Income Tax Return Filing, Section 114 & ATL: Frequently Asked Questions

Section 114 specifies who is legally required to file an Income Tax Return in Pakistan and prescribes the manner, conditions, and time for filing.

Every person falling within the criteria mentioned in Section 114 must file a return, including companies, taxable individuals, certain property owners, vehicle owners, NTN holders, and various other specified persons.

Yes. If you fall within any category specified in Section 114, filing is mandatory regardless of whether tax is payable.

Not necessarily. Many persons must file even if no tax is payable.

Yes. The Commissioner may issue a notice requiring a person to file a return.

Yes. Unless exempt under law, every company is generally required to file annually.

Any individual whose taxable income exceeds the basic exemption limit applicable for that tax year.

You may still be required to file if you fall under any other category listed in Section 114.

If their taxable income exceeds the exemption limit or they meet any other filing criteria.

Yes. Persons earning income subject to final taxation are also required to file.

A flat having a covered area of 2,000 square feet or more in a rating area.

Examples include:

• Pakistan Engineering Council (PEC)

• Pakistan Medical & Dental Council (PMDC)

• Pakistan Bar Council & Provincial Bar Councils

• Institute of Chartered Accountants of Pakistan (ICAP)

• Institute of Cost and Management Accountants of Pakistan (ICMAP)

Business income exceeding Rs. 300,000 (up to Rs. 400,000 as specified in subsection (1A)).

Depending on the case:

• Wealth Statement (Form 116)

• Foreign Income & Assets Statement (Section 116A)

• Tax payment evidence (CPR / Challan)

• Other prescribed documents & audited financial statements

Examples include:

• Death of a taxpayer

• Bankruptcy or insolvency

• Company liquidation

• Permanent departure from Pakistan

• Other appropriate circumstances

Yes, where a person has not filed for the last five completed years.

Where the revised return is filed within prescribed timelines or other statutory exceptions apply.

Generally:

• Revised accounts & wealth statement

• Reasons for revision

• Other prescribed documents & evidence of additional tax paid

A mechanism allowing eligible taxpayers to settle matters through the prescribed automated process.

Primarily yes, but it also governs revision, notices, electronic filing, and related compliance requirements.

Because it establishes the statutory obligation to file an Income Tax Return and forms the foundation of tax compliance under the Income Tax Ordinance, 2001.

Under Section 114 of the Income Tax Ordinance 2001, every resident person with a annual taxable income exceeding PKR 600,000 (for salaried individuals) or PKR 400,000 (for business individuals), as well as owners of immovable property, commercial vehicle owners, company directors, and individuals seeking to remain on the Active Taxpayer List (ATL) are statutorily required to file their annual income tax return via FBR IRIS 2.0.

Missing the FBR tax return filing deadline (typically September 30 for salaried & individual taxpayers) results in removal from the Active Taxpayer List (ATL) or placement on the Inactive list. Inactive status leads to doubled withholding tax (WHT) rates on property transactions, banking cash withdrawals, vehicles, and dividends under 10th Schedule. To reinstate ATL status, a late filing surcharge under Section 182A (Rs. 25,000 for individuals, Rs. 50,000 for AOPs, and Rs. 100,000 for companies) must be paid.

Yes. Under Section 114(6) of the Income Tax Ordinance 2001, a taxpayer can revise their return in FBR IRIS within 60 days of filing if an omission or wrong statement is discovered, provided the revision does not result in a lower taxable income without CIR approval.

Under Section 140, FBR instructs banks to recover assessed liabilities. You can resolve this by filing an urgent Stay Application with Commissioner Appeals (Section 127), submitting a written reply on IRIS, or negotiating a 25-30% partial payment to obtain a Release of Attachment Order within 24-48 hours.

Section 61 provides a direct tax credit calculated as (A/B)*C for donations made via crossed cheque to approved universities, government hospitals, and NPOs under Section 100C. The donation amount C is capped at 30% of taxable income for individuals and 20% for companies.

Under Section 87, legal representatives or heirs are liable for tax owed by a deceased person, limited strictly to the value of the estate in their possession or control. Unpaid tax forms a statutory first charge on the estate.

Section 91(1) requires business income earned by a minor child (<18 years) to be clubbed with the taxable income of the parent having the higher taxable income. Inherited business income is exempt under Section 91(2) and taxed separately in the minor’s name.

Section 114C prohibits ineligible persons (non-filers) from registering vehicles, purchasing property over threshold limits, buying mutual funds, or making large cash withdrawals unless they have filed preceding returns and declared 130% sufficient resources.

Section 12(2A) taxes annual pensions exceeding PKR 10 Million under the final tax regime. Pensioners aged 70 or above enjoy 100% tax exemption, while pensioners re-employed by their former employer are taxed under normal salary slabs.

Under Section 80(2)(a) of the Income Tax Ordinance, 2001, an AOP includes a firm, a Hindu Undivided Family, an artificial juridical person, a Limited Liability Partnership (LLP), and any body of persons formed under foreign law, excluding incorporated companies.

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Under Section 92(1), an AOP is assessed and taxed as an independent legal entity under the progressive slab rates provided for AOPs in Division I, Part I of the First Schedule.

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Yes. Under Section 92(1), if the AOP has paid the tax due on its income, the share received by an individual member out of that income is exempt from direct tax in the member's hands.

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Under Section 88, "Rate Purpose" is an averaging calculation where exempt AOP income is added to an individual's personal taxable income solely to determine the tax slab rate applicable to their personal income.

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The statutory formula is (A/B) X C, where {A} is the tax on combined income, {B} is the combined total income (personal taxable + exempt AOP share), and {C} is actual personal taxable income.

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Under the Second Proviso to Section 92(1), member profit shares lose their tax exemption unless financial statements audited by a CA or CMA firm are filed alongside the AOP's return.

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The audit must be conducted by a firm of Chartered Accountants (under the Chartered Accountants Ordinance, 1961) or a firm of Cost and Management Accountants (under the Cost and Management Accountants Act, 1966).

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Under the First Proviso to Section 92(1), the corporate member's share is excluded from the AOP's total income computation and taxed directly in the hands of the company at corporate tax rates.

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Under Section 21(m), salary, commission, or interest paid by an AOP to its members is inadmissible as a business deduction for the AOP and is added back to its taxable income.

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Under Section 181E and Rule 80B, every AOP must electronically submit particulars of its ultimate beneficial owners holding \(\ge 25%\) controlling interest on Form BOF-01.

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Under Serial No. 30 of Section 182(1), failure to file beneficial ownership information carries a fixed penalty of Rs. 1,000,000 for each default.

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Under Section 98A, the reconstituted AOP at the time of filing is responsible for filing the return, but income is apportioned among the members entitled to receive it.

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Under Section 142, tax due by a non-resident member can be assessed in the name of the AOP or any resident member and recovered from AOP assets or the resident member personally.

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Yes. Under Section 113(1), an AOP with a turnover of Rs. 100 million or above in Tax Year 2017 or any subsequent year is subject to Minimum Tax on gross turnover.

Read the full guide: AOP Taxation in Pakistan: Section 88 & 92 Guide →