Obligation to file Income Tax Declarations

This blog provides general information about taxpayers for filing income tax obligations of declarations (return of income and statement of final/fixed tax, Obligation to file Income Tax Declarations).

What is a Return of Income

The Return of Income is a Form filed by a person to the Income Tax Department. It contains details of the person’s annual income(s).

Who is required to submit a return of income?

1. Every company irrespective of any conditions, whether earning exempt income, or still in start-up stage or any other situation;
2. Associations of persons and individuals with annual income over Rs. 400,000/- for tax year 2013.
   1. Any person who is charged to tax in any of the two preceding tax years
   2. Any person who claims a loss to be carried forward and set-off against the income of the following year(s).

1. Any person who owns immovable property:
2. with land area of 250 sq. yards or more located in areas falling within the municipal limits, a Cantonment Board, or the Islamabad Capital Territory;
3. with land area of 500 sq. yards or more located in rating area; or a flat located in areas falling within the municipal limits , a Cantonment Board, or the Islamabad Capital Territory; or
4. a flat with covered area of 2,000 sq. feet or more located in rating areas;
5. Any person who owns a motor vehicle having engine capacity of 1,000 cc or more
6. Any person who has obtained a National Tax Number; or
7. Any person who is the holder of commercial or industrial connection of electricity where the amount of annual bill exceeds Rs. 1,000,000.
8. Non profit organizations, irrespective of any conditions;
9. Any welfare institution approved under Clause (58) of Part I of the Second Schedule to the Income Tax Ordinance, 2001, irrespective of any conditions.
10. Every individual whose income under the head „Income from business‟ exceeds Rs. 300,000 but does not exceed the maximum amount that is not chargeable to tax.
11. Any person [who in the opinion of the Commissioner was required to furnish the return of income (for any of the aforesaid reasons) but has failed to do so] to whom a notice for furnishing of the return of income has been served by the Commissioner.

Even if none of the above applies, one may still need to file a return in order to claim a refund of tax deducted or collected at source (other than final tax).

Who is not required to file Income Tax Return

Exceptions (not required to file return of income) to the above are as under:

• Deriving income exclusively from salary (The annual statement of deduction of income tax from salary, filed by the employer is treated as return of income on behalf of such employee);
• Entire income is subject to final tax or fixed tax for which a separate statement is prescribed;
• A widow, an orphan below the age of 25 years or a disabled person solely for the reason of owning immovable property (a flat or land of 250 sq. yards or more) located in areas falling within the municipal limits, a Cantonment Board, or the Islamabad Capital Territory; and
• A non-resident for the reason of owning immovable property;
• Who is required to furnish the statement of final/fixed tax?
• Any person deriving income subject to a separate charge, income subject to final tax or separate block of income
• Any person [who in the opinion of the Commissioner was required to furnish the statement of final/fixed tax but has failed to do so] to whom a notice for furnishing of the statement of final/fixed tax has been served by the Commissioner.

What is the due date for furnishing the return of income and/or statement of final/fixed tax?

The due dates for furnishing the return of income and/or statement of final/fixed tax for are as under:

Taxpayers	Due date for Tax Return Filing
In case of a company (Both for return of income and/or statement of final/fixed tax) whose tax year ends between 1st July and 31st December	30th September
In case of a company (Both for return of income and/or statement of final/fixed tax) whose tax year ends between 1st January and 30th June	31st December
In case of salaried individual (Both for return of income and/or statement of final/fixed tax only)	31st August
In case of other individual and association of persons required to furnish statement of final/fixed tax only	31st August
In case of other individual and association of persons required to furnish statement of final/fixed tax and return of income	30th September
In case of other individual and association of persons required to furnish return of income only	30th September

Where to furnish the return of income and/or statement of final/fixed tax?

Hard copies (printed forms)of the return of income and/or statement of final/fixed tax can be furnished:

o By post or courier service; or

o Delivery by hand; to the Tax Facilitation Center of the respective Large Taxpayer Unit or Regional Tax Office having jurisdiction over a taxpayer where electronic filing of return of income and/or statement of final/fixed tax is not mandatory.

Soft copies (electronic filling) of the return of income and/or statement of final/fixed tax are required to be furnished through Federal Board of Revenue web portal (www.e.fbr.gov.pk).

Is it mandatory to furnish the return of income and/or statement of final/fixed tax electronically?

Electronic filing of return of income and/or statement of final/fixed tax is mandatory for the following:

• A company;
• An Association of Persons; and
• An individual registered under the Sales Tax Act, 1990
• An individual deriving income from salary of Rs. 500,000 or more.

What penalties and default surcharge are charged from non-filers, late-filers or short-filers?

• Non-filers or late-filers attract a penalty equal to 0.1% of the tax payable for each day of default subject to a minimum penalty of Rs. 5,000 and a maximum penalty of 25% of the tax payable;
• Non-filers, late-filers or short-filers owing a tax payable on the due date of furnishing the return of income and/or statement of final/fixed tax also attract Default Surcharge (interest) at the rate of KIBOR plus 3% per quarter; and
• Where a return of income and/or statement of final tax are required to be furnished in compliance to a notice served by the Commissioner, the non-filers and late filers commit an offence punishable on conviction with a fine or imprisonment for a term not exceeding one year or both.

Can penalty for non-filing or late filing be avoided?

Penalty for non-filing or late filing can be avoided by taking extension in time for furnishing the return of income and/or statement of final/fixed tax from the Commissioner.

For this purpose application in writing, by the due date, has to be made to the Commissioner specifying the reasons for inability to furnish the return of income and/or statement of final/fixed tax by the due date.

If the Commissioner is satisfied that because of the absence from Pakistan, sickness of the taxpayer, any misadventure or any other reasonable cause, the taxpayer is unable to furnish the return of income and/or statement of final/fixed tax on the due date, the Commissioner is empowered to allow extension for furnishing the return of income and/or statement of final/fixed tax upto 15 days and in exceptional circumstances for a longer period.

What if an omission or wrong statement is discovered later in the return of income and/or statement of final/fixed tax?

A return of income and/or statement of final/fixed tax can be revised to correct any omission or wrong statement discovered later on, within 5 years from the end of the financial year in which the return of income and/or statement of final/fixed tax was originally furnished.

The revised return of income and/or statement of final/fixed have to be accompanied with revised accounts or revised audited accounts and the reasons for such revision.

Furnishing of revised return of income and/or statement of final tax does not absolve a person from payment of default surcharge.

In case of refund what is required to be done?

• If computation of tax results in a refund, you are required to submit a separate application for claim of refund in the prescribed form with the return of income and/or statement of final tax.
• The refund can also be claimed later on (after you have submitted your tax returns) but within two years from the date of assessment (date of filling of return etc.) or from the date on which the tax was paid, whichever is later.

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