June 18, 2024

Pakistan Taxation

To tax (from the Latin taxo; “I estimate”, which in turn is from tang?; “I touch”) is to impose a financial charge or other levy upon a taxpayer (an individual or legal entity) by a state or the functional equivalent of a state such that failure to pay is punishable by law. The same is the definition of tax in Pakistan. You have to pay or plan to avoid it , no other way out.

 Taxes in Pakistan consist of direct tax or indirect tax, and may be paid in money or as its labour equivalent (often but not always unpaid labour). Tax in Pakistan is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority and is any contribution imposed by government, local government or municipal government of Pakistan under various names like toll, tribute, tallage, gable, impost, duty, custom, excise, subsidy, aid, supply, or other name.

 Governments of Pakistan  uses different kinds of taxes and vary the tax rates. This is done to distribute the tax burden among individuals or classes of the population involved in taxable activities, such as business, or to redistribute resources between individuals or classes in the population. Historically, the nobility were supported by taxes on the poor; modern social security systems are intended to support the poor, the disabled, or the retired by taxes on those who are still working.


Objects of Taxation system in Pakistan

 The main purpose is revenue. Taxes in Pakistan are levied to raise money in order to spend on Pakistan army (Improve defence), roads (Infrastructure development), schools and hospitals (Social Development of the people of Pakistan) , and on more indirect government functions(market regulation and so forth).

 A second object of government of Pakistan for levying tax is Redistribution. Normally, this means transferring wealth from the richer sections of society to poorer sections. Variable tax rates are basically done to achieve the same.

 A third purpose of taxation is Repricing. Taxes are levied to address externalities: tobacco is taxed, for example, to discourage smoking, and many people advocate policies such as implementing a carbon tax.

We, can provide you with information and guidance on being a tax filer in Pakistan. Here’s a general overview of the process:-

  1. Taxpayer Registration: To become a tax filer, you need to obtain a National Tax Number (NTN) or a Computerized National Identity Card (CNIC). You can register online through the Federal Board of Revenue (FBR) web portal or visit the Regional Tax Office (RTO) or Tax Facilitation Center (TFC) in your area.
  2. Types of Taxes: In Pakistan, individuals typically file income tax returns. However, depending on your situation, you may also need to file other taxes, such as sales tax, wealth tax, or corporate tax if you own a business.
  3. Tax Year and Filing Deadline: The tax year in Pakistan runs from July 1st to June 30th. The deadline for filing tax returns is usually September 30th of the following year. However, it’s important to check for any changes or extensions to the deadline each year.
  4. Tax Return Forms: The FBR provides different tax return forms depending on the nature of your income and taxpayer category. The most common forms for individuals are the Income Tax Return Form (IT-1) for salaried individuals and the Income Tax Return Form (IT-2) for individuals with other sources of income.
  5. Income Sources and Deductions: You will need to report all your income sources, including salary, business income, rental income, capital gains, etc., in the tax return. Additionally, you can claim deductions for eligible expenses such as charitable donations, medical expenses, education expenses, etc.

Filing Methods:

You can file your tax return electronically through the FBR’s online portal known as the IRIS (Integrated Tax Administration System). Alternatively, you can submit a physical copy of the tax return at the designated tax offices.

Tax Payment:

If you have any tax liability after filing your return, you will need to pay the due amount to the FBR. You can pay the taxes through various methods, including online banking, ATMs, or physically at designated branches of authorized banks.

Retaining Documents: It is important to maintain proper records and documentation related to your income, expenses, and deductions for at least five years after filing the tax return. This includes salary slips, bank statements, receipts, and any other relevant documents.

It’s crucial to consult with a qualified tax professional or visit the FBR’s official website for the most up-to-date and accurate information regarding tax filing in Pakistan, as tax laws and procedures may change over time.

WAQAR AND WASI (W&W) Specializes in a full range of tax services and is one of the leading firms giving full support from tax planning to tax litigation, from tax compliance to tax mitigation. We can do it all for you, just leave a message and the concerned W&W representative will get in touch to assist you through the complex web of the Pakistan taxation system.