Filing an income tax return in Pakistan is a crucial responsibility for individuals and businesses alike. Understanding the process not only ensures compliance with the law but also helps avoid potential penalties. In this comprehensive guide, we will walk you through each step of filing your income tax return accurately and efficiently.
Understanding Income Tax in Pakistan
Income tax is a direct tax levied by the Federal Board of Revenue (FBR) on the income of individuals, companies, and organizations. The income tax system in Pakistan operates on a self-assessment basis, meaning taxpayers are responsible for calculating and paying their taxes correctly.
Who is Required to File an Income Tax Return?
According to Pakistani tax laws, the following individuals and entities are required to file income tax returns:
- Salaried individuals earning above the taxable threshold.
- Business owners and self-employed professionals.
- Companies and firms registered in Pakistan.
- Non-resident Pakistanis with income sourced from Pakistan.
- Individuals owning immovable property or vehicles beyond a specified value.
- Taxpayers who wish to claim a tax refund or adjust withholding tax.
Prerequisites for Filing an Income Tax Return
Before filing your tax return, ensure you have the following:
- National Tax Number (NTN): Registration with the FBR is mandatory.
- Active Taxpayer Status (ATL): Check your status on the FBR website.
- CNIC (Computerized National Identity Card): Required for identification.
- Bank statements and details of income sources.
- Documentation of deductible expenses and tax credits.
Step-by-Step Guide to Filing Income Tax Return in Pakistan
Step 1: Register with FBR (If Not Already Registered)
- Visit the FBR IRIS portal.
- Create an account using your CNIC, email, and mobile number.
- Obtain your NTN upon successful registration.
Step 2: Gather Necessary Documents
- Salary certificate (for salaried individuals).
- Profit and loss statement (for businesses).
- Bank statements showing income and deductions.
- Proof of tax payments and withholding tax certificates.
Step 3: Login to the FBR IRIS Portal
- Enter your username and password.
- Navigate to the “Declaration” section.
- Select the Normal/ Salary Return ( As per your category)
Step 4: Fill Out the Income Tax Return Form
- Select the appropriate tax year.
- Enter details of your income in the Pay, Wages or Other Remuneration (including Arrears of Salary) 1009 section and presss the calculate button.
- Incase you have some investments in the stockexchange/ funds and you have the Capital gain/loss fill the section of Capital Gain.
- Incase of foregin or agriculture income go in the Foreign Sources / Agriculture and enter the values and click on the Calculate.
- Double-check for accuracy to avoid discrepancies.
Step 5: Calculate Tax Liability
- The system will automatically calculate your tax payable or refund due based on the information provided.
- If you have paid the Zakat under any govt approved firm, enter the amount of paid Zakat or other educational expenses.
- Enter the value (amount) of paid tax , which deducted from your salary or paid tax
Enter the values of witholding taxes ( amount and Taxes ) all theses information can be collected from the relevant service providers ( e.g. Tax paid on the mobile phone sim cards) these taxes can be refunded from the FBR. in the Adjustable Taxes section.
- Profit on Debt u/s 151 @ 15%
- Motor Vehicle Registration Fee u/s 231B(1)
- Motor Vehicle Transfer Fee u/s 231B(2)
- Motor Vehicle Sale u/s 231B(3)
- Motor Vehicle Leasing u/s 231B(1A) (Non-ATL) @4%
- Goods Transport Public Vehicle Tax u/s 234
- Private Vehicle Tax u/s 234
- Electricity Bill of Domestic Consumer u/s 235
- Telephone Bill u/s 236(1)(a)
- Cellphone Bill u/s 236(1)(a)
- Prepaid Telephone Card u/s 236(1)(b)
- Phone Unit u/s 236(1)(c)
- Internet Bill u/s 236(1)(d)
- Purchase by Auction u/s 236A (including renewal of license)
- Sale / Transfer of Immovable Property u/s 236C
- Tax Deducted u/s 236C where Property Purchased & Sold within Tax Year
- Tax Deducted u/s 236C where Property Purchased Prior to current Tax Year
- Purchase / Transfer of Immovable Property u/s 236K
- Advance Tax on Withdrawal of Balance under Pension Fund u/c 23A of Part I of Second Schedule
- Advance tax on On-Money u/s 231B(2A)
- Persons remitting amount abroad through credit / debits / prepaid cards u/s 236Y.
After entering the values , click on calculate button.
If You have paid taxes on the stock investments enter the values of paid taxes of the Dividends in the Final / Fixed / Minimum / Average / Relevant / Reduced Tax section, the tax information can be get from the CDC eServices.
Step 6: Pay Any Due Taxes
In the computations section , the information will be displayed for your admitted tax ( which is to be paid or Refundable tax which you can tak refund.
- If you owe taxes, generate a Payment Slip ID (PSID).
- Make the payment via online banking, ATM, or at designated bank branches.
Step 7: Submit Your Income Tax Return
- Review your return thoroughly.
- Click on the “Submit” button to file your return.
- Download the acknowledgment receipt for your records.
Common Mistakes to Avoid While Filing Income Tax Returns
- Incorrect personal information (CNIC, contact details).
- Miscalculating income or deductions.
- Failing to declare all sources of income.
- Late submission, leading to penalties.
- Not retaining proof of submission and payment receipts.
Benefits of Filing Income Tax Returns in Pakistan
- Legal compliance with FBR regulations.
- Eligibility for tax refunds and adjustments.
- Inclusion in the Active Taxpayer List (ATL), reducing withholding tax rates.
- Facilitates obtaining loans, visas, and financial documentation.
Penalties for Non-Compliance
Failure to file your income tax return can result in:
- Heavy fines and penalties.
- Legal action by the FBR.
- Higher withholding tax rates on financial transactions.
Filing Income Tax Returns as a Non-Resident Pakistani
Non-resident Pakistanis are required to file returns if they:
- Earn income from Pakistani sources.
- Own immovable property or vehicles in Pakistan.
- Wish to claim withholding tax refunds.
The process is similar, but they must declare only their Pakistan-sourced income.
