Salaried individuals need to file returns despite exemption

KARACHI: Salaried individuals are not exempted from filing returns if they have discharged their obligations during the past two years, sources said on Tuesday.

The sources said salaried individuals driving income above Rs400,000 are required to file income tax returns for tax year 2020 despite enhancement in threshold of the exempted income for payment of tax and filing income tax returns.

Sources in the Federal Board of Revenue (FBR) said such salaried class is required to file returns because they filed income tax returns for the preceding year.

The FBR enhanced the exempt income for tax payment and filing of return from Rs400,000 to Rs600,000 through Finance Act 2019.

Under the latest law (section 114(1)(ab)), the filing of annual income tax return is mandatory for every person (other than company) whose taxable income for the year exceeds the maximum amount that is not chargeable to tax under the law for the year.

A FBR official said the section said individuals are liable to file their returns if they had been charged to tax in respect of any of the two preceding tax years.

The official said such individuals are also required to file their returns of income for next three years irrespective of their below threshold income.

Rehan Jafri, former president of Karachi Tax Bar Association said salaried individuals who filed their income tax returns of past year or their income tax was deducted at source during the past two years are required to file their income tax return.

However, people whose income is above Rs400,000 in tax year 2019 but their income tax was not deducted or they had not filed their returns would not be required to file their return for tax year 2020.

Tax returns from salaried class have a big chunk in total returns filed with the FBR. An estimate said salaried individuals make around 40 percent of the total returns. Out of the total returns filed under the head of salary the filing from the lower slab is the highest.

The FBR has received around 2.85 million for tax year 2019 and the return filing for this year can continue till February 28 next year with payment of fine and penalty.

The government increased the threshold income for payment of income tax to facilitate lower income groups.