What is Withholding Tax (WHT)?

withholding tax

Withholding tax is a requirement of government for the buyer of any service or item of income to withhold or the deduction of tax from the payment which is paid to the government.

Why Withholding Tax?

  • Less interference with the tax authority
  • Helps to expand the tax net
  • Daily basis revenue generation
  • Includes Tax Evasion
  • Economics documents
  • Maintaining flow with the least cost

Withholding Tax Trend:

Withholding tax (WHT) regime is a worldwide trend and the largest source of national revenue in Pakistan. The dependence on WHT has also been on the rise in recent years. Of the 740 (b) direct tax reserves for the financial year 2012, Rs.422 (b) with a share percentage of 57% was derived from different holding taxes.

Scores Of Withholding Tax:

WHT has been part of the tax system in one way or another since Government and taxpayers directly taxed the two scores.

  • Provides regular revenue to the government for its expenses and operations throughout the year
  • It provides taxpayers with an opportunity to meet their obligations in qualifying installments.

Directorate General of Withholding Tax:

Currently, globalization has forced many countries to adapt their economies to new trade and investment policies included in free trade agreements, tax policies, and alignment. Countries cannot close their borders or their economies. Tax policies are inseparable from international economies. Therefore, the Directorate General of Withholding Tax has been set up by the Finance Act 2008 under Section 230A of the Income Tax Ordinance 2001 to review and manage these holding tax systems while maintaining this competitive environment.

Also Read: What are the penalties of being non-filer?

Efficient Source Of Revenue:

WHT is an efficient source of revenue. Their share of direct tax revenue is about 41%. Rise of Rs.422(b) in 2012 as compared to Rs. 5(b) in 1991 talks about rapid growth and consequent heavy dependence on withholding tax.

According to the Income Tax Act, 1922 tax deduction was from two source salaries and interest on securities. Different provision of the tax law was introduced later to extend WHT net in the 1990s, by providing WHT on large-scale transactions.

The main withholding provisions are related to salaries, imports, exports, commissions and brokerage, dividends, contracts, loan interest, utilities, car taxes, stock exchange provisions, and non-residents, etc. with different rates.



What are the penalties of being non-filer?

penalties of being non-filer

Being a responsible Pakistani, if you haven’t filed your tax then you will have to face the penalties of being non-filer. According to PkRevenue , the date on which you pay your taxes has expired or you may not have the information for your return completion, or you may not have enough money to pay taxes and you may be afraid to file your return. In any case, the non-payment of taxes has serious consequences.

Those who do not file their tax will be caught sooner or later.

We have all heard many stories of income tax denials, whether they are straightforward tax dodgers or political demonstrators everyone has to face major civil penalties as well as criminal penalties of fines and imprisonment.

 Beware, the thing you were not told is that failure in filing tax returns can be very costly.

According to Tax laws:

According to Income Ordinance, 2001, tax laws define both lenient and severe penalties for the individuals who have taxable income but not paying their tax or the individuals who are registered with tax authority but their annual returns are not filed or filed after the due date.

Specification of the number of Fines and penalties :

The Income Tax Ordinance, 2001 specifies the number of fines and penalties for non-compliance. Section 114 of the Ordinance deals with the persons who are required to file their annual income tax returns and Section 116 relates to wealth-related statements.

Penalties Under Section 114:

According to section 114 the person who fails to return the required income within the due date will have to face penalties of being non-filer which are the following :

Penalties for late filing income tax   0.1% of the tax payable in respect of the defaulted tax year on each day and a maximum of 50% of the tax payable

Provided that the above-mentioned fine is less than Rs. 40,000 or no tax is paid in this tax year, then such a person will have to pay a fine of Rs. 40,000


Provided that if the income amount is 75% of the income amount coming from salary and the amount of income from salary is under Rs.50 lakhs, the penalty amount, in that case, will be at least Rs.5,000



Penalties for failure to present the statement of wealth and Reconciliation of Wealth Statement   Such a person will have to pay a penalty of 0.1% per week of taxable income or Rs.100,000 whichever is excessive
Penalty for failure to submit foreign assets and income statement within the due date An individual has to pay 2 % of the income of foreign income or assets each year  
Penalty for the fake or misleading written, oral or electronic statement to Inland Revenue Authority or to an Income Tax Authority   Rs. 25,000 or 100% of tax amount whichever is higher an individual has to pay

According to section 182 A:

According to section 182 A, FBR declares that the taxpayers who will not file their returns within the due date will not appear in the active taxpayer’s list for the year the returns have been paid that person will be included in active taxpayer list only in the condition if he pays he following surcharges:

Categories of Taxpayers   Surcharges at Rupees
For Individual 1000  
For Company   20,000  
For an Association of a Persons   10,000

Penalties Under Section 191:

Further penalties according to the income tax ordinance under Section 191 for the person who fails to submit a notice under subsection (3) and subsection (4) of section 114 of subsection (1) of section 116. Commit a crime or offense with a fine or imprisonment for a term not exceeding one year.

More Penalties of being non-filer:

Taxpayer’s failure for presenting a return of income or wealth statement without any excuse within the period prescribed by the court is considered as a crime and is punishable according to which a person is liable to a fine, not more than fifty thousand rupees or imprisonment not more than two years, or both.

What are the consequences of missing tax deadline?

What are the consequences of missing tax deadline

It is the duty of every filer to tax their files before the deadline in order to protect him from the consequences of missing the tax deadline. However, If any person failed to tax his filer before the deadline, he should file his tax as soon as possible. In case of failure of pay tax, you will have options for a tax extension, late payment, or penalties of late payment.

Note: The last date for federal tax return filing for tax year 2019 is July 15, 2020

Filing for an Extension:

In case of missing tax deadline, you can go for a file for an extension if you want to get yourself protected from penalties. You will have to pay a 5% amount each month after missing the deadline. However, if IRS is paying you the refund, then there is no need to ask for tax extension but if you are not getting a refund then there is a need to filing a tax extension. Moreover, if you are getting refind from IRS for 3 to 4 taxpayers every month in a year then there will be no penalty for missing the deadline.

If the balance is pending:

In case if you have paid your tax before the deadline but you still have a pending amount due then every month, you will have to pay the penalty of 0.5% of the total amount per month and it will be a maximum of 25% payment of late payment. You can also end up likely to owe interest to the remaining amount.

If you are not given with extension, then you will have to pay a penalty of 5% of the pending amount per month with interest as well.

Extension of time for tax payment:

You also have an option to apply for an extension of time in order to pay your tax after the deadline but you will have to meet the legal requirements as well in order to get a time extension. You can apply for a time extension here: Application form for Extension of Time for Tax Payment.

If you want to pay your income tax, visit ‘How to pay income tax‘.

Mobile Devices Regularization – DIRBS

Mobile Devices Regularization – DIRBS

What is DIRBS:

Mobile Device Regularization – DIRBS stands for Device Identification, Registration, and Blocking System used to identify the non-complaint devices. A strong inflow of mobile phones and their import is in demand in the country. However, leaving noteworthy issues with the grey market and counterfeit devices affecting Government, Distributors, MobileNetwork Operators, and Consumers.

How It Works:

The system uses the International Mobile Equipment Identity (IMEI) a 15-digit number that is used for identification of the device. It reveals the device make model and details of type approval, manufacturer, and country of production.

Any person who buys a new smartphone in Pakistan needs to check the phone’s compliance with PTA at the time of purchase. You can check the validity by sending the phone’s IMEI to 8484 by text message or you can check it online at the PTA website. Android users can also check it through by downloading DIRBS android mobile app from the Play Store.

Also Check: How to Pay Income Tax

Advantages Of DIRBS:

DIRBS System helps to identify the illegal devices and the devices which are imported. The copies of the original equipment from official OEMs, Devices whose import tax has not been paid, the devices with invalid IMEIs which are not assigned by GSMA, multiple devices with the same IMEI, the devices that have been reported within Pakistan and globally to GSMA  as stolen or lost these types of devices are considered as illegal or invalid devices using the DIRBS.

Objectives Of DIRBS:

DRIBS  System is used for Identification and approval of Devices in which the device with SIM functionality must contain a unique and valid IMEI, new devices with unverified DIRBS, IMEI / false identifiers will not be registered by the Mobile Network Operators (MNOs) on their networks, the retailers and users will identify the validity of IMEI and only the PTA approved devices will be imported into the country and handling of stolen devices in which the introduction of the mechanism by PTA  through which OEMs and operators will be able to notify the PTA of any business being identified by stolen devices, once notified, MNOs will block stolen devices and mobile network operators (MNOs) will notify the PTA of any device connected to their network if reported as stolen are the main focus.

Awareness Through DIRBS:

              DIRBS system is a very informative awareness for consumers and retailers to check compliance. The system is also beneficial for both the retailers and customers in a way they can check the devices is it proper in warranty in PTA or approved by PTA while purchasing new devices.

How to pay Income tax?

how to pay income tax

If you are a filer or taxpayer and want to pay income tax, you can pay it either online or manually. Please see the payment methods:

Factors of Income Tax Calculation:

Calculating income tax depends on various factors that contain your status whether you are an individual, a company, a firm or a local authority, The amount of your income and its nature, and your age.

Heads of Income:

According to Income Tax Ordinance, 2001, taxable income is divided into five categories:

Salary

Business

Capital Gains

Income from Property

Income from Other Sources

Benefits of Paying Income Tax:

Paying your tax returns and wealth statements is good for your government as well as for you to get filer benefits to enjoy a minimum withholding tax on all of your services at excise offices, airports, banking transactions, in purchasing new cars and for real-estate matters. Earlier, the FBR had separate portals for companies and individuals. But now, they’ve made it easier for everyone.

Online Tax Payment

Steps for FBR E-Enrollment:
Here are the ways for FBR E-Enrollment to start paying your income tax: 

  • Get yourself register with FBR and start paying your tax returns online.
  • For unregistered person go to FBR IRIS portal provide all relevant information by clicking on the registration tab
  • For different options again open the IRIS portal and click on e-enrollment.
  • To complete the registration process, enter all the asked details like your mobile number, CNIC, etc.
  • Login into your account and fill the form by entering all your income information.
  • Now you are a Tax Filer.
  • In order to check that you are on active taxpayer list or not type ATL give space then enter 13-digit CNIC number and send SMS it to 9966.

Guidelines to Pay Income Tax:

Once, you become tax filer you need to pay your income tax by following these steps:

  • First of all, log into e-file
  • Click on the e-Payments tab.
  • Then, go to Create Payment, select Income Tax Annual Return option.

Creating Payment Slip:

  • Selection of related tax year
  • Entering the Tax amount due
  • Selecting a payment mode
  • Clicking on create a button and confirm the e-payment created.
  • Select the nearest city branch of State Bank (SBP)or National Bank (NBP) for payment slip deposit. (you can download the PSID by printing it)
  • After the payment of due tax, the COMPUTERIZED PAYMENT RECEIPT (CPR)is generated. It is reflected in Iris within 24 hours of payment being submitted

Manually Tax Payment:

If you can’t go online and pay taxes then you can manually submit your statements on paper at the Taxpayer Facility Counters of the relevant regional tax office.

However, if you want to pay your income tax but you are not a filer, then check the relevant blog ‘How to become filer‘.

Late Tax Payment Penalty:

Failure to pay your taxes is punishable by a fine or a penalty of one year or two in prison.

How to apply for NTN number online?

Other than apply for NTN manually, you can apply for NTN number online through the FBR official website by following steps given below:

Online Procedure:

apply for NTN online

Step 1: First of all, you need to go to the website: https://e.fbr.gov.pk in order to apply for your NTN number.

Step 2: Here you will see the ‘e-Registration’ tab. All you need to do is select a new e-registration in order to start with a new application.

Step 3: In this step, you need to select the type of application according to your requirements.

Step 4: After that, select the taxpayer type (Individual, AOP, or Company).

Step 5: Here you will have to Enter the CNIC / Reg. Inc according to the type of selected taxpayer, Name and image character then click Ok in order to continue the process.

Step 6: Now you will see the already selected category on the next screen.

Step 7: Once completing the online registration form, verify it and submit that application if you want to apply online. To process from TFC, you need to submit the application at the TFC counter along with your all required documents.

Step8: A Token number will be assigned to that application for further processing/ approval/inquiry. After login, go to the Registration=> Enrollment=> Change profile and update the information accordingly. Moreover, if you want to apply for NTN number manually other than applying for NTN number online, follow the steps:

Manual Procedure:

Step 1: Download the taxpayer registration form by clicking here.

Step 2: After filling the form, submit it to concern NTN Cell/RTO.

Recommended Blogs:
How to become Filer
Check NTN number

How Overseas Pakistanis can become tax filer?

How Overseas Pakistanis can become filer

Many Pakistani National living in foreign countries may have a question arising in their mind that how overseas Pakistanis can become filer. You can find your answer here:

Do Overseas Pakistanis Have to File Taxes?

Yes, overseas Pakistanis can become filer and every foreign Pakistani has to pay their taxes based on their income in Pakistan. Like many other countries, taxation in Pakistan depends on the individual’s resident status other than the foreign country in which he/she resides. Previously, if someone was held for 183 days (or more) during the tax year, it was assumed that the tax resident would end July 1 to June 30. However, this period has been reduced to four months following the 2019 financial law. This means that for the year 2019-20, a person must remain in a foreign country for at least eight months to claim tax-free status. In addition, Pakistan residents should be aware that their income is taxed. Meanwhile, after filing tax returns for foreign Pakistanis, it is necessary to file an income tax return on income from Pakistan. Non-resident Pakistanis are not obligated to file a declaration of wealth. Foreign Pakistanis file tax returns if the Pakistan-based income is below the legal income tax threshold or in any case. If they need a valid CNIC, they file tax returns to trigger the filer benefits.

How Can Overseas Pakistanis File Tax Returns in Pakistan?

First of all, foreign Pakistanis must get NTN (National Tax Number) and it can be obtained by registering on FBR’s online portal.

You should first check the FBR filer status.

How to Check Your FBR Filer Status and NTN?

You can check the taxpayer status and the NTN using the following two methods:

  1. Type ATL [space] CNIC in a message and send this message to 9966. Please note that do not add any dash, any character or extra space between the numbers because it will not be sent. In a few minutes, you will receive a text message of your taxpayer status. For this purpose, you will need a Pakistani SIM card.
  2. Visit the official FBR website and go for search taxpayers in the navigation panel that shows up on the website. At the top-down menu, select Active Taxpayer (IT). Then you will be asked to type your CNIC and the verification code received in the text message. After entering the CNIC and the verification code, click on Verify and you will immediately know whether your name exists in the ATL (Active Taxpayer List) or not.

If your name is available on ATL but you don’t know the NTN number, click on the online NTN / STRN Inquiry link and get your NTN number. Meanwhile, if anyone has an NTN and no Iris login credentials, log in details can be obtained by clicking on the ‘E-Enrolment for Registered Person’.

Registration for NTN

Foreign Pakistanis, who have not filed their taxes before, are required to register themself on FBR by visiting FBR and click on the registration number. They should fill in the required details to enter the iris system.

The person who is applying for NTN should verify himself with the code sent via mobile phone or email. The person is required to verify himself as soon as possible as verification code works for a few minutes after sent to you.

After completing the ‘Registration Form’, submit it to get your NTN number.

For more information, check out our comprehensive blog ‘How to become Filer’.

Filing Tax Return for Overseas Pakistanis

First of all, log in to IRIS and then click the ‘Declaration’ menu available above. Follow the procedure described and be sure while stating your income from foreign sources in the ‘Other Sources’ section of the website.

Moreover, depending upon the months you spent in Pakistan during the financial year. Depending, choose your status as ‘resident’ or ‘non-resident’ in the ‘Active’ section and enter the required information in the input field.

How to become a Filer in Pakistan?

how to become filer

If you are the citizen of Pakistan, it is your duty to pay your tax. To become a filer in Pakistan, you must simply follow the procedure explained below:

  • NTN number can be obtained by visiting your legal adviser or by visiting FBR website and making a request. For this purpose, go to the site and then go to the Registration for Unregistered Person tab. Fill the form as it is a simple form. After filling it, it will generate your NTN number.
  • NTN number takes a few hours and you will get a unique NTN number at your disposal but now the government is working on converting your National CNIC as your NTN number.
  • IRIS RegistrationGo to the federal board of the Revenue website and then go to the IRIS tab. Register yourself to e-enrollment.
  • Once you got registered, you will receive a confirmation email.
  • Fill in the income details required. You need to have all the relevant tax content available.
  • Once you submit all the details, IRIS will confirm that you have now submitted it.
  • After successful submission, you will receive a confirmation email. Later you will be active on the ATL listing.
  • You can also validate it through logging in and entering your NTN or CNIC.

By following these steps, you can become a filer. Moreover, being a filer also gives you different advantages. So, please see the filer benefits.

How to check FBR filer status?

If you don’t know how to check FBR Filer Status, you can get it in many ways. Here are the ways through which you can check your FBR filer status.

VERIFICATION THROUGH ONLINE PORTAL

The ATL status check lets you confirm the Active Taxpayer status.

Active FBR filer status
ATL Status check
CHECK ACTIVE TAXPAYER STATUS BY SMS
  • Type “ATL (space) 13 digits Computerized National Identity Card (CNIC)” and send to 9966.

Check Active Taxpayer status of AOP and Company by SMS through the following procedure:

  • Type “ATL (space) 7 digits National Tax Number (NTN)” and send to 9966.

Check AJ&K Active Taxpayer status by SMS through the following procedure:

  • For any Individual person, you need to type AJKATL (space) CNIC and send it to 9966. The CNIC number shouldn’t have spaced inserted.
  • The person having should type NTN AJKATL (space) 11 digit NTN number and send it to 9966. Also, NTN number shouldn’t have any space inserted between digits.
CHECK ACTIVE TAXPAYER STATUS BY DOWNLOADING ATL

For updated, active taxpayer list please click on the link given:

Active Taxpayer List (Income Tax)

Who is filer and non-filer in Pakistan?

who is filer and non-filer?

FBR has introduced a holding tax for non-filers to double rates as compared to filers withholding tax under the Income Tax Ordinance 2001 to differentiate between filer and non-filer in Pakistan.

Filer:

A person who owns “Taxpayers Card” also with his name appearing on the “Active Tax Payer” list issued by the Federal Board of Revenue is known as “Filer“.

Non-Filer

A person who is not registered with (FBR) as an active taxpayer and does not files income tax returns annually is known as “Non-Filer”.

Purpose of Differentiating between Filer and Non-Filer:

The basic purpose of differentiating filer and non-filer in Pakistan categories is to Increase the tax base and also to punish those who do not file their tax returns, the Finance Act 2014 imposed higher taxes for non-filer. The tax of non-filers is being tightened every year to force them to become filers.

Benefits of Filer:

  • Filers have to pay less with-holding tax.
  • No restrictions on filers from purchasing or importing motor vehicles.
  • Filers can purchase any property without any restrictions.
  • Filers have to pay fewer tax rates on prize bonds.
  • Filer pays a 15% tax on their dividends.

Disadvantages of Non-Filer:

  • Ban on non-filers from purchasing or importing motor vehicles according to The Finance Bill – 2018 and local carmakers have already implemented and notified it.
  • Ban on non-filers from purchasing a property worth more than Rs one lakh. 4 million.
  • Non-Filers have to pay higher withholding taxes.
  • Non-Filer has to pay higher tax rates on prize bonds.
  • Non-Filer pays 20 percent tax on their dividends.
  • Higher rates on the registration of vehicles and taxes on tokens.

Nowadays, with the advent of information technology (IT) facilities, becoming a filer is not so difficult. The FBR has introduced a number of facilities in this regard which help people to easily become filers and file their tax returns. A person has to register a National Tax Number (NTN) before filing a tax return or registering for an ATL. You can register for NTN by visiting “iris.fbr.gov.pk” without visiting the tax office.