Becoming a tax filer in Pakistan is an important step to ensure compliance with the law and to avail various benefits as Federal government has proposed multiple punitive measures in the annual budget for FY2024-25 to punish individuals and businesses who do not file income tax returns.
Punitive measures for Non Filers
The new finance bill has introduced significant amendments to Section 114B of the Income Tax Ordinance, 2001, aimed at curbing tax evasion by non-filers. The proposed changes could have far-reaching implications, including restrictions on international travel for Pakistani citizens who fail to file their tax returns.
Currently, Section 114B grants the Federal Board of Revenue (FBR) the authority to disable SIM cards and disconnect electricity and gas services for non-filers. The new proposal seeks to extend these measures by preventing non-filers from traveling abroad. This restriction would apply to any Pakistani citizen required to file tax returns but failing to do so, should the parliament approve the proposal.
Exemptions from this travel restriction are provided for holders of the National Identity Card for Overseas Pakistanis, minors, and students.
The bill also proposes strict penalties for implementing agencies that fail to enforce these punitive actions. An initial penalty of Rs100 million will be imposed for non-compliance, increasing by Rs200 million for each subsequent violation.
Furthermore, the bill outlines severe consequences for businesses and traders who do not register under specific schemes, such as the Tajir Dost Scheme.
Non-compliant traders and shopkeepers face the sealing of their businesses. Additionally, they could face up to six months of imprisonment, a fine, or both for failing to register their businesses.
Another notable change is the proposed increase in advance tax on sales to distributors, dealers, and wholesalers who are non-filers.
The tax rate for these transactions would rise from 0.2% to 2%. Similarly, for non-filer retailers, the advance tax rate would increase from 1% to 2.5%.
These proposed amendments underscore the government’s commitment to broadening the tax base and ensuring compliance among all taxable entities in Pakistan. If passed, these measures will significantly impact non-filers and could lead to a more robust tax collection system.
Worry not, we got you covered, here is a detailed step-by-step guide to help you become a tax filer in Pakistan:
1. Obtain a National Tax Number (NTN)
Step 1: Gather Required Documents
- CNIC (Computerized National Identity Card) for individuals
- Business registration documents (if applicable)
- Proof of address
Step 2: Apply for NTN Online
- Visit the Federal Board of Revenue (FBR) website: FBR
- Click on the “Registration for Unregistered Person” link
- Fill in the required information and submit the form
- You will receive your NTN via email or SMS
2. Register on the FBR Online Portal
Step 1: Visit the FBR IRIS Portal
- Go to the IRIS portal: FBR IRIS
Step 2: Create an Account
- Click on the “Registration for Unregistered Person” option
- Provide your NTN, CNIC, and other required details
- Create a username and password for your IRIS account
3. Prepare Your Tax Documents
Step 1: Collect Financial Information
- Salary slips, bank statements, and any other sources of income
- Proof of investments and assets
- Business income and expense records (if applicable)
Step 2: Calculate Taxable Income
- Use the FBR tax calculator to determine your tax liability
- Deduct allowable expenses and tax credits
4. File Your Income Tax Return
Step 1: Log in to IRIS Portal
- Use your username and password to log in to the IRIS portal
Step 2: Fill Out the Income Tax Return Form
- Select the relevant tax year
- Complete the form with accurate information about your income, deductions, and tax payable
- Attach scanned copies of the required documents
Step 3: Submit the Return
- Review the filled form for accuracy
- Submit the return electronically through the IRIS portal
- You will receive an acknowledgment receipt
5. Pay Your Tax (If Applicable)
Step 1: Generate Payment Challan
- If you have any tax payable, generate a payment challan from the IRIS portal
Step 2: Make Payment
- Pay the tax through designated banks or online banking services
- Keep the payment receipt for your records
6. Verify Your Filer Status
Step 1: Check FBR Active Taxpayer List (ATL)
- Visit the ATL section on the FBR website: ATL
- Enter your CNIC or NTN to verify your status
Step 2: Confirm Your Filer Status
- Ensure your name appears in the ATL to confirm you are an active taxpayer
Tips and Considerations
- Timely Filing: File your tax return before the deadline to avoid penalties.
- Professional Help: Consider consulting a tax advisor for accurate filing, especially if your financial matters are complex.
- Record Keeping: Maintain records of all submitted documents and receipts for future reference.
By following these steps, you can become a registered tax filer in Pakistan and comply with legal requirements while enjoying the benefits of being a filer.
