Income Tax Return Filing in Pakistan is Really Compulsory?

Pakistan’s income tax law binds all citizens belonging to any profession or business, and have an annual income of Rs 300,000 (Rs 25,000 per month) and more, to get income tax return filing with the Federal Board of Revenue (FBR) annually, even recently FBR makes it compulsory for salaried employees, having an annual income above Rs 500,000 electronically file their returns.

According to the income tax ordinance, Income Tax Return Filing is entirely separate from paying the tax. Even if one pays tax or his tax on salary is deducted at source, one is bound to file a return if his income is PKR.300,000 or more without any exception. It is essential to mention that taxable income is PKR.400,000, but for Income Tax Return Filing, it is PKR.300,000.

The return of income is not merely the undertaking of tax payment, but it also includes the wealth statement and detail of sources of revenue. When returns are filed every year, any change in the sources of income and increase/decrease in wealth has to be mentioned and explained, and thus, few people do so to hide specific facts. Most returns are not filed to hide new sources of income or increase in assets.

According to experts, this becomes a major hurdle in the documentation of the economy. In a recent investigation, tax evasion of billions of rupees surfaced when announced expenditures of a person were compared with his filed tax returns.

Failure in Income Tax Return Filing violates Income Tax Ordinance 2001 (ITO) and is a crime. Income Tax Return Filing is an essential part of an economic system, and this practice is entirely different from paying taxes. He said even if one pays taxes and does not file returns, one does not fulfill his legal obligations.

Section 114 & 115 of the ITO 2001 explain in detail with who is really liable for Income Tax Return Filing. Important sub-sections of these are reproduce below:

Subject to this Income Tax Ordinance 2001, the following persons require to furnish an income tax return, namely:

Every company;
The business individual whose income exceeds PKR 300,000 in a tax year
All Salaried individuals whose income is PKR 300,000 or more
A person (other than a company) whose taxable income for the year exceeds the maximum amount that is not chargeable to tax under this ordinance for the year
Any non-profit organization
Any welfare institution
The person has obtained National Tax Number (NTN)
A Person charged to tax in any of the two preceding tax years; A Person whose taxable income exceeds PKR 300,000
Every person who is the holder of commercial/industrial connection of electricity.
Every person who owns a motor vehicle has an engine capacity above 1000 CC.
A person registered with Chamber of commerce & industry, Any trade and Business association, Any market committee, Any professional Body/Council/Institute.
Every person who owns the immovable property.
i) Area of 250 Sq. Yds or more / owns a flat located within the municipal limits
ii) Area of 500 Sq. Yds or more / owns a 2000 sq. ft flat located within a rating area.

KLA Pakistan provides professional assistance in all of your tax-related services, including the issuance of NTN, E filing of Income Tax Return, and compliance to notices for salaried to businesses of all sizes. Get in touch today — Law Redefined!

FOR ALL YOUR TAX RELATED REQUIREMENTS, CONSULT OUR PROFESSIONALS.

You might find these further articles useful:

If Your Goal Is To Get Biggest Refund Possible

Why you should Audit your Financial Statement

Advantages of Company Registration in Pakistan

Benefits of FBR NTN Verification

Show Us Your Love, Join Us At: