The Finance Bill 2022 presented by the Pakistani government has brought significant changes in tax laws, including the Income Tax Ordinance 2001. One of the crucial changes introduced in the new bill relates to the late filing of income tax returns. Individuals who fail to file their income tax returns on time will face hefty fines and penalties, which may have severe implications on their financial stability.
In this article, we will discuss the changes made in the late filing penalties for income tax returns in Pakistan under the Finance Bill 2022. We will also highlight the importance of timely filing of income tax returns and the consequences of failing to do so.
Late Filing Penalties for Income Tax Returns
As per section 182 of the Income Tax Ordinance 2001, individuals who fail to file their income tax returns on or before the due date will face a penalty. The new Finance Bill 2022 has increased the penalties for late filing of income tax returns significantly.
Under the new bill, the penalty for late filing of income tax returns will be calculated as follows:
Such person shall pay a penalty equal to higher of;
- 0.1% of the tax payable in respect of that tax year for each day of default; or
- Rupees one thousand for each day of default:
Provided that the minimum penalty shall be;
- Rupees ten thousand in case of an individual having seventy-five percent or more income from salary; or
- Rupees fifty thousand in all other cases
The penalty amount will depend on the type of income earned by the individual. If the person has already paid all the due taxes and only the filing of the return was delayed, they will pay a penalty of 10,000 rupees if their income is only from salary. For business individuals and Associations Of Persons (AOPs), the penalty amount will be 50,000 rupees if no other tax is payable.
Importance of Timely Filing of Income Tax Returns
The timely filing of income tax returns is essential for individuals to avoid penalties and fines. Filing tax returns also helps individuals in securing loans, visas, and other important documents that require tax compliance. Moreover, it allows individuals to claim tax refunds and adjustments that may have been missed in the previous year’s tax returns.
Consequences of Late Filing of Income Tax Returns
Individuals who fail to file their income tax returns on time face several consequences. The most significant of these consequences is the penalty and fine levied on them, which can be substantial and may have an adverse impact on their finances. Moreover, such individuals are excluded from the Active Taxpayer List (ATL), which may lead to other restrictions, such as difficulty in getting loans and visas.
The Finance Bill 2022 has introduced significant changes in the late filing penalties for income tax returns in Pakistan. Individuals who fail to file their income tax returns on time will face severe penalties and fines, which may have far-reaching consequences on their finances. Therefore, it is crucial for individuals to file their income tax returns on or before the due date to avoid such penalties and fines.