Year
Any extra Source of Income (i.e Bank Profits, Dividend, Rent, Foreign Income, Capital Gain, Prize Bonds, Gift, Inheritance if applicable).

Documents list mandatory in case of Savings & Investments or Dividends for becoming a tax filer in Pakistan is mentioned as follows

Dividend income, Interest.
Income earned from stocks or any other property
Acquisition dates, detail of cost of purchase and sold property during the year
Expenses related to the investments made
Record of tax payments incurred in the form of cash Withdrawal, Mobile and Telephone, Banking instruments, Capital Gain on Securities, Motor Vehicle Registration and Token, Children School Fee, Purchase and Sale of Property, Gift, Inheritance, etc

Tax Filer in Pakistan can Claim following Refund/adjustment when submitting Income Tax Return

The filer can enjoy the below mentioned benefits/refunds at the time of filing return:

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

Benefits to a Tax Filer in Pakistan

There may be the following advantages for becoming a tax filer in Pakistan.

Fewer Taxes in Buying/Selling/Transfer of an 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, Demand Drafts, Pay order etc.] and Money Transfer.
Lesser Taxes on Bank Profits / Commission / Dividends / Saving Certificates / Prize Bonds winning etc.
Fewer Taxes on rendering professional Services.
Tax filers can take advantage in eligibility for entire loan applications from Banks
Entitlement for getting tenders of government and registration on corporate panels:
Easier assessment of Income of an Individual at the time of processing Visa Applications
Penalty for non-filing of Income Tax Return can be avoided.