How to File Income Tax Return of Company with FBR?

1. Normal Tax: Calculated at a standard rate (e.g., 29%).
2. Minimum Tax: Paid when the company’s income is low, but gross revenue triggers a minimum charge (1.25%).
3. Alternative Corporate Tax (ACT): 17% of company Accounting Profit.

The highest among Normal Tax, Minimum Tax, or any ACT becomes your company’s tax liability. Let’s proceed step by step:

Step 1: Prepare Financial Statements

Before filing, ensure your accounts are ready:

• Profit & Loss Statement
• Balance Sheet
• Cash Flow Statement

You need to know:

• Total Sales
• Cost of Sales (Opening Stock + Purchases – Closing Stock)
• Operating Expenses (Salaries, rent, utilities, etc.)
• Finance Costs (Interest on loans, etc.)
• Accounting Profit: Calculated before tax adjustments.

Step 2: Adjust for Taxable Income

Tax laws do not allow certain expenses and provide benefits for others. Therefore, make adjustments:

Add back non-allowable items:

1. Accounting depreciation (replace with tax depreciation).
2. Non-deductible expenses (e.g., provisions, personal expenses).
3. Any accounting losses on sale of assets.

Deduct allowable tax items:

1. Tax depreciation or amortization.
2. Adjusted capital gains on asset sales.
3. Tax credits, carry-forward losses, or special allowances.

Your adjusted Net Taxable Income is derived after these changes.

Step 3: Calculate Tax Liability

1. Normal Tax: Apply the standard corporate tax rate (e.g., 29%) on Net Taxable Income.
   Example: If taxable income is PKR 2,550,000 →
   Normal Tax = 2,550,000 x 29% = PKR 739,500.
2. Minimum Tax: Apply the minimum tax rate on gross sales:
3. ACT: Accounting profit i.e as per financial records, without any tax adjustments.

Step 4: Enter Data into FBR Iris Portal

1. Log in to the FBR Iris Portal.
2. Go to the Income Tax Return section.
3. Enter the following details:
   • Total Sales (excluding already taxed amounts).
   • Allowable expenses and adjustments.
   • Tax calculations and withheld amounts.
4. Verify your Tax Payable against Iris’s auto-computation. If discrepancies arise, check your entries and calculations.
5. Submit the return and pay the tax liability via Challan through your bank or online.

Also Read:

Understanding Minimum Tax in Pakistan: Who Needs to Pay and Why?

Understanding Alternative Corporate Tax (ACT) in Pakistan

Key Considerations

1. Double Taxation Issue: If a part of your sales already had taxes withheld, do not include them again for minimum tax.
2. Minimum Tax Adjustment: Iris will sometimes show a difference (known as “minimum tax chargeable”). Verify calculations and only pay the valid amount.
3. Documentation: Keep records of all adjustments, invoices, and payments for audits.

Filing a company’s annual tax return involves precise adjustments, accurate calculations, and a clear understanding of tax rules. Prepare financials carefully, compare all tax types, and use the Iris portal responsibly. Avoid overpayment by ensuring no duplicate taxes are applied.

If you follow these steps systematically, your company’s annual tax filing will be smooth and compliant.