Karachi, October 3, 2024 – The Federal Board of Revenue (FBR) has announced the categories of individuals and entities required to file income tax returns for the tax year 2024-25, in compliance with Section 114 of the Income Tax Ordinance, 2001.
This notification outlines the obligations for taxpayers across different sectors, ensuring broader compliance with Pakistan’s tax laws and streamlining the country’s tax collection process.
Who Must File Income Tax Returns?
According to the FBR, the following persons and entities are legally obligated to file their income tax returns:
1. Companies and Individuals Earning Taxable Income:
Every company, and any individual (excluding companies) whose taxable income exceeds the threshold defined by the Income Tax Ordinance, is required to submit a tax return. This includes non-profit organizations as per Section 2(36) of the Ordinance.
2. Final Taxation Subjects:
Persons whose income falls under final taxation provisions are also obligated to file returns. These taxpayers must report all income subject to taxation and provide relevant documentation.
3. Owners of Significant Property or Assets:
Any individual who owns immovable property measuring 500 square yards or more, or a flat in areas within municipal limits, cantonments, or Islamabad Capital Territory, is required to file tax returns. Additionally, those who possess immovable property or flats of similar size in rated areas must also comply with the filing requirements.
4. Motor Vehicle Owners:
The obligation extends to individuals who own motor vehicles with an engine capacity exceeding 1000 CC. This stipulation aims to capture those with substantial assets that signify higher income levels.
5. National Tax Number (NTN) Holders:
Any person who has obtained a National Tax Number (NTN) is automatically required to submit tax returns. Holding an NTN suggests engagement in taxable activities and income generation, and the FBR mandates compliance from these individuals.
6. High Electricity Consumers:
Individuals with commercial or industrial electricity connections whose annual bill exceeds PKR 500,000 must file returns, reflecting their significant business operations and energy consumption.
7. Professionals and Business Entities:
Registered professionals and business entities, including those affiliated with organizations like the Pakistan Engineering Council, Pakistan Medical and Dental Council, Pakistan Bar Council, and other similar professional bodies, are required to file returns. This ensures accountability and transparency among professionals contributing to the country’s economic activity.
8. Foreign Income and Assets Declaration:
Residents with foreign income or assets must file a return in line with Section 116A of the Ordinance. This is part of the FBR’s ongoing effort to combat tax evasion and encourage the declaration of offshore assets.
Filing Guidelines
The FBR has emphasized the need for taxpayers to submit their returns in the prescribed format, accompanied by annexures, statements, or documents as required. Each return must include all relevant details, such as income particulars, tax payments, and records of wealth, foreign income, and assets. The filing must also be supported by the appropriate tax payments, where applicable, to ensure that taxpayers fulfill their financial obligations to the state.
The filing of returns can be done electronically, as specified by the FBR, through the web or other computer-readable media. The FBR is also expected to release further guidelines on e-intermediaries authorized to digitize and transmit tax data to the department.
Special Notices and Requirements
The FBR has made provisions for special cases where the Commissioner may issue a written notice requiring a return for less than twelve months. This can occur in situations such as the death of a taxpayer, bankruptcy, liquidation, or permanent departure from Pakistan. In such cases, returns must be filed within the time specified in the notice.
Additionally, the Commissioner may issue notices to persons who, in their opinion, are required to file returns but have failed to do so. These individuals must submit their tax returns within 30 days of receiving such a notice. The Commissioner can issue notices for the last five or ten tax years, depending on the circumstances.
Revised Returns and Penalties
In cases where taxpayers discover omissions or errors in their filed returns, they may submit revised returns, subject to specific conditions. The revision must include updated accounts and reasons for the changes, and it may require the Commissioner’s approval. Failure to meet the specified conditions will render the revised return invalid.
Taxpayers who voluntarily revise their returns and pay any tax shortfalls before receiving audit notices or other compliance requests may avoid penalties. However, if the taxpayer revises their return after the issuance of a show-cause notice, they are liable to pay not only the tax and default surcharge but also 50% of the penalties imposed.
Conclusion
The FBR’s comprehensive guidelines for the 2024-25 tax year highlight its commitment to improving compliance and broadening the tax net. By clarifying the categories of individuals and entities required to file returns, the FBR aims to promote transparency, accountability, and fairness in Pakistan’s taxation system. Taxpayers are urged to meet these requirements promptly to avoid penalties and ensure their contribution to the nation’s financial well-being.