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.