Taxpayers could face a penalty of Rs500,000 or 100% of the tax shortfall for false or misleading declarations under the Income Tax Ordinance.
ISLAMABAD: The Federal Board of Revenue (FBR) has warned taxpayers against submitting false or misleading statements, information or documents in their Tax Year 2026 income tax returns and wealth statements as the filing deadline approaches.
The deadline for filing income tax returns and wealth statements for Tax Year 2026 is September 30, 2026, leaving taxpayers limited time to review their declarations and ensure all required information is accurate and complete.
FBR sources said the Income Tax Ordinance, 2001 prescribes substantial penalties for taxpayers who furnish false or misleading statements, information or documents to an Inland Revenue or Income Tax Authority.
FBR outlines scope of false statements
Under the relevant provisions of the tax law, a person may face a penalty for making a false or misleading statement to an Inland Revenue Authority in writing, orally or electronically.
The provision covers statements contained in an application, certificate, declaration, notification, return, objection or any other document prepared, submitted or furnished under the Income Tax Ordinance.
It also extends to books of account and other records maintained or produced by a taxpayer.
The law further covers taxpayers who furnish or file false or misleading information, documents or statements with an Income Tax Authority, regardless of whether the material is submitted in written, oral or electronic form.
Omitting material facts can also attract penalty
The provisions also apply where a taxpayer omits a material matter or fact from a statement or information furnished to the tax authority, making the statement or information false or misleading in a material particular.
This means taxpayers need to ensure that their declarations are not only factually correct but also complete in respect of material information required under the law.
Penalty for false or misleading statements
Under the prescribed penalty regime, a taxpayer found liable for such conduct may face a penalty of Rs500,000 or 100 percent of the amount of tax shortfall, whichever is higher.
The potentially significant financial consequence highlights the importance of carefully reviewing all information before submitting the Tax Year 2026 return.
Taxpayers should pay particular attention to declarations relating to income, expenses, assets, liabilities and other financial information, as well as the supporting documentation maintained for their tax affairs.
Reasonably arguable position gets protection
The law, however, provides an important qualification in cases involving an assessment order deemed to have been made under Section 120.
No penalty is imposed to the extent that the tax shortfall results from the taxpayer adopting a reasonably arguable position regarding the application of the Income Tax Ordinance to their circumstances.
The provision distinguishes between a genuinely arguable interpretation of tax law and a false or misleading declaration, subject to the conditions prescribed under the legislation.
Taxpayers urged to check returns before deadline
With the September 30, 2026 filing deadline fast approaching, taxpayers are required to exercise caution when preparing their income tax returns and accompanying wealth statements.
Ensuring accurate disclosure, retaining appropriate documentation and reviewing all material information before submission can help taxpayers avoid potentially substantial financial consequences under the tax law.