So, you are eligible for tax in Pakistan, and you might be debating whether to file with the FBR or stay a non-filer. While being a non-filer can feel like an easy way out, becoming a filer has its perks and responsibilities. Filing is your badge of being a responsible citizen. But let’s be honest-there are a few disadvantages of being a filer in Pakistan.
The same goes for non-filers. So read on and find out what being a filer means for you and the challenges that come with it!
What is a Filer in Pakistan?
In Pakistan, a filer is a taxpayer who regularly submits their income tax returns to the Federal Board of Revenue (FBR). A filer can be an individual or organization. If you want to take the benefits that come under tax laws, then you have to first become a compliant taxpayer.
But being a filer in Pakistan also puts some responsibilities on your shoulders. First, you must file your annual income tax returns by the deadline. Make sure your submitted information is accurate and on time.
Paying the correct amount of tax is another vital duty. As a filer, you should calculate your dues carefully to avoid any nasty surprises during audits.
Likewise, filers must keep thorough records of their financial transactions and documentation. This organized approach is vital. Why? Because it is your evidence if questioned by the FBR.
Similarly, stay updated on tax laws and regulations. Well, you know, tax regulations often change, and ignorance is not an excuse.
Disadvantages of Being a Filer in Pakistan
Being a filer in Pakistan has its share of challenges, and they can mount up. For instance:
✅ Higher Tax on Certain Transactions
The 2024-2025 budget in Pakistan introduced increased tax rates for filers, which can enormously impact their financial decisions. The tax imposed on imports increased to 11% for raw materials and to 12% for commercial imports. This increase may result in lower profitability. You will also get more expensive material sourcing.
Likewise, if you are up to property purchases, then you should know that the tax rate for filers has increased to 7%. Such hype can deter potential investors and homebuyers like you, who are already grappling with rising costs.
And you know, dividend income has also taken a hit, with the tax now set at 30% for filers. This sharp increase may discourage investors from purchasing dividend-paying equities, which would reduce total returns.
✅ Complex Filing Process
Filing taxes in Pakistan can feel like a K2 to climb, especially for salaried individuals and small business owners. First, you need to gather a ton of documents salary slips, bank statements, expense receipts, and tax forms.
Then, if you are a salaried person, you have to verify your hard work. Hard work means your income. You have to account for every little thing, from bonuses to overtime.
And if you are a small business owner, get ready for a bumpy ride. You must keep meticulous records of every transaction. No doubt, it is a full-time job in itself.
Another major obstacle is time. Hours or even days may pass during the process. Getting paperwork together, completing forms, and making sure everything is correct is exhausting for sure.
But the biggest thing is confusion. You can cross the above objections but this one. It keeps you in the loop. Tax laws can be complex and change at a moment’s notice. Many filers find themselves second-guessing their calculations or misinterpreting regulations.
Similarly, online filing systems can be glitchy, and technical issues pop up just when you least expect them. So, you’re paying and still face challenges. This is how the tax system works.
✅ Penalties for Late Filing
There are severe consequences for missing Pakistan’s tax filing deadline. If your return is not filed on time, you may be fined up to Rs. 1,000 per day that it is late. And it piles up quickly.
To make matters worse, late filers may also be subject to extra taxes on any unpaid dues. Further, you will miss potential tax benefits.
Difference Between Filer and Non-Filer in Pakistan
| Aspect | Filers | Non-Filers |
|---|---|---|
| Tax Rates | Enjoy lower tax rates on multiple transactions | Face higher withholding taxes |
| Financial Transactions | Experience fewer hurdles and easier access to financial services | Struggle with access to financial services |
| Legal Compliance | Adhere to tax lawsNo threatening legal risk | More prone to audits and penalties |
Benefits of Being a Filer Despite the Disadvantages
Well, being a filer also offers you numerous benefits. As, a filer and non-filer have both their ups and downs. So, taxpayers get ready for some relief.
✅ Lower Tax Rates on Transactions
One benefit of filing in Pakistan is that regular transactions are subject to reduced tax rates. For property sales, you pay just 1% tax, while non-filers face a hefty 2%. This can make a difference. Right?
For vehicle registration, the benefits keep rolling in. As a filer, you benefit from far lower fees. For instance, you must pay PKR 25,000 to register a car with an engine capacity of 1300cc to 1600cc, whereas those who do not file will have to pay PKR 50,000.
✅ Savings-Oriented Bank Transactions
Reduced withholding taxes on banking transactions are another perk. Filers only pay 0.3% tax on withdrawals over PKR 50,000, while non-filers pay 0.6% tax. Over time, this difference might accumulate and reduce that banking pressure.
✅ Better Financial Situation
Being a filer also has the benefit of improving one’s financial situation. Filers can get better terms on loans and business deals, since banks and other financial institutions see them as more responsible.
How to Become a Filer in Pakistan
Hence, from the above discussion, you have decided to become a filer. But how? Don’t worry, below easy-peasy steps will register you as a filer.
Step 1: Get Your National Tax Number (NTN)
Firstly, apply for your NTN. You can do this online through the FBR website.
Step 2: Choose Your Filing Method
You can file manually as well as electronically. Try to file your return electronically using the IRIS portal. It’s user-friendly and saves you time.
Step 3: Collect Required Documents
Gather your all necessary paperwork like salary slips, bank statements, investment receipts, and any documentation for eligible deductions.
Step 4: Submit Your Income Tax Return
Log into the FBR IRIS portal and fill out your return. Make sure you provide accurate information about your income, expenses, and assets. But do it before the deadline.
Step 5: Pay Your Taxes
Now, figure out your tax liability and pay any dues. You can do this online through the FBR’s e-payment system or at specific banks.
Step 6: Verify Your Status
After filing and payment, check the Active Taxpayers List (ATL) on the FBR website to confirm you’re officially a filer.
FAQ’s
Is it better to be a filer or a non-filer in Pakistan?
It is best to be a filer in Pakistan. Because it proves you are a responsible citizen. Further, you will enjoy lower tax rates on various transactions, and get easy access to financial services.so, there are a lot of benefits to filing in Pakistan.
What are the disadvantages of not being a filer?
Non-filers face higher withholding taxes, which can significantly increase the cost of transactions like property purchases and vehicle registrations. They may also have limited access to financial services and are more likely to be audited and penalized by tax authorities.
How much tax do filers pay compared to non-filers?
Filers typically pay lower tax rates. For example, on property transactions, filers are charged 1%, while non-filers face 2%. The same is true for other transactions.
What happens if a filer misses the tax deadline?
If a filer misses the tax deadline, they may incur financial penalties. The initial penalty is usually a fixed amount, and filers might also face additional fines for each day the return is late, along with potential loss of tax benefits.
