Filing income tax returns is a crucial obligation for individuals, businesses, and associations of persons in Pakistan. The deadline for filing returns is September 30th each year, and the consequences of failing to meet this deadline can result in fines and penalties. This article aims to provide a comprehensive guide to income tax return filing in Pakistan, with a focus on the consequences of not filing by the due date.
Firstly, it is important to understand that the due date for income tax return filing for the tax year 2022 has been extended to December 15th for individuals and associations of persons. However, businesses still need to file their returns by the original due date of September 30th.
If an individual, business, or association of persons fails to file their income tax returns by the due date, they will be subject to fines and penalties. The amount of the fine is based on the type of entity and the period of delay. If a person’s income from salary is more than 75% of their total income, they will be fined Rs. 10,000. For businesses and associations of persons, the fine is Rs. 50,000.
If the return is filed within one month of the due date, the penalty will be waived up to 75%. This means that only 25% of the fine will be payable. For example, if an individual is fined Rs. 10,000 and they file their return within one month of the due date, they will only have to pay Rs. 2,500. Similarly, if a business is fined Rs. 50,000 and they file their return within one month of the due date, they will only have to pay Rs. 12,500.
If the return is filed within two months of the due date, the penalty will be waived up to 50%. This means that only 50% of the fine will be payable. For example, if an individual is fined Rs. 10,000 and they file their return within two months of the due date, they will only have to pay Rs. 5,000. Similarly, if a business is fined Rs. 50,000 and they file their return within two months of the due date, they will only have to pay Rs. 25,000.
If the return is filed within three months of the due date, the penalty will be waived up to 25%. This means that only 75% of the fine will be payable. For example, if an individual is fined Rs. 10,000 and they file their return within three months of the due date, they will only have to pay Rs. 7,500. Similarly, if a business is fined Rs. 50,000 and they file their return within three months of the due date, they will only have to pay Rs. 37,500.
It is important to note that the option to file for an extension is no longer available after the due date. The extension must be filed on or before the due date to be valid. If an extension order is allowed within 15 days, even if the order is not received, the allowed period for extension is 15 days by default.
In addition to fines and penalties, failing to file income tax returns by the due date can result in the exclusion of the individual, business, or association of persons from the Active Taxpayer List, on and after the first day of March 2023. This can have significant consequences, such as the inability to obtain tax clearance certificates or open new bank accounts.
In conclusion, filing income tax returns is a crucial obligation for individuals and businesses in Pakistan. Failing to meet the deadline for filing returns can result in fines and exclusion from the Active Taxpayer List. Therefore, it is essential to file tax returns on time to avoid any penalties and maintain your status as an active taxpayer. By understanding the consequences of late filing and staying updated with the latest tax laws and regulations, taxpayers can ensure compliance with tax requirements and avoid any legal issues.
