[DISCLAIMER] THIS IS FOR GENERAL GUIDANCE ONLY AND NOT A LEGAL, EXPERT, PROFESSIONAL OR ACTIONABLE ADVICE. PLEASE CONSULT A PROPER TAX LAWYER / CONSULTANT FOR CORRECT AND ACCURATE APPLICABILITY OF LAW ON CASE TO CASE BASIS. THIS ARTICLE IS BASED ON INCOME TAX ORDINANCE 2001 AS AMENDED UPTO 11^TH MARCH 2019. LAST UPDATED ON 04-SEPTEMBER-2019.

Who is required to file tax return?

The basic question, which pertains to taxation in Pakistan, is who should file a return. Income Tax Ordinance 2001 (ITO or ITO 2001 or Ordinance) dictates several returns which are to be filed under the ordinance. Returns under Section 114, 115, 116 and 116A are most commonly returns which are required to be filed by the persons. 114 details the conditions for which an annual return of Income is to filed, and Section 115 deals with the instances, where all of the income taxed falls under final tax. Whereas Section 116 stipulates the conditions who should file the wealth statement and Section 116A defines who should file Foreign Wealth Statement.

Who should File “Return of Income”? Section 114

Return of Income or Annual income tax return as it is commonly called or 114 as normally used by tax practitioners is required to be filed annually for a complete “Tax Year” from 1 July to 30 June (or in specific cases, other periods or not for complete period). The section specifies following persons who are required to file returns by law.

• Every Company (i.e. Private, Public, Society, NGO, Trust or any such organization which is formed under any law)
• Every individual and a partnership firm / AOP which has taxable income is in excess of the maximum amount which is not charged to tax.

Apart from the above two major categories, following categories of persons are also required to file return under section 114, whether or not they have taxable income.

• A person having NTN
• A person who had taxable income in last two years
• A resident person registered with any chamber of commerce and industry or any trade or business association or any market committee or any professional body including Pakistan Engineering Council, Pakistan Medical and Dental Council, Pakistan Bar Council or any Provincial Bar Council, Institute of Chartered Accountants of Pakistan or Institute of Cost and Management Accountants of Pakistan.
• Holder of commercial or industrial connection of electricity where the amount of annual bill exceeds rupees five hundred thousand
• owns a motor vehicle having engine capacity above 1000 CC
• owns a flat having covered area of two thousand square feet or more located in a rating area
• owns immovable property with a land area of five hundred square yards or more located in a rating area;
• owns immovable property with a land area of two hundred and fifty square yards or more or owns any flat located in areas falling within the municipal limits existing immediately before the commencement of Local Government laws in the provinces; or areas in a Cantonment; or the Islamabad Capital Territory
• Every individual whose income under the head ‘Income from business’ exceeds rupees three hundred thousand but does not exceed rupees four hundred thousand in a tax year is also required to furnish return of income from the tax year.

There are few other categories as well, however, majority of individuals fall under the above categories are required by law to file tax returns.