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How to prepare and file tax returns in Pakistan

Preparing and filing tax returns in Pakistan is a crucial responsibility for businesses and individuals to comply with the tax laws and regulations. Here are the steps to prepare and file tax returns in Pakistan:

  1. Obtain National Tax Number (NTN): The first step in filing tax returns in Pakistan is to obtain a National Tax Number (NTN) from the Federal Board of Revenue (FBR). Businesses and individuals can apply for an NTN online or visit the nearest Regional Tax Office (RTO) or Large Taxpayers Unit (LTU) to obtain the NTN.
  2. Maintain Proper Records: It’s important to maintain accurate and complete records of all financial transactions, including sales, purchases, expenses, and other financial activities. Businesses should keep records of invoices, receipts, bank statements, payroll records, and other relevant financial documents to support the information reported on their tax returns.
  3. Understand Tax Forms: Pakistan has different tax forms for different types of taxpayers. Businesses need to file Income Tax Return (ITR) while individuals need to file Annual Income Tax Return (AITR) or Wealth Statement depending on their income and assets. It’s important to understand the applicable tax forms, their requirements, and any changes in the tax laws and regulations to accurately complete the forms.
  4. Calculate Taxable Income: Taxable income is the income on which tax is calculated. To calculate taxable income, businesses and individuals need to subtract allowable deductions, exemptions, and rebates from their total income. Deductions may include business expenses, depreciation, contributions to retirement plans, and other allowable expenses. Exemptions and rebates may vary depending on the taxpayer’s status, age, and other factors. It’s important to carefully calculate taxable income based on the applicable tax laws and regulations.
  5. File Tax Return Online: In Pakistan, tax returns can be filed online through the FBR’s online portal known as the Iris system. Businesses and individuals need to register on the Iris portal, complete the relevant tax forms, and upload the required documents, including financial statements, supporting documents, and tax payment receipts, if applicable. It’s important to ensure that all the information provided in the tax return is accurate, complete, and supported by appropriate documentation.
  6. Pay Taxes: After filing the tax return, businesses and individuals need to pay the calculated tax liability, if any, within the due date. The FBR provides various options for tax payments, including online banking, Electronic Funds Transfer (EFT), and other authorized payment channels. It’s important to ensure that the tax payment is made on time to avoid penalties and interest charges.
  7. Claim Tax Credits: Taxpayers in Pakistan can claim various tax credits, such as credit for tax deducted at source, credit for tax paid on foreign income, and credit for tax paid on advance tax. It’s important to review and claim all eligible tax credits to reduce the overall tax liability.
  8. Submit Supporting Documents: Along with the tax return, businesses and individuals may be required to submit supporting documents to the FBR, including financial statements, bank statements, and other relevant documents. It’s important to ensure that all the supporting documents are accurate, complete, and consistent with the information provided in the tax return.
  9. Respond to FBR Queries: The FBR may review and audit the tax returns filed by businesses and individuals. If the FBR has any queries or concerns regarding the tax return, taxpayers may be required to respond to the queries and provide additional information or documentation. It’s important to promptly respond to FBR queries and provide accurate and complete information to avoid any potential penalties or legal consequences.
  10. Maintain Records for Audit: Taxpayers in Pakistan are required to maintain their financial records, including supporting documents and tax returns, for at least five years from the end of the tax year.