By Amna Tariq Shah
On trying to persuade people to fulfill their civic duty by filing their income tax returns, I am often confronted with counterarguments suggesting that the Inland Revenue Service (IRS) should not be bothered about filing of income tax returns if tax has already been paid through deduction by employers or other means. I do not blame people who come up with such arguments because even the most educated class in our country is tax-illiterate. So, it is not surprising why people would think that way.
To understand why it is essential for you to file your return, you first need to know what an income tax return is. Unfortunately, not many of us know that.
Income Tax Return – the ‘what’ part
To put it in a nutshell, an Income Tax Return is a document filed with the IRS (Federal Board of Revenue), encompassing the following details about your earnings and spending:
- Income, profit or losses
- Tax already paid
- Refund claims or tax liabilities calculated
- Wealth and expenses etc (in form of wealth statement – in case of individuals)
So, what actually is an income tax return? – It is a documentary proof of your income earned and tax paid on it in any particular year to which it belongs. A normal tax year starts from 1st July and ends on 30th June the next year. If you keep delaying filing your income tax return because you are under any sort of misconceptions and misassumptions about how much hassle it could cause you, you really need to rethink. Filing income tax returns is totally hassle-free these days; it does not mean standing in long queues or falling a victim to red-tapism. Everything is handled on automated system. If you are not already registered with the FBR, you can do so in a matter of minutes using the FBR online portal. If you already have all the essential information readily available, your return would not take more than minutes to be filed.
The ‘why’ part
Why is it important to have your income tax returns filed? Most people I know believe that since they are already paying taxes, filing income tax returns is irrelevant and unnecessary. The objective of the Government is to ensure payment of taxes but this does not end here. Returns form a crucial part of tax payments. It is your constitutional obligation to file your returns in time. It helps the IRS document your income and losses, and taxes paid thereupon.
‘How’ can return filing benefit you?
Filing of your income tax returns is highly beneficial as it gives legality to your earnings. If you timely pay your taxes and file your returns, you are less likely to attract the attention of the IRS. Other benefits are listed below:
- Have you accrued losses in your business? Well, you could set them off against income for the next year. However, if your returns in the concerned previous years were not filed, then the loss is all yours. It can only be set off if you are a filer.
- Buying immovable property? You are required to pay extra percentage of tax if you are a non-filer.
- Buying a new car? I hope you are a filer, because if not, you pay an additional tax on it.
- Making a banking transaction otherwise than through cash? You are required to pay a certain percentage of tax at the time of sale of any instrument, including demand draft, pay order, special deposit receipt, cash deposit receipt, short term deposit receipt, call deposit receipt, rupee traveler’s cheque or any other instrument of such nature to the concerned bank, in case you are a non-filer.
- Applying for a VISA? You must know that some embassies require evidence of income tax return filing at the time of processing your application. So, are you cancelling your trip or filing your return?
- Return filing provides a standard proof of income of a person and helps to establish a record with the tax authorities.
- You think you have paid more tax than your actual liability? Claim a refund and get the excess amount back! Of course, you can only do that if you are a filer.
- Not filing your accurate returns within the due date means you can easily get caught by the IRS. This means you do not only end up paying the tax dues but also the amount of penalty and default surcharge levied on it. And don’t even talk about the hassle of fulfilling the requirements of compliance and documentation expected from you during proceedings with the IRS. Aren’t you better off just filing your return?
- You may be sure that your employee is deducting tax on your salary but are you sure the tax so deducted is being deposited in the government treasury? By filing your return, you are recording the tax amount deducted from you with the IRS. If your employee did not deposit this tax rightfully into the national kitty, they will be easily caught and probed into it. Do you not want justice for yourself or are you OK seeing your money go to total waste?
- Finally, we all know that payment of taxes helps you contribute towards national income and resultantly in the appraisal of the national economy. Be a good citizen; file your returns voluntarily and well within time.
Imposition of penalty, launching of prosecution, and scrutiny of your income are some of the repercussions you are likely to encounter at the hands of IRS, if you are a non-filer. On the other hand, filing of return could help you in great many ways discussed above. Therefore, it is always in your favour to file your income tax returns, timely and accurately.
Fulfill your national obligation; file your income tax returns now.
* The author is currently posted as the Deputy Commissioner (Inland Revenue), Large Taxpayers’ Unit, Islamabad, and can be reached at email@example.com