The first step towards filing Income Tax Return for Business in Pakistan is to declare your business income, expenses, tax deductions, assets, liabilities and tax payable to the Federal Board of Revenue on IRIS portal. In simple language, the business owner needs to register with FBR, obtain NTN/ login credentials, prepare business records, complete Return of Income and Wealth Statement if applicable, reconcile the numbers and submit the ROIWS online.

According to FBR, the filing of income tax returns is done through IRIS while e-enrollment provides NTN (a unique number) and password for login. As per FBR, when the Return of Income and Wealth Statement status changes to ‘Completed Task’ it means that the document was successfully submitted.

Having the IRIS opened and number entered isn’t enough for someone that requires professional assistance in Income Tax Return Filing Pakistan, the review of records is startlingly significant. An incorrect return may result in non-filing, an incorrect tax liability, risk of audit and/or an FBR notice.

How to File Income Tax Return for Business in Pakistan (Step-by-Step)

1: Log in to IRIS

Go to FBR IRIS website and log in using your NTN/Registration number and password. Be sure to update your profile prior to filing. Update your mobile number, email, business address or activity code before if it is incorrect.

2: Select the Correct Tax Year and Return Form

Select the proper tax year. One of the common mistakes is choosing the wrong tax period. If the income is from business, then it is normally reported in section 114 of the Income Tax Ordinance 2001. Choose the form that is appropriate for your type of taxpayer and your source of income.

3: Enter Business Income

Input receipts, service income, trading income or other business income. Once a shopkeeper has checked the daily sales records and bank deposits, he/she can enter in gross sales. Once you have been able to verify and document the receipts on your bank statement and payment platforms, a freelancer can enter them into your local or foreign receipts.

4: Add Allowable Business Expenses

Include business expenses that are allowable, including rent, salaries, electricity, internet, office expenses, vehicle expenses, professional fees, software subscriptions, repair and purchase expenses that are properly supported. Expenses that are allowed as expenses in the income tax return in Pakistan must be legitimate, business and documented.

5: Add Withholding Tax and Advance Tax

Include withholding tax withheld by banks, customers, suppliers, telecom companies, vehicle registration authorities or any other entity where the withholding tax is deducted. Enter advance tax paid throughout the year. This assists in working out the tax liability on Pakistan’s business income.

6: Prepare Profit and Loss Account and Balance Sheet

Business return is to be backed up by business accounts for tax return. The profit and loss account will reflect on the income and expenses and the balance sheet will reflect the assets, liabilities and capital. The annual accounts for FBR return should be consistent with the wealth statement and bank statements.

7: Generate Tax Challan and Pay Tax

IRIS gets the calculation of tax payable (if it does), generates a tax challan and pays the tax through the banking channel provided by IRIS. Once payment is made, ensure CPR is in safekeeping. CPR is proof of payment, and may be required if payment is not recorded in IRIS.

8: Submit Return and Check Completed Task

Once the Return of Income and Wealth Statement is completed reconcile and submit. The successful completion of the forms is indicated by them being translated from Draft to Completed Task in FBR.

What Is a Business Income Tax Return in Pakistan?

A business income tax return is an income tax return that is filed by a business every year. It contains details regarding business income and income tax, business admissible expenses, CPR, tax challan, business capital and wealth statement information, advance tax, withholding tax, etc.

Return can be availed by sole trader, shopkeeper, trader, freelancer, online sellers, service provider, AOP, Partnership firms or Private limited companies etc. The simplest aim is to make FBR aware of the income generated and the costs of the business as well as the tax deducted and any remaining tax due.

Difference Between Income Tax and Sales Tax

The primary association of income tax is with profit and/or taxable income. This is not the situation with sales tax. It can be applied to a business registered under the Sales Tax Act, 1990 or, depending on the province, a service provider that is registered under PRA, SRB, KPRA or BRA. According to FBR, every person, who registers under the Sales Tax Act, 1990 or Federal Excise Act, 2005, is supposed to submit sales tax return.

NTN, STRN and CNIC as NTN

NTN is an acronym for National Tax Number. For many, CNIC is equal to NTN, following their registration. STRN stands for Sales Tax Registration Number which is applicable where sales tax registration is applicable. It is important to fill business NTN tax return with the correct taxpayer profile and business activity and accounting period Pakistan.

Who Needs to File Business Tax Return with FBR?

Business tax return filing in Pakistan is basically applicable to those who are receiving business income. The sole proprietors, shopkeepers, traders, freelancers, e-commerce sellers, service providers, AOPs, companies and partnership firms are included in this list.

A company or AOP will have its own legal and tax registration requirements, as will a sole proprietor, which can be done under an individual profile. The first step to do while preparing an income tax return is to register with FBR, the process of which can be done online through IRIS, while the Principal Officer of an AOP or Company might have to visit the Regional Tax Office (RTO).

Sole Proprietors, Shopkeepers and Traders

A sales and purchase, rent, salary, utility bill, bank deductions, stock and profit form part of income tax return Pakistan sole proprietor. For Pakistan shopkeeper’s income tax return, bank deposits, cash flow and available purchase records should be equal to business sales.

Freelancers, Online Businesses and E-commerce Sellers

Freelancers and online sellers must also be aware of the business tax compliance rules. Business income and expenses should be appropriately included in the return if you are a digital provider, an online vendor or if you receive foreign remittances. If you’re looking for a more specific guide, then you should check out Income Tax Return for Freelancer Pakistan.

Companies, AOPs and Partnership Firms

A detailed account – such as a profit and loss account, balance sheet, and tax payment and registration details – will typically be required from a company or AOP. Incorporated structure, usually, Income Tax Return for the Company Pakistan is more complex as compared to a simple individual return. Income Tax Return for Partnership Firm Pakistan also includes details of its partners/members, records and proper classification of income.

Documents Required for Business Tax Return Filing

Prior to kick off IRIS income tax return filing Pakistan, gather these details:

CNIC, NTN, IRIS login, mobile number, email address, Business name, Business address, Principal business activity, Accounting period, Business bank statements, Sales and purchases record, Invoices, receipts, Salary record, Rent record, Utility bills, Withholding tax certificates, Advance tax details, CPR and Tax challan.

FBR provides the following information about the e-enrollment requirements for individuals (business income excluded): CNIC or passport number, cell number, email, address, accounting period, business name, business address and principal business activity. FBR also provides information requirements for principal officers separately for companies and AOPs.

For businesses: Retain SECP incorporation documents, bank certificates, director information, accounting records and audited/prepared financial statements (if applicable) For AOPs: retain the partnership deed, CNIC of the partners, business address and bank information.

How to Register on FBR IRIS and Get NTN

This process is initiated by registering with FBR. Business owner (individual) can register with IRIS with his CNIC, verified mobile number and email. By registering you will be able to log in using your NTN or registration number.

In case of any difficulties at the time of registration, the NTN Registration Services in Lahore might be helpful for business owners who are not aware of how to update their business details, activity code or tax profile.

With e-enrollment, FBR will send the taxpayer an NTN and password which the taxpayer can use to log into IRIS. Taxpayer can use Forgot Password option to retrieve forgotten password and can verify codes sent to mobile and e-mail.

An FBR IRIS Login Guide should be able to provide the newbies with instructions on how to log in to the portal, reset password, verify mobile/email, choose proper tax year and prevent them from filing the wrong return form.

How to Calculate Taxable Business Income in Pakistan

In the simplest term, it’s:

Taxable profit of the business = Business receipts – Allowable business expenses

The final tax liability however, will depend on the type of business and applicable tax regime, withholding tax, advance tax and the existing tax law. Some of the income could be subject to normal tax regime and some transactions could be subject to final tax regime or minimum tax. This is why it is not advisable to copy someone else’s return.

In the case of a shopkeeper, the purchases, rent, salaries, electricity, closing stock and withholding tax will be reviewed, for example, on a yearly basis. A freelancer could require to have a look at foreign remittance, bank deductions, internet costs, software and business-use equipment.

For instance, Advocate Shahid frequently recommends that business owners compare the bank deposits, sales and wealth statement prior to calculating tax. Many IRIS problems are only reported later as the taxpayer reported income without asset/liability or drawing figures.

How to File Wealth Statement with Business Return

Assets, liabilities, personal expenses, business capital, opening wealth and closing wealth are displayed on a wealth statement. It is a link between your income and your gain or loss in wealth.

Only when current year’s wealth is higher or lower by the same amount that income is higher or lower than expenses will the Wealth Statement be successfully submitted, FBR says. The income tax return won’t be submitted if it’s not able to be reconciled with the wealth statement.

If wealth statement does not reconcile in IRIS/assess business capital, cash balance, bank balance, personal drawings, assets purchased, loan received, loan repaid and household expenses. Please do not fill out figures just to submit the return.

Filing Deadline, Tax Payment, Fees and Penalties

According to FBR, the last date to file income tax returns for individuals and AOPs is 30 September, for companies is 31 December while for those companies with special tax year, it is 30 September.

Income Tax Return Deadline Pakistan is a good Guide for an Internal Resource since Deadline, Extension and ATL consequences are all search topics of interest.

Late filing can impact filer status, ATL appearance and exposure to surcharge. Depending on the facts, penalties and default surcharge also may be incurred under the Income Tax Ordinance, 2001. There is a fee associated with the professional handling of records that is dependent on the complexity of the records. A simple sole proprietor return is likely to be cheaper than an AOP or company return as companies need to check more information like withholding returns, compliance history and balance sheet information.

How to Check Filer Status and ATL After Filing Return

Active Taxpayer List (ATL) is a term used to describe this. Indicates if taxpayer is deemed to be active for the tax year. According to FBR, checking the online portal, SMS and downloadable ATL list is the option to check ATL status. The individuals can send a SMS with ATL + CNIC to 9966 and AOPs and Companies can send a SMS with ATL + NTN to 9966.

If the return has been filed but you are remaining non-filer, then look to see if the return was actually filed, that it was moved to Completed Task, if the correct tax year was filed and if any late filing surcharge applies.

How to Become Tax Filer in Pakistan must write about the process of registration, filing returns, ATL checking and some common causes of delayed filers.

Common IRIS Errors and Their Solutions

IRIS Return Not Submitting

This typically occurs due to the lack of reconciliation of the wealth statement, lack of tax payment, there is an incomplete annexure or the tax period is not selected.

CPR Not Showing in FBR Account

Check PSID and CPR, payment date, check bank processing and recheck IRIS. If the problem persists, maintain evidence of paid to file for complaint/correction.

Invalid NTN or CNIC Not Registered

Review the details of FBR registration, e-enrollment and profile. If there is no business activity, amend registration particulars prior to filing.

Mobile Number or Email Not Verified

Utilize the registered SIM and working email. Make use of the registered SIM and working email. Password reset/verification codes are reliant on accurate mobile and email details.

Profit and Loss Mismatch

Prepare Sales and Purchase, Expense, Stock, Opening capital, Closing capital, Liabilities and Drawings reconciliation. A mismatch can raise audit risk and/or cause errors in the wealth statement.

Common Mistakes to Avoid

Never declare sales with no bank deposits. Don’t take any expenses on a whim or without receipts or proof. Don’t avoid or escape withholding tax deductions. Please don’t save the return in Draft. Never file the return, without reading the wealth statement. Avoid making a copy of last year’s return without verifying the year to date business income, expenses, bank accounts and assets.

If you are a salaried individual who has a side business, you must not use the wrong form or overlook income from the side business. Income Tax Return for Salaried Person Pakistan can be a better guide for those who have only salary income but if there is mixed income, it is to be carefully classified.

Sales Tax, STRN, PRA, SRB, KPRA and BRA: When Required?

Doing your income tax return does not mean that you are filing your sales tax. If your business is sales tax registered, it’s possible you might need to file sales tax returns separately. Provincial sales tax authorities can also include service providers.

For Punjab, e-registration, e-enrollment, e-filing and payment and active taxpayer services are offered by PRA. The registration, enrolment, tax payment and return filing for sales tax in Sindh on services is done electronically in accordance with SRB’s information.

Legal Issues After Business Tax Return Filing

If there is a discrepancy between the withholding tax, business income, bank deposits, expenses, sales, purchases or wealth statement, a notice will be issued by FBR after filing. There are various references in the law that could apply to this situation, such as section 114 (return filing), section 120 (deemed assessment), section 122 (amended assessment), section 182 (penalties) and section 205 (default surcharge).

Taxpayer can appeal against an order passed by a Commissioner/ Officer Inland Revenue, if he is not satisfied with such order, says FBR. The appeal process can involve the Commissioner Appeals, Appellate Tribunal and higher court.

It’s at this point where the services of a Tax Consultant Lahore or tax lawyer can come in handy and prepare a notice reply, rectification application, revised return, or appeal. Our Tax Consultancy services include return filing, NTN registration, bookkeeping review, reply to the FBR notices and tax planning.

Official Portals and Department Guidance

Main body of the income tax is the Federal Board of Revenue. IRIS is used to file income tax returns, update IRIS, reset password, filing of returns, revision of returns, filing of wealth statement and updating the wealth statement. If sales tax is due on services, the relevant Provincial authority (PRA, SRB, KPRA or BRA) based on its location and the nature of its business, should be used.

FAQs

How to file income tax return for business in Pakistan?

Lodge a return after reconciling – business income, expenses, withholding tax, advance tax, details of wealth statement with FBR and log into IRIS.

Is business income tax return filed through IRIS?

Yes. FBR’s online filing of income tax returns is done using IRIS.

Do I need NTN before filing business tax return?

Yes. To use IRIS and file the return, you must have FBR registration/e-enrollment credentials.

Can I file business tax return myself?

Yes, if you have all of your records and know what income, expenses, CPR, wealth statement and wealth reconciliation are. Any cases that are complicated should be reviewed professionally.

What documents are required for business tax filing?

You will require CNIC, NTN, IRIS log in, sales records, expense records, bank statements, profit and loss account, balance sheet, withholding tax information, CPRs and wealth statement information.

How do I calculate business profit for FBR return?

Under the terms of business profit, generally all the business receipts minus the business expenses which are allowable under the applicable tax law and tax regime are calculated as business profit.

What happens if I file late?

Late filing can impact on your ATL status, and can also result in an ATL surcharge, penalties, and/or default surcharge, depending on the law and circumstances.

Can I revise a wrong business income tax return?

Yes, the revision (IRIS subject) can be possible based on legal requirements and approval as appropriate. Carefully read through the error before submitting it for revision.

Conclusion

It’s not just a formality to file an income tax return for business in Pakistan. Comprehensive document of business receipts, costs, tax liabilities, assets, liabilities and compliance. The best way to do this is to make records, reconcile numbers, send out through the right IRIS form and then check that the return is transferred to Completed Task. Meaningful return filing assists business owner to become a filer, minimizes compliance risk and mitigates confident response in case of any query later by FBR.