Income Tax Filing in Pakistan: Penalties, Late Returns, and FBR Guidelines
Are you tangled up in the web of income tax filing in Pakistan? Feeling overwhelmed with deadlines and penalties? Don’t worry; you’re not alone. Many individuals and businesses find the income tax filing process daunting. But don’t worry! In this comprehensive guide, we’ll solve the mysteries of income tax filing, late returns, penalties, and how to navigate through them smoothly.
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Understanding Income Tax Filing in Pakistan:
First things first, let’s grasp the basics. Income tax filing is required under section 114 of Income Tax Ordinance, 2001 for all the persons (individual, AOP or Company) subject to some conditions earning income in Pakistan. Whether you’re a salaried employee, a freelancer, or a business owner, you’re required by law to file your income tax returns annually.
1) Logging into IRIS:
File online Income Tax Return by logging into Iris. Iris is online portal where Income Tax Return is filed.
If you are a first time Income Tax filer, registration will be required on Iris before you can file your Income Tax Return.
After registration you can log into Iris and file your Income Tax Return. Those having obtained a National Tax Number (NTN) or Registration Number but do not have credentials to log into Iris can get access by clicking on ‘E-enrollment for Registered Person’ at the link provided below:
You can get help from the link given below:
Tax return filing service by Scounts:
Income tax Return Filing – Scounts
2) Completing Income Tax Return:
The process of completing an online income tax return involves filling out both the Return of Income and Wealth Statement forms. Video tutorials and a Knowledge Base portal offer guidance on filing these forms. Successful submission is confirmed when both forms move from the Draft folder to Completed Task in Iris.
For the Wealth Statement, reconciliation is necessary, ensuring that the current year’s wealth change matches the difference between income and expenses. Failure to reconcile prevents income tax return submission.
Salaried individuals can use Declaration form 114(I) to file their income tax return, provided their income from salary exceeds 50% of their total income.
To change the PIN for Iris, users can log in and navigate to ‘Change Pin’ at the top of the screen, entering the required information in the dialog box.
3) REVISING INCOME TAX RETURN:
An Income Tax Return can be revised within five (5) years of being originally filed to correct any omission or wrong statement discovered later on.
In order to revise the Income Tax Return filed, one has to file an application for revision in Iris. After approval of your application you can file a revised Income Tax Return in Iris.
The Penalty for Filing Income Tax Returns Late:
So, what happens if you miss the deadline for filing your income tax return in Pakistan? Well, the tax authorities don’t take it lightly. According to the Income Tax Ordinance, 2001, if you fail to file your income tax return by the due date, you may be subject to penalties. These penalties can range from monetary fines to legal consequences.
Clause a of Section 182A of Income Tax Ordinance 2001:
If a return not filed within due date, the taxpayer will not be included in the active taxpayers’ list for the year for which the return was not filed within the due date.
Provided that without prejudice to any other liability under this Ordinance, the person shall be included in the active taxpayer’s list on filing return after the due date, if the person pays surcharge at Rupees-
1) twenty thousand in case of a company;
2) ten thousand in case of an association of persons;
3) one thousand in case of an individual.
Consequences of Not Filing Income Tax Returns:
Now, you might be wondering, what’s the worst that could happen if I don’t file my income tax return? The answer: trouble with the Federal Board of Revenue (FBR). Failing to file your income tax return can lead to FBR scrutiny, audits, and even legal actions. Moreover, being a non-filer may restrict you from certain privileges, such as opening a bank account, buying property, or applying for loans.
PENALTY FOR LATE PAYMENT
Failure to pay tax payable on due date will attract penalty or default surcharge or both. Failure to make payment on your tax dues is an offence punishable on conviction with a fine or imprisonment for a term not exceeding one year or both.
What penalties and default surcharge are charged from non-filers, late-filers or short filers?
i) Non-filers or late-filers attract a penalty equal to 0.1% of the tax payable for each day of default subject to a minimum penalty of Rs. 5,000 and a maximum penalty of 25% of the tax payable;
ii) Non-filers, late-filers or short-filers owing a tax payable on the due date of furnishing the return of income and/or statement of final/fixed tax also attract Default Surcharge (interest) at the rate of KIBOR plus 3% per quarter; and
iii) Where a return of income and/or statement of final tax are required to be furnished in compliance to a notice served by the Commissioner, the non-filers and late filers commit an offence punishable on conviction with a fine or imprisonment for a term not exceeding one year or both.
Reference: 2014417124311383ObligationtofileIncomeTaxDeclaration.pdf (fbr.gov.pk)
Filing of Income Tax Return After Due Date:
To file the online Income Tax Return after due date you would still have to complete the filing of Income Tax Return as described above.
How to check ACTIVE TAXPAYER STATUS:
Active Taxpayer status can be checked in the following three (3) ways:
VERIFICATION THROUGH ONLINE PORTAL:
The ATL status check allows you to confirm your Active Taxpayer status.
CHECK ACTIVE TAXPAYER STATUS BY SMS:
Check Individual’s Active Taxpayer status by SMS through the following procedure:
Type “ATL (space) 13 digits Computerized National Identity Card (CNIC)” and send to 9966.
Check Active Taxpayer status of AOP and Company by SMS through the following procedure:
Type “ATL (space) 7 digits National Tax Number (NTN)” and send to 9966.
Check AJ&K Active Taxpayer status by SMS through the following procedure: For Individual, type AJKATL (space) CNIC (without dashes). Send it to 9966.
Having NTN AJKATL (space) 11 digit NTN (without dashes). Send it to 9966.
CHECK ACTIVE TAXPAYER STATUS BY DOWNLOADING ATL:
You can also download ATL from:
https://fbr.gov.pk/Downloads/?id=3901&Type=Docs
Can the FBR Seize Your Bank Account?
Yes, the FBR has the authority to seize your bank account if you fail to comply with their notices and pay your taxes. FBR can issue a notice to your bank to freeze your account and recover the outstanding tax amount.
In conclusion, filing your income tax return on time is crucial to avoid penalties and legal troubles. If you miss the deadline, make sure to file a belated return to stay compliant with the tax laws in Pakistan. And remember, it’s always best to seek professional advice if you’re unsure about anything related to your taxes.
