1. Statutory Requirements and Active Taxpayer Status

Mandatory Filing

Every individual, business, and AOP earning a taxable income above the minimum threshold (currently PKR 600,000 for most salaried individuals) is legally required to file an annual Income Tax Return through the FBR’s online portal, IRIS.

The Active Taxpayers List (ATL)

Maintaining the status of a ‘Filer’ by consistently filing your annual return is crucial. Inclusion in the ATL grants substantial financial advantages:

• Reduced Withholding Tax (WHT): Filers benefit from significantly lower rates of WHT on transactions such as property transfers, vehicle purchases, banking transactions (cash withdrawals and transfers), and income from dividends and profit on debt. Non-Filers often face double the WHT rate.

• Proof of Compliance: Filer status is often a prerequisite for business contracts, government tenders, visa applications, and securing financial facilities from banks.

2. Heads of Income for Taxation

The Income Tax Ordinance, 2001, classifies all chargeable income into five categories. All income from these sources must be declared:

1. Salary: Income received from employment.

2. Income from Property: Rental income from immovable assets.

3. Income from Business: Profits and gains from all commercial activities, including trading, manufacturing, and self-employment (freelancing).

4. Capital Gains: Profit realised from the sale of specific capital assets (e.g., shares, securities, and real estate).

5. Income from Other Sources: Residual income not covered above (e.g., bank interest, royalties, prize bond winnings).

3. Income Tax Slabs and Rates (Tax Year 2024-2025)

Pakistan operates a progressive tax system, with rates increasing as income rises. Tax rates are applied differently based on the nature of the income.

Tax Slabs for Salaried Individuals (Annual Income)

Tax Slabs for Non-Salaried / Business Individuals & AOPs

Rates for business income are distinct from salaried income and generally result in a higher tax burden at lower thresholds. The top marginal rate can reach 35% to 45% on the highest income slabs.

Important Tax Deductions & Credits

Tax relief can be claimed through specific provisions:

• Zakat: Deductible from total income if paid through recognised institutions.

• Donations: Donations to approved charitable institutions may qualify for tax credits.

• Investments: Certain investments, such as approved mutual funds and life insurance premiums, may qualify for tax credits subject to conditions.

4. Documentation and Key Deadlines

Required Documents

• CNIC / NTN: Your primary identification.

• Income Proof: Salary slips/certificates or audited financial statements (for businesses).

• Tax Withholding Certificates: Proof of tax deducted on salary (U/S 149), bank profit, utility bills, and property transactions.

• Wealth Statement Data: Comprehensive details of all assets (properties, vehicles, bank accounts, gold, investments) and liabilities (loans, mortgages).

Filing Deadline

The deadline for filing the annual Income Tax Return for most individuals and AOPs is typically September 30th (following the end of the tax year on June 30th). Failure to meet this deadline leads to heavy penalties and loss of ATL status.

Contact Us for Professional Support

Navigating the complexities of the Income Tax Ordinance, ensuring accurate Wealth Statement reconciliation, and minimising your tax liability legally requires expert knowledge.

We offer comprehensive tax services to individuals and businesses, including:

• NTN/Registration with FBR.

• Preparation and filing of annual Income Tax Returns and Wealth Statements.

• Filing of revised returns and handling FBR notices.

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