How To Become a Tax Filer In Pakistan?

Every person in Pakistan defined by the Income Tax Ordinance, 2001 must file a tax return. Understanding how to file, whether electronically or manually, is crucial for every taxpayer. Penalties apply if a taxpayer fails to file despite knowing the requirement.

The Government of Pakistan classifies taxpayers as filers and non-filers. A filer submits their Income Tax Return with all FBR requirements, while a non-filer does not. Tax filers enjoy benefits in transactions like property deals, cash withdrawals, bank profits, and dividends.

There are two methods for filing an Income Tax Return to become a tax filer in Pakistan.

Manual Filing of Income Tax Return

1. Download the Income Tax Form from FBR Website.
2. Complete Personal Particulars, Source of Income, Business/Personal Expenses, Taxes, and Deductions for Income Tax Return. Include Assets, Liabilities, and Reconciliation for Wealth Statement for the relevant Tax Year.
3. After completing the forms, sign and submit them to the relevant department. Remember to keep the acknowledgment.

Online Filing/ E-File of Income Tax Return

Taxpayers have a valid NTN for filing income tax returns. The taxpayer registers with FBR to create an account login on IRIS. After registering with FBR, the taxpayer can access the system to file their Income Tax Return. The taxpayer logs into the FBR System, completes the required information, and submits their Income Tax Return and Wealth Statement.

Checklist for Filing Tax Return and Becoming a Filer in Pakistan

This is the tax checklist for collecting documents and forms needed to file an Income Tax Return and become a filer in Pakistan.

Personal Information

FBR IRIS Login is a mandatory item on your tax prep checklist. All taxpayers need the following information.

1. Your Login USER ID
2. Password

Sources of Income

Forms and documents required for filing an Income Tax Return in Pakistan depend on a person's source of income.

Documents required for a salaried individual to become a filer in Pakistan: CNIC copy, salary certificate, bank statement, tax deduction certificate, proof of investment (if any), and utility bills.

• 1. Tax Deduction Certificate of Financial Year * (July to June)
  2. Record of tax payments made for cash withdrawals, banking instruments, children's school fees, mobile and telephone bills, motor vehicle registration and tokens, and property transactions.
  3. Any additional income source: rent, bank profits, dividends, prize bonds, foreign income, capital gains, gifts, inheritance (if any).

Documents required for Business Individuals and Self-Employed to become Filers in Pakistan

• 1. Verification of amounts through income records (e.g., Business Bank Statements and Accounts).
  2. Records of all expenses: cheque registers, credit card statements, salary, rent, utilities, travel, communication, etc.
  3. Information on business-use assets (cost, service start date, etc.) for depreciation.
  4. Office in home information, if applicable
  5. Record of tax payments made via cash withdrawals, banking instruments, electricity, school fees, mobile and telephone bills, vehicle registration and tokens, property transactions, etc.
  6. Any extra income: rent, bank profits, dividends, prize bonds, foreign income, capital gains, gifts, inheritance if applicable.

Documents needed for Rental Income to become a Filer in Pakistan.

• 1. Records of income and expenses
  2. Information on rental assets (cost, service start date, etc.) for depreciation.
  3. Tax Payment Record for Financial Year July to June
  4. Additional sources of income: bank profits, dividends, prize bonds, foreign income, capital gains, pension, gifts, inheritance, if applicable.

Documents required for retirement income to become a filer in Pakistan.

• 1. Pension/annuity income/Retirement Benefits
  2. Social security income (if any)
  3. Record of Tax Payments made during the Financial Year
  4. Additional sources of income: rent, bank profits, dividends, prize bonds, foreign income, capital gains, gifts, inheritance (if any).

Documents needed for Savings & Investments or Dividends to become a filer in Pakistan include bank statements, investment certificates, dividend vouchers, tax return forms, and proof of identity.

• • Interest, dividend income
  • Income from stocks or other property
  • Dates of acquisition, records of purchase cost, or other basis in sold property.
  • Expenses related to your investments
  • Record of tax payments made for cash withdrawals, banking instruments, children's school fees, mobile and telephone bills, motor vehicle registration and tokens, property transactions, capital gains on securities, gifts, and inheritance.

Other Income & Losses

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

Personal Expenses Financial Year (July to June)

1. Rent
2. Rates / Taxes / Charge / Cess
3. Vehicle Running / Maintenance
4. Travelling
5. Electricity
6. Water
7. Gas
8. Telephone
9. Asset Insurance / Security
10. Medical
11. Educational
12. Club
13. Functions / Gatherings
14. Donation, Zakat, Annuity, Profit on Debt, Life Insurance Premium, etc.
15. Other Personal / Household Expenses
16. Contribution in Expenses by Family Members

Wealth Statement

Personal Assets and Liabilities

1. Agricultural Property
2. Commercial, Industrial, Residential Property (Non-Business)
3. Business Capital
4. Equipment (Non-Business)
5. Animal (Non-Business)
6. Investment (Non-Business) (Account / Annuity / Bond / Certificate / Debenture / Deposit / Fund / Instrument / Policy / Share / Stock / Unit, etc.)
7. Debt (Non-Business) (Advance / Debt / Deposit / Prepayment / Receivable / Security)
8. Motor Vehicle (Non-Business)
9. Precious Possession
10. Household Effect
11. Personal Item
12. Cash (Non-Business)
13. Any Other Asset Gold Jewelry, Prize Bonds etc
14. Assets in Others’ Name Spouse, Children, Parents, Brother
15. Assets held outside Pakistan

Liabilities

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

Active Taxpayer List in Pakistan

When the Income Tax Return and Wealth Statement are submitted, the taxpayer becomes a filer once the FBR system updates its records each Sunday night. Active Taxpayer status  Check by visiting the FBR website or sending a message to 9966 with "ATL CNIC" (ATL 35202 XXXXXXX1) in massage and send message on 9966.

Benefits of Becoming a Tax Filer in Pakistan

Filing an Income Tax Return is mandatory. Individuals, firms, and companies with Active Taxpayer status receive benefits from various sectors in Pakistan.

Here are some benefits of becoming a tax filer in Pakistan, showing how individuals, firms, and companies benefit.

• Less Taxes in Buying/Selling/Transfer of Immovable Property.
• Less Taxes on Registration/Transfer/Token of Motor Vehicles.
• Less Taxes on WHT on Cash Withdrawal from Banks.
• No taxes on issuing banking instruments (cheques, pay orders, demand drafts) and money transfers.
• Reduced taxes on bank profits, savings certificates, dividends, commissions, prize bond winnings, etc.
• Less Taxes on providing professional Services.
• Preference for eligibility in all bank loan applications.
• Eligibility for government tenders and corporate panel registration:
• Simple Income Evaluation for Visa Applications
• Avoidance from Audit and Penalty of Rs. 40,000/- for non-filing of Income Tax Return

In Pakistan, tax filers can claim refunds or adjustments for the following when filing their income tax returns.

• Withdrawal of cash from the bank per section 231.
• Advance Tax on sale or transfer of immovable property under Section 236C.
• Advance Tax on events and gatherings under Section 236D.
• Advance Tax Collection by Educational Institutions under Section 236 I
• Advance Tax on purchasing immovable property under Section 236K
• Income Tax/Withholding Tax on motor vehicle purchase, registration, transfer, and token under section 234.
• Advance Tax on Domestic Electricity Use under Section 235A
• Advance Tax on International Air Tickets under Section 236L
• Advance Tax on non-cash Banking Transactions under section 236P
• Withholding tax on mobile phone bills per section 236(1)(a).
• Withholding Tax on Telephone Landline Bills under section 236
• Advance Tax on Purchase of Air Ticket under section 236B

 

If the taxpayer files their Income Tax Return and Wealth Statement for the first time, they won't become a filer until the filing deadline passes. To gain immediate Active Taxpayer status in Pakistan, they must also submit the previous year's Income Tax Return and Wealth Statement with a surcharge of Rs. 1000.

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