How to File Income Tax Return in Pakistan

Introduction

In Pakistan, filing income tax returns is a crucial liability of every citizen and also organizations. It may sound like a very complicated process, but with the right information, it can be a very easy thing to do. In this ultimate guide, we will help you to provide a guide on how to file an income tax return in Pakistan, the required documents, how to become a filer in Pakistan and non-filer meaning, and how to maintain compliance with FBR regulations.

What Is an Income Tax Return?

An income Tax Return (ITR) is a return filed by investors and taxpayers (filer in Pakistan) to declare their source of income, expenditure, and statements with the government, especially the FBR. (FBR full form Federal Board of Revenue). In conclusion, the chief purpose of completing the income tax return is to determine how much of a tax an individual or an organization owes or whether he or she is due for a refund in proportion to the amount of earned income.

Why Is It Important to File an Income Tax Return?

Filing income tax returns not just legal formalities but also the country’s economy benefits a lot. Some of the key reasons to file an income tax return include:

1. Legal Compliance: Non-filing carries certain penalties or, if you intend on setting up a company, legal ramifications as well.
2. Eligibility for Loans: Also, a filed tax return is useful when the individual needs to borrow money from any bank to meet certain costs.
3. Tax Refunds: In other cases, if you have paid more taxes than you should have, then preparing and submitting a return means getting one.
4. Record Keeping: A tax return is a formal statement of an individual, or company, of their income and taxes for a specific previous period.

Steps to File Income Tax Return in Pakistan

Obtain a National Tax Number (NTN)

FBR filer status check online. This status essentially means that before paying your income tax or filing your income tax return you need to be registered with FBR for which you are issued a National Tax Number NTN. For this reason, you earn a special number that belongs to you as a taxpayer.

How to Get NTN:

• Open the FBR website or go to the nearest FBR office.
• Download the NTN registration form.
• There are the following requirements: CNIC, Proof of income, and Other relevant documents required.

Once you are registered, you will be issued a unique number called NTN, and this number is the only number you shall use to file your taxes.

Collect Necessary Documents

Before filing your return, make sure you have all the following documents:

• Income Details: A statement of total revenues including wages, salary, income from business, rents, etc.
• Deductions: Any other information on any possible allowable deduction for tax, business, or charitable contributions.
• Bank Statements: Your bank statements, if there is any other proof of income or investment.
• Utility Bills: Any bill of utilities to claim for deductions or exemption where necessary.
• Previous Tax Returns: In case this is not your first tax return, there are often requirements for earlier year’s tax returns.

Access the FBR Portal

The FBR maintains an online portal called Integrated Risk Information System IRIS to file tax returns. Here is a description of how to access it:

1. Go to the official FBR website: www.fbr.gov.pk.
2. Visit the homepage of your profile; use your NTN and Password to sign into your account.
3. If you do not have an account, then one has to create one by filling in his NTN and CNIC number.

Choose the Right Tax Return Form

FBR offers several types of the tax return dependent on the kind of income and the category of the taxpayer. Depending on whether you are an individual, business or a salaried person, you have to choose the right form.

• For salaried individuals: Form 114(1)
• For business owners and self-employed individuals: Form 114(2)

Choose the form that corresponds to both your tax class and your type and amount of income.

Fill Out the Form

Choosing the form is preceded by filling it in with true and complete data. The form typically asks for:

• Personal Information: Your name, CNIC, NTN, and your address.
• Income Details: Your total income from all sources, including salary, business income, and investments. All the monies receive regularly from any source such as wages, salary, commission, fee, tips, bonuses, royalties, income from rents, or any other business pursuits, interest, or dividends, by individuals in any capacity throughout the year.
• Deductions and Exemptions: This is any cost or loss that has given rise to the exclusion of a given amount of income from tax.
• Taxable Income: Use this information to compute your taxable income.

Look also at all the information given and make sure none of them are wrong or outdated.

Submit the Return

When you are done fill the form ensure that you read through the whole form in search of any mistake which you may have made while filling the form. After completing the form, click on Submit. Once you have submitted your return, you will hear back from FBR. An acknowledgment receipt is given after filing and it should be saved or printed as there is no other proof of filing.

Common Mistakes to Avoid When Filing Tax Returns

1. Filing Late: This means that when one submits their tax returns late he or she will be forced to compensate for the charges incurred i.e. penalties.
2. Incorrect Information: Sharing misleading or inadequate details will slow down the return filing process or lead to consequences.
3. Not Claiming Deductions: Ensure that it is possible to claim all plausible deductions just in order to decrease your taxable profit.

How to Pay Income Tax

When You file your income tax return and you owe some amount to the government it will be expected of you to pay that amount. The FBR provides different payment methods, including:

• Bank Payment: You can pay your fee at any branch of the bank either online or by visiting a branch that has a payment challan.
• Online Payment: Another way to pay your amount is also through the FBR’s online tax payment facility.

What Happens After Filing the Tax Return?

Upon filing, the FBR will scrutinize your return in its assessment. It will only get back to you if there are disparities or problems with your account. You may also be given a tax audit notice if this return has been selected for an audit. And where you are eligible for a refund, the FBR will affect it after going through your return. Many refunds are made to the bank account.

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Conclusion: Filing Income Tax Returns in Pakistan

On the face of it, filing an income tax return may appear to be a daunting chore, but once understood, it is a fairly straightforward exercise. By reading this guide you can perform your legal duties and file your tax return effortlessly. It is verily understood that there are many benefits of filer in Pakistan. It is also a responsible way of the people and thus a kind contribution to the development of the nation. It is also worthy of note that there are consequences for late submission and wrong returns. In any case, if you are in doubt regarding any of the steps you are advised to consult our PK Tax consultant or an accountant.