Taxpayers often receive notices from authorities, which in Pakistan is the Federal Board of Revenue (FBR), regarding incomplete return submissions and audit assessments. Understanding Income tax notices in Pakistan is important for everyone to avoid penalties and comply with tax laws.
Types of Income Tax Notices in Pakistan
Tax authorities may issue these Income Tax Notices in Pakistan when there are discrepancies or missing submissions regarding income tax returns, final tax statements, or wealth declarations:
1. Income Tax Notices in Pakistan to Submit Return of Income < 1 Year (Sec 114(3))
If you have not submitted your income tax return for the past year, you might receive a notice under Section 114(3). This notice asks taxpayers to file their income tax return for the current year to avoid penalties.
2. Notice to Submit Return of Income for Previous 5-10 Years (Sec 114(4))
If you missed submitting returns for any of the previous 5-10 years, the tax authorities can send a notice under Section 114(4) requiring you to file returns for those missing years.
3. Notice to Submit Statement of Income Subject to Final Tax (Sec 115(5))
If the income is subject to final tax for any of the past five years, tax authorities can ask you to submit statements under Section 115(5).
4. Income Tax Notices in Pakistan to Submit Wealth Statement (Sec 116(1))
This notice emphasizes a wealth statement listing your assets, liabilities, and net worth. Section 116(1) applies when authorities suspect a mismatch between your declared income and wealth.
5. Notice to Submit Foreign Assets Declaration (Sec 116A(2))
If you hold foreign assets, you must declare them after getting this notice.
6. Notice of Incomplete Return Submitted After 180 Days (Sec 120(3))
If your income tax return is found incomplete after the submission period of 180 days, the FBR will send you a notice under Section 120(3) demanding the missing information or corrections.
Income Tax Notices in Pakistan regarding Audit and Amendment
These typees of Income Tax Notices in Pakistan alarm taxpayers about the audit process or revisions to their tax filings. Audits may be triggered by specific reasons, such as large deductions, high income, or international transactions that can be highlighted in the database.
1. Notice of Call for Records/Documents Within 6 Years (Sec 177(1))
If the FBR needs to audit your records for up to 6 years, they may issue this notice under Section 177(1). One will need to provide the necessary documentation for their review.
2. Notice Under Section 176(1) for Audit (Sec 214(c) with Sec 177)
This notice informs taxpayers that they have been selected for an audit under Section 176(1) and that the audit will be conducted as per the provisions of Section 214(c) and 177. The taxpayer must comply with due diligence by providing all requested documents.
3. Provisional Assessment Under Section 122(9)
When the FBR believes that the taxpayer has underreported their income, then, this notice gives you a chance to respond before the assessment becomes final. Altogether, this is a fair warning from authroity to comply with tax obligations.
4. Showcase for Rectification of Mistakes (Sec 221(2))
This notice is issued if mistakes or discrepancies appear in a tax return and requires the taxpayer to explain these errors and submit a corrected return.
Withholding Taxes and Miscellaneous Income Tax Notices in Pakistan
Miscellaneous notices can be issued for non-compliance or additional information requests.
1. Notice for Monitoring of Withholding Taxes (Sec 161(1A)/205)
Section 161(1A) allows tax collecting authority to monitor whether you have complied with withholding tax rules. You may receive this notice if any irregularities are found.
2. Notice to Obtain Information or Evidence (Sec 176)
However, FBR can send a notice under Section 176 if it needs more information or evidence to complete its assessment or audit. This is ordinarilypart of an investigation process.
3. Notice for Revision by Chief Commissioner (Sec 122B)
If your tax assessment is already under revision, you may receive this notice from the Chief Commissioner to correct any errors or discrepancies in the original filing.
4. Showcase Notices for Imposition of Penalties (Sec 182)
Section 182 is invoked when penalties for non-compliance are being considered. In addtion, the taxpayer can explain his actions or rectify the issue before penalties are imposed.
5. 152(5) Non-Deduction of Tax on Payment to Non-Resident
When payments are made to a non-resident, and the necessary taxes are not deducted, this notice is issued, prompting compliance or explaining the lapse.
6. 140(1) Recovery from Person Holding Money on Behalf of Taxpayer
This notice is a recovery mechanism where the tax authorities demand money from individuals or institutions holding funds on behalf of the taxpayer.
7. Show-cause Notices for Penalties, Refunds, and Other Matters regarding Income Tax Notices in Pakistan
- Show-cause 122(B)(2): Explains why a lower rate exemption certificate was issued.
- Show-cause 129(2): Challenges appeal decisions to increase tax or decrease refunds.
- Show-cause 132(4): Issued by the Income Tax Appellate Tribunal (ITAT).
- Show-cause 147(6): Requires taxpayers to estimate advance tax for the year.
- Show-cause 170(4): Concerns refunds and the need for justification.
- Show-cause 172(5): Addressed to representatives of non-residents.
- Show-cause 223(6): Sent to authorised representatives of taxpayers.
- Show-cause 230F(9): Related to property tax or immovable property.
- Show-cause 101(A)(7): Covers capital gains from assets outside Pakistan.
Conclusion
In conclusion, receiving a tax notice can be daunting, but understanding the different types of notices and the actions required can help you stay compliant. If you receive any of these notices, you must take them seriously; ignoring them, however, may result in fines or penalties. A person’s Active Taxpayer status can be verified through their online NTN verification on the FBR’s website.
If you’ve received a tax notice and need legal assistance, our expert tax lawyer’s team at LEX (lex.com.pk) are here to help. Contact us today to ensure compliance and avoid penalties.
Frequently Asked Questions (FAQs)
1. What are Income tax notices in Pakistan, and why do I receive one?
A tax notice is a formal communication from the tax authorities asking you to comply with tax obligations. For example, if you receive an Income Tax notice in Pakistan, it means FBR demands that you comply with some tax obligations.
2. What should I do if I receive an audit notice?
You should gather and respond to all the relevant documents within the stipulated time. It is advisable to consult with a tax lawyer or accountant to ensure all aspects of your tax filings are correctly handled.
3. Can I appeal against Income Tax Notices in Pakistan?
Yes, the decision or notice is appealable. The appeal involves submitting additional information or documentation to challenge the notice.
4. What happens if I ignore Income Tax Notices in Pakistan?
Ignoring a tax notice can lead to penalties, fines, and legal action, and if the issue escalates, you may also face restrictions or asset seizures.
5. What is a wealth statement notice, and why is it important?
A wealth statement notice under Section 116(1) requests a detailed account of your assets and liabilities. However, It helps the FBR ensure that your declared income matches your net worth.
6. How can I avoid receiving Income Tax Notices in Pakistan?
To avoid receiving tax notices, file your returns on time, accurately declare your income, and comply with withholding tax rules. Also, regularly consult with tax professionals at LEX (Lex.com.pk) to stay updated on any changes in tax laws.
7. Can I get assistance from a lawyer for handling Income tax notices in Pakistan?
Tax lawyers at LEX (Lex.com.pk) can help you understand the tax notice, gather the required documents, and provide the best legal solution.