How to File Income Tax Returns in Pakistan?
July 03, 2023
Filing
income tax returns is not only a legal requirement for individuals and
enterprises in Pakistan, but also a significant responsibility. It plays a
vital role in the nation's economic growth by assuring a fair distribution of
resources, funding government initiatives, and supporting public welfare
programs.
In
Pakistan, when the taxable income exceeds 600,000 rupees but is less than
1,200,000 rupees, a specific tax rate of 2.5% is imposed on the portion that
exceeds 600,000 rupees. This implies that individuals in this income bracket
are subject to income tax on the amount that exceeds Rs 600,000. This
progressive tax structure ensures that those with higher incomes pay a slightly
higher percentage of their earnings in taxes, allowing for a fair and equitable
distribution of tax burdens.
Why is it important to file income tax
returns?
1. Legal
Compliance:
The
Income Tax Ordinance of 2001 mandates the filing of income tax returns in
Pakistan. Noncompliance may result in fines, penalties, and legal repercussions.
2. Contribution
to National Progress and Development:
Income
tax revenue plays a crucial role in the nation's progress and development. It
helps the government finance societally-beneficial infrastructure projects,
healthcare services, education initiatives, and social welfare programs.
3. Transparent
Financial System:
The
filing of tax returns contributes to the establishment of a transparent
financial system. By accurately reporting your income, assets, and expenses,
you contribute to the maintenance of financial transparency, which discourages
tax evasion and promotes a fair and just society.
4. Facilitating
Economic Planning:
Income
tax returns provide the government with essential data for analyzing economic
trends, evaluating the tax base, and formulating effective fiscal policies.
This information helps policymakers make informed decisions and plan for the
economic development and stability of the nation.
5. Access to
Financial Services:
Many
financial institutions and service providers require individuals and businesses
to provide evidence of submitting income tax returns in order to gain access to
financial services.
Detailed Instructions for Filing
Income Tax Returns in Pakistan:
Now,
let's examine the steps involved in filing income tax returns in Pakistan:
Step 1: Collect the Necessary
Documents:
Gather
your National Identity Card (NIC) or Computerized National Identity Card
(CNIC), National Tax Number (NTN) certificate (for businesses), bank
statements, salary slips or income statements, investment and property records
(if applicable), and any other pertinent financial documents.
Step 2: Choose your tax filing status:
Individual
(salaried or non-salaried), Association of Persons (AOP), partnership, or
corporation. This determination will determine which tax return form you must
complete.
Step 3: Register for an Iris account:
Register
for an Iris account on the Federal Board of Revenue (FBR) website
(https://iris.fbr.gov.pk/), the online portal for tax filing. Include your
NIC/CNIC number, email address, and other contact information, as required.
Create a username and password for your Iris account, and authenticate your
email address and phone number using the OTP (One-Time Password) that is
provided.
Step 4: Complete your account profile:
Sign
in to your Iris account and fill out your profile with correct personal and
contact information.
Step 5: Complete the Tax Return:
Download
the appropriate tax form from the Iris portal based on your filing status.
Individuals may use Form ITR-1 or Form ITR-2, while AOPs, partnerships, and
corporations may need Form ITR-3 or Form ITR-6. Fill out the form accurately,
declaring all of your income sources, deductions, and exemptions in accordance
with the provided instructions.
Step 6: Calculate tax payable or refundable:
The
Iris system will automatically compute your tax liability or refund based on
the information contained in your tax return.
Step 7: Submit and File Your Return:
Verify
the accuracy and completeness of all the information you provided on the tax return
form. Save the completed form and produce an XML file. To submit your tax
return, upload the XML file via the Iris portal.
Step 8: Tax Payment (if applicable):
Make
your tax payment through an authorized bank or the online banking system if you
owe taxes. Keep the confirmation of payment for future reference.
Step 9: Verification and
Acknowledgment:
After
submitting your tax return, you will receive a confirmation and acknowledgment
receipt. Print this receipt, sign it, and retain it for your records.
Individuals
and enterprises in Pakistan have a crucial obligation to file income tax
returns. With the Federal Board of Revenue's (FBR) modern online system, the
process has become more convenient and accessible. By following this
comprehensive guide, you can easily navigate the steps of registration, form
completion, and submission.
For more
information, Dial 03-222-111-026, 03-111-111-026, or 042-111-111-026.