Filing taxes is a financial responsibility and legal compliance in Pakistan. Understanding the distinction between a tax filer and a non-filer, the advantages of becoming a filer, and the process to become one can significantly impact your financial well-being. This article will provide a clear and concise explanation of who a tax filer is in Pakistan, the benefits of being a filer, and the steps to become one.
What is a Tax Filer?
A tax filer in Pakistan is an individual or entity that has registered with the Federal Board of Revenue (FBR) and regularly submits income tax returns. This process involves declaring your income, calculating your tax liability, and paying any due taxes. Being a tax filer indicates compliance with tax laws and contributes to the country's revenue system.
What is a Non-Filer?
A non-filer, on the other hand, is someone who either has not registered with the FBR or fails to submit their income tax returns regularly. Non-filers are subject to higher tax rates and may face legal penalties for non-compliance. The government encourages taxpayers to become filers by offering various benefits and imposing higher taxes and fines on non-filers.
Advantages of Becoming a Tax Filer
Becoming a tax filer in Pakistan offers numerous advantages, ranging from financial benefits to legal and social perks. Here are some of the key benefits:
Lower Tax Rates
One of the most significant advantages of being a filer is the reduced tax rates on various financial transactions. Some examples according to the Finance Act 2024:
- Bank Transactions: Filers are subject to a withholding tax of 0.3% on cash withdrawals exceeding PKR 50,000 in a day, compared to 0.6% for non-filers.
- Property Transactions: Filers pay a withholding tax of 1% of the property's value, while non-filers are taxed at 2%.
- Vehicle Registration: Filers enjoy lower tax rates on vehicle registration. For example, the tax rate for filers on registering a 1000cc car is PKR 10,000, compared to PKR 30,000 for non-filers.
Access to Financial Services
Being a tax filer opens up access to various financial services:
- Bank Loans and Credit: Banks prefer lending to filers due to their verified financial standing and compliance with tax laws. This results in easier access to personal and business loans, as well as higher credit limits.
- Credit Card Approvals: Filers often receive quicker approvals and higher limits on credit cards.
- Mutual Funds: Various exemptions and lower tax rates on profits.
Travel Benefits
The Finance Act 2024 also provides travel-related benefits for filers:
- Reduced Airport Tax: Filers pay a lower airport tax on international travel. For example, the airport ticket tax for filers is PKR 15,000, compared to PKR 30,000 for non-filers.
- Travel Permission: Non-filers will be subject to a travel ban till they become filers.
Legal Compliance and Avoidance of Penalties
Being a filer ensures compliance with tax laws, helping you avoid penalties and legal consequences. Non-filers face higher withholding taxes, fines, and potential legal action for non-compliance.
How to Become a Tax Filer
The process of becoming a tax filer in Pakistan is straightforward and can be done online through the FBR’s IRIS portal. Here are the steps:
Registration with FBR
- Visit the FBR Website: Access the online portal.
- Register for NTN: Obtain your National Tax Number (NTN).
- Create an IRIS Account: Register on the IRIS portal for e-filing.
Filing Your Tax Return
- Log into IRIS: Use your credentials to access your account.
- Select the Appropriate Form: Based on your income type.
- Enter Income Details: Provide accurate information about your income. Do not enter inaccurate information as this will result in sanctions and show cause notices.
- Claim Deductions and Credits: Utilize allowable deductions and tax credits.
- Submit the Return: Review and submit your return online.
Conclusion
Being a tax filer in Pakistan not only ensures legal compliance but also provides numerous financial and social benefits. Lower tax rates, easier access to financial services, and travel perks are just a few of the advantages. If you are not yet a filer, now is the perfect time to register with the FBR and start filing your income tax returns.
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