What are the Benefits of Being a Tax Filer in Pakistan?

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A large chunk of the total population of Pakistan is based on salaried employees and entrepreneurs. Despite being home to millions of working and business professionals, the country’s tax-to-GDP ratio is alarmingly low. So, why do all these people not pay taxes? Well, the biggest reason behind the phenomenon of tax gap is lack of awareness. There are numerous benefits of being a tax filer that most of these self-employed and salaried individuals in Pakistan don’t know about. 

Funds collected from the taxpayers in Pakistan is also one of the biggest sources of income for the state’s economy. Furthermore, it is the rightful duty of every Pakistani citizen to pay taxes levied on their assets. Serious efforts like penalising non-filers of tax returns and provision of benefits to the tax filers in Pakistan are being jointly concerted by the government of Pakistan and Federal Board of Revenue (FBR) to bring more and more people into the tax net. 

Efforts to increase tax net in Pakistan
Serious efforts have been undertaken by the taxation authorities to bring more and more people into tax net

After making filing of tax returns for salaried and business individuals mandatory, FBR Pakistan has started sending letters to people in which they have been directed to register for National Tax Number and get their names included in Active Taxpayers List (ATL).

Government’s Tax Amnesty scheme 2019

A tax amnesty scheme has been introduced by the government of Pakistan in 2019. The government’s amnesty scheme 2019 covers a number of assets from real estate to undisclosed sales. Moreover, by the end of June 2020, a default surcharge ranging between 10% and 40% will be imposed upon making late payments, which means individuals have ample of time to disclose their assets and income under the tax net. 

As a side note, you can also take a look at our post in which we have discussed tax bracket 2019 in detail. 

Who Should File Tax Returns?

Salaried and business individuals in Pakistan have to file tax returns
Filing tax returns brings with it many benefits for salaried and business individuals

In the light of Pakistan’s Tax Law, all individuals having an annual income of PKR 4 lakh or above are supposed to file their tax returns on an annual basis. National Tax Number, which is more commonly known as NTN, is a special number allotted by the government of Pakistan to every taxpayer. This is how Federal Board of Revenue (FBR) put you in the list of Active Taxpayers List.

After getting your name included in ATL, you will get the privilege of paying lower taxes than the non-filers on financial transactions including different types of bank transactions, sale/purchase of property and vehicle, etc.  

List of Benefits of Being a Tax Filer in Pakistan

Want to start filing tax returns? Do it right away. Taxpayers in Pakistan, by all means, enjoy more relief on taxes compared to the non-filers. So, let’s take a look at the list of advantages of being a tax filer in Pakistan.

  • Taxpayers are only required to pay half of withholding tax in comparison to the tax paid by the non-filers.
  • A non-filer is barred from owning a property worth over PKR 50 lakh whereas people who regularly file tax returns can purchase any property.
  • Non-filer importers of raw material would have to pay 8% on the total import whereas tax payer importers are required to pay 5.5% on raw material imports. 
  • Paying 9% duty on commercial exports is obligatory for non-filer exporters in Pakistan. On the other hand, the taxpayers are only supposed to pay 6% duty on their commercial exports.
  • A total of 20% tax is liable on the dividends (company’s profit) of non-filers against the 15% tax rate set for tax filers.
  • Coming to the taxes levied on profits of banks and saving schemes, a non-filer has to pay 15% tax against the 10% tax paid by active taxpayers in Pakistan.
  • Tax filers only pay 15% tax upon winning prize money through prize bond as compared to the 25% tax paid by the non-filers.
  • People who regular file income tax returns have to only 1% on property transfer tax against 2% tax paid by property owners who are non-filers.
  • Whether it’s the auctioning by government or any other private entity, tax filers pay only 10% tax against 15% tax paid by non-filers in Pakistan.

Below is data showing a comparison between the amount of taxes levied on filer and non-filer on funds transfer through banks as well as on vehicle ownership, registration and transfer. This will give you a better idea about the advantages of being a tax filer in Pakistan.

Difference in Applicable Taxes for Filers and Non-Filers

Bank Transaction Non-Filers Filers
Cash Withdrawal Above PKR 50,000 0.60% 0.30%
Bank Transfer, Cheque, Purschase Order Exceeding PKR 50,000 0.40% 0%
Purchase of Vehicle Non-Filers Filers
Under 851 CC PKR 10,000 PKR 10,000
851 – 1000 CC PKR 25,000 PKR 20,000
1001 – 1300 CC PKR 40,000 PKR 30,000
1301 – 1600 CC PKR 1,00,000 PKR 50,000
Registration of Vehicle Non-Filer Filer
Under 851 CC PKR 10,000 PKR 10,000
851 – 1000 CC PKR 25,000 PKR 25,000
1001 – 1300 CC PKR 40,000 PKR 30,000
1301 – 1600 CC PKR 100,000 PKR 50,000
Transfer of Vehicle’s Registration Non-Filer Filer
Under 851 CC PKR 5,000 PKR 0
851 – 1000 CC PKR 15,000 PKR 5,000
1001 – 1300 CC PKR 25,000 PKR 7,500
1301 – 1600 CC PKR 65,000 PKR 12,500

In case, you also want to register for NTN and include your name in FBR’s Active Taxpayers list, then here is everything you need to know about the process of becoming a tax filer in Pakistan.

For more updates on new taxation laws in Pakistan, keep following Zameen Blog, Pakistan’s best blog that covers all lifestyle related matters. 



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