7 Common Mistakes to Avoid While Filing Income Tax Returns

Common Mistakes to Avoid While Filing ITR

Over the years the government of Pakistan offered several benefits to persons filing income tax returns in Pakistan. In many cases, we have observed that persons only to avail benefit of “Filer” status file their nil, incomplete, wrong or false declaration with the Federal Board of Revenue in complete disregard of the law without pondering its consequences. Eventually, such persons encounter strict audit proceedings, penalty or assessments, for filing false declarations from the Federal Board of Revenue (FBR).

Here are 7 common mistakes to avoid when filing income tax returns with FBR to avoid penalty, audit proceedings or assessments:

1- Check your FBR Maloomat Portal before filing income tax return

It is a presumption of law that any income or asset not disclosed in the income tax return is liable to be taxed under the law. FBR on the daily basis retrieves income, asset and expense information of persons from different reporting entities. All the information that FBR receives is used totally with the income tax return filed by you with FBR. In case of incomplete information, FBR initiates a legal proceeding and sends you a notice for compliance. It is therefore strongly recommended that before filing your income tax return, do check your FBR Maloomat Portal to avoid filing incomplete returns. Use FBR Maloomat Portal now by entering your login credential to know the information FBR already carry against you.

2- Declare All Incomes Including Income From Investments

Every person declaring his income must ensure to add details of all incomes in their income tax return. Some of the incomes under the law include as follow:

  • Business income.
  • Rental income.
  • Salary income.
  • Profit on sale of property.
  • Dividends.
  • Prize bonds.
  • Profit on saving accounts.
  • Fixed assets.
  • Gain on sale of precious items.

Most of the time while filing returns we forget to report a profit on investments on our income tax return such as profit or interest on income from fixed deposits (FDs), capital gains arising from the sale of mutual funds or any other asset. Individuals generally forget to report interest earned from a savings bank account, fixed deposits, recurring deposits, etc.

3- File Complete Wealth Statement

Law requires that along with the declaration of income, a person must also declare a wealth statement with complete detail of assets acquired and held in or up-till a Tax Year. The taxpayer must add the detail of assets acquired in his name or acquired Benami in name of his family members, including bank accounts, saving certificates, prize bonds, vehicles (fully owned or on lease), share capital in the business and such other assets as may be acquired in a tax year for which return is being filed.

4- Declare the Actual Expenses

The taxpayer must also calculate all the expenses incurred in a tax year including rent, car maintenance, traveling, education, household expenses and such other expenses as may be incurred during the year.

5- Not Submitting Income Tax Returns on Time

In most cases, the taxpayer receives income tax notice for not filing an income tax return on time. Every person filing an income tax return after the due date is required to pay a minimum penalty of PKR 20,000/- in the case of a salaried person, whereas, in the case of a business person minimum penalty payable is 5% of the tax payable on business income but in no-case minimum penalty payable by a business person is PKR 20,000/-. It is recommended to file your income tax return before the deadline. The deadline for filing income tax returns for any tax year is generally 30th September unless extended or further extended by FBR.

6- Wrongfully Claiming Tax Credits and Tax Deductions

There are certain tax credits and tax deductions allowed to certain persons under the law. However, in several cases, taxpayers wrongfully claim tax credit and deductions. It is best to take legal advice from a tax expert to know whether you are entitled to any tax credit or tax deduction under the law to avoid facing any income tax notices from FBR.

7- Revise Your Return to Remove Errors and Discrepancies

The normal time allowed to revise your return is 60 days from the day on which the return has been filed with FBR. Taxpayers must thoroughly review the return filed with FBR and instantly revise their income tax return as soon as they discover any mistake, error or discrepancy to rectify the mistake.

If you are worried about receiving income tax notices from FBR, all you need to do is to contact the best law firm in Lahore (Hamza and Hamza Law Associate). We offer a 100% worry-free income tax return filing service to our clients.