"The hardest thing to understand in the world is the income tax.” ~ Albert Einstein (2024)

Alhamdulillah, I submitted my income tax return for tax year 2022. Submitting income tax return on time is not only obligation of some people by prevailing law of Pakistan, but it is ethical responsibility of each and every responsible citizen. I have been submitting my income tax return since when I was student and working as “Senior Officer Account” at “DYL Motorcycles Ltd (Automotive Manufacturing)” in August 2009. At that time, my annual income was approximately PKR 150K per annum and I was not liable to submit any return as per law.

Through this article, I would like to help people and try to convince that, submitting income tax return is not that much complicated task to be performed every year. I am not tax expert or tax consultant, I am just sharing my views and experiences. Senior members of ICMAP, ICAP, lawyers and tax experts are requested to add their kind comments and please rectify me if I am incorrect anywhere in this Article or tax reference are not updated with recent changes.

I would like to focus on benefits of filing income tax returns for salaried class individuals and overseas Pakistanis. These two class of individuals are earning 100% white money as per prevailing income tax of our beloved country. But, unfortunately most of them are not filing income tax returns due to lack of knowledge or support or advice from any professional accountants or lawyer or tax expert. I would like to elaborate more on why the income of salaried class and overseas shall be considered as 100% white money,

1. Salaried class individuals pay advance income tax which are withheld by their employers on monthly basis on their incomes as per Section 149 of Income Tax Ordinance. So, what they receive every month is actually after tax income.
2. Overseas Pakistanis who are non-resident individuals (being a citizen of Pakistan is present in any other country for more than one hundred and eighty-two days during the tax year or who is a resident taxpayer of any other country – Section 81 and Section 82) are exempted to pay tax on their foreign earning as per section 51. There is no tax on their foreign remittances through proper banking channel as per Section 111.

It means that, these two classes are already following the income tax rules of Pakistan except submitting proper income tax returns on annual basis. Most of them are not aware of the fact that, just because of not submitting wealth statement with income tax returns, they will not have proper money trail of their wealth, if it will be required in future. They might face many difficulties on time of disclosing their wealth in one-go at any tax year especially when the amount would be significant.

I would like to highlight some mistakes which are identified in my friends’ circle,

• Mistakes of Salaried Individuals: they do not raise the requests to their employers for withholding certificates undersection 149 at the end of every tax year or end of employment. There are chances of not submission of withholding income tax by tax departments due to human errors or in some cases employers are not registered with FBR, but they withhold income tax and do not deposit to FBR.
• Mistakes of Overseas Individuals: Many individuals do not submit income tax returns. Those who file returns, they do not prefer to file income tax return with wealth statement and reconciliation of annual cash flows. They just submit Nil return through tax consultants. I observed the same habit of individuals who even belong to accounting & finance backgrounds. They pay hefty fees to their tax consultants for the submission of Nil returns only. I have two advices for them,

1. Please try to submit income tax returns with wealth statements, so that you will have proper record of your money trail with annual reconciliation of cash flows. You will not need to face hassle in declaring assets on time of coming back to the status of resident of Pakistan.
2. If you are not agree with above advice, please do not pay fees of tax consultants for filing Nil income tax return. Actually filing Nil return of income tax is the matter spending five minutes at IRIS (FBR) website for 10 clicks only.

What I am trying to communicate is, please submit your annual income tax return by yourself, it is very easy to learn and submit especially for salaried class and overseas Pakistanis. You may find tutorial at FBR website or you may take help of your friends who are student or member of ICMAP or ICAP or corporate lawyer or tax expert.

Let’s have brief look on section 114 of income tax which states that who are liable to submit income tax returns in Pakistan,

1.Every person (other than a company) whose taxable income for the year exceeds the maximum amount that is not chargeable to tax under this Ordinance for the year.

2.Every person whose income for the year is subject to final taxation under any provision of this Ordinance.

3.any person who;

• Has been charged to tax in respect of any of the two preceding tax years.
• Owns immovable property with a land area of five hundred square yards or more or owns any flat located in areas falling within the municipal limits existing immediately before the commencement of Local Government laws in the provinces; or areas in a Cantonment; or the Islamabad Capital Territory.
• Owns immoveable property with a land area of five hundred square yards or more located in a rating area.
• Owns a flat having covered area of two thousand square feet or more located in a rating area.
• Owns a motor vehicle having engine capacity above 1000 CC.
• Has obtained National Tax Number (NTN).
• Is the holder of commercial or industrial connection of electricity where the amount of annual bill exceeds rupees five hundred thousand.
• Is a resident person registered with any chamber of commerce and industry or any trade or business association or any market committee or any professional body including Institute of Cost and Management Accountants of Pakistan (ICMAP), Pakistan Engineering Council, Pakistan Medical and Dental Council, Pakistan Bar Council or any Provincial Bar Council or Institute of Chartered Accountants of Pakistan.
• Is a resident person being an individual required to file foreign income and assets statement under section 116A.
• Persons or classes of persons notified by the Board with the approval of the Minister in-charge.

I would love to answer queries of all Non-Resident Pakistanis around the world FREE OF COST, if they are facing any difficulty in submitting their own return.

Let’s Help Each Other and Grow Together. Let’s try to build the responsible society.

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