TaxationBasics Of Income Tax Return

 

What Is Income Tax Return?

Income Tax Return is a form or a statement filed by the filer stating details of income, expenses, deductible allowances, adjustable taxes, and the computation of income tax liability. In the true legal sense, the income tax return is a deemed assessment order issued to the taxpayer by the Commissioner on the day the return was furnished (section 120 of the Income Tax Ordinance, 2001). Furthermore, it is important to mention that a wealth statement that reflects the person’s total assets and liabilities is also needed to be filed along with the income tax return.

What Is A Normal Tax Year?

As per section 74 of the Income Tax Ordinance 2001, a normal tax year shall be a period of twelve months ending on 30th day of June.

Who Is A Filer?

In accordance with section 2(23A) of the Income Tax Ordinance 2001, a filer is a taxpayer whose name appears in the active taxpayers’ list issued by the Board. This list can be easily accessed by anyone from the website of the Federal Board of Revenue (FBR).

Who Is To File Income Tax Return?

This is probably one of the most important questions frequently asked by any common person. As per section 114 of the Income Tax Ordinance 2001, the following are required by law to file the income tax return:

• Every company
• Every person (other than a company) whose taxable income for the tax year exceeds the maximum amount that is not chargeable to tax under Income Tax Ordinance, 2001 for the year (in case of Individuals and Association of Persons the maximum amount is Rs. 400,000/- for the tax year 2022) or
• Any non-profit organization as defined in clause (36) of the section of the Income Tax Ordinance 2001.
• Every person whose income for the year is subject to final taxation any provision of Income Tax Ordinance 2001.
• Any person not covered in the above who:

1. 1. 1. has been charged to tax in respect of any of the two preceding tax years;
      2. claims a loss carried forward under the Income Tax Ordinance 2001 for a tax year;
      3. 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;
      4. owns immovable property with a land area of five hundred square yards or more located in a rating area;
      5. owns a flat having a covered area of two thousand square feet or more located in a rating area;
      6. owns a motor vehicle having engine capacity above 1000 CC;
      7. has obtained National Tax Number; or
      8. is the holder of commercial or industrial connection of electricity where the amount of annual bill exceeds rupees [five hundred thousand]
      9. 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 Pakistan Engineering Council, Pakistan Bar Council or any Provincial Bar Council, Institute of Chartered Accountants of Pakistan or Institute of Cost and Management Accountants of Pakistan; or
      10. [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.
• Every individual whose income under the head ‘Income from business’ exceeds rupees three hundred thousand but does not exceed rupees [four hundred thousand] in a tax year is also required to furnish a return of income from the tax year.

Format Of Income Tax Return

In accordance with section 114 of the Income Tax Ordinance 2001 a return of income:

• Shall be in the prescribed form and shall be accompanied by such annexures, statements, or documents as may be prescribed.

Provided that the Board may prescribe different returns for different classes of income or persons including persons subject to final taxation;

• Shall fully state all the relevant particulars or information as specified in the form of return, including a declaration of the records kept by the taxpayer.
• Shall be signed by the person, being an individual, or the person’s representative where section 172 of the Income Tax Ordinance 2001 applies.
• Shall be accompanied with the evidence of payment of due tax as per return of income.
• Shall be accompanied with the wealth statement as required by section 116 of the Income Tax Ordinance 2001.
• Shall be accompanied with the foreign income and assets statement as required under section 116A of the Income Tax Ordinance 2001.