In the financial year 2024-25 Pakistani government introduced a new status of “Late Filer” for taxpayers. It is simple means that if any person submit his tax returns after due that his status will become late filer. Earlier, that was not the case. There were only two status, filer and non-filer. It is very important to understand the filer vs. non-filer vs. later filer status in Pakistan income tax system. So in this article, I am going to explain you the difference between Filer, Non-Filer and Late Filer Status.
Before that you should understand income tax system of Pakistan.
Brief Overview of Pakistan’s Income Tax System
The income tax system of Pakistan is based on Income Tax Ordinance 2001. In this ordinance different tax slabs, income tax return filing methods, and various taxes are mentioned. Pakistan’s tax year is started from July to June. In this financial year various amendments are frequently introduced. Similarly, in the finance bill 2024 a new tax status of later filer was introduced. These rules and regulations are binding on all the taxpayers in Pakistan.
Importance of Tax Compliance
Tax compliance is super important for a country to run smoothly.
When people businesses pay their taxes, it helps government get money. This money is used for services like schools,, roads, and even defense. Following tax laws sure that everyone pays fair share. It the playing field for businesses, too. Plus, when folks comply taxes, it keeps tax system honest. This way, it’s for people to evade, and it can help the economy grow.
Introduction of the three Main Categories: Filer, Non-Filer, and Late Filer
In the Finance bill 2024 the government of Pakistan made some big changes to its income tax system. These moves are all about encouraging to file their taxes on time, bringing in more revenue, & maybe changing how people invest especially in the real estate business.
In the past, taxpayers were split into just two categories: “Filers” and “Non-Filers.” Now, there’s a new category called “Late Filers.” This means there’s a penalty for individuals and associations of persons (AOPs) who don’t get their tax returns in by the deadline, usually September 30th. If you file late, you’ll have to pay higher tax rates than regular filers. You can also view the revised tax rates on property.
Definition of a Filer
A filer in Pakistan is someone or an organization that submit an income tax return each year to the Federal Board of Revenue (FBR). This return their income, deductions, & tax responsibilities from the last tax year. When they do this, filers help build up the national tax base and get on the ‘Active Taxpayers List’ that the FBR keeps.
Benefits of Becoming a Filer
Being a filer in Pakistan comes with several benefits.
First off, it boosts your financial credibility. So, getting loans banks & financial institutions becomes a whole lot easier, plus you can score better terms. Filers also get to enjoy a bunch of government schemes. These include housing initiatives, education subsidies, healthcare programs. On top of that, they usually pay lower tax rates on different transactions. This covers stuff like buying property, registering vehicles, and banking activities too.
Now, filers in Pakistan have to deal with income tax based on their taxable income. To figure that out, you subtract allowable deductions from your total income. The tax system is progressive. This means that if you make more money, you’ll pay a higher percentage in taxes.
Tax Implications for Filers
Filers need to calculate their tax obligations using the rates mentioned in in the Income Tax Ordinance 2001. Then they have to send the true values to the FBR. It’s super important to get the tax calculations right and pay on time. Otherwise, you might end up facing penalties or late fees.
Definition of a Non-Filer
A non-filer in Pakistan is someone or something that hasn’t turned in an income tax return to the Federal Board of Revenue (FBR). This means haven’t told the tax folks about their income, deductions, or how much tax they owe. Non-f often hang out with the informal economy, & they can get hit with penalties and restrictions because they’re not following the rules.
Consequences of being a non-filer (penalties, restrictions)
Being a non-filer Pakistan can lead to some tough consequences. Non-filers deal with financial penalties like big fines & interest charges on unpaid taxes. Plus, they run into all sorts of restrictions, like limits on buying property, registering vehicles, or joining government programs. Lately, the government has really stepped up its game against non-filers. They’ve started doing things like freezing bank accounts and putting travel bans on those who keep ignoring the rules. These strong measures are meant to push folks to pay their taxes & help grow the tax base.
How to Transition from non-filer to filer
Changing from a non-filer to a filer in Pakistan isn’t too hard. You just need to create your NTN and file your tax returns. You can also master this tax return filing method by enrolling in our course. Just gather some important papers, like your CNIC, proof of where you live, and bank statements. With those docs ready, you can get your NTN & become a filer. Remember, it’s really important to declare your income accurately and pay the admitted tax to keep your filer status active.
Definition of a Late Filer
Late filer is a new term introduced in through finance bill 2024. A late filer in Pakistan is person or company that submit their income tax returns after due date. If you’re a late filer, you’ll face higher tax rates and penalties especially in the sale and purchase of property.
Reasons for Late Filing
There are a bunch of reasons why people or businesses might submit their income tax returns late. Some of these are:
- Not knowing what to do: A lot of people might not even know the deadlines or what happens if they file late.
- The tax system is tricky: The rules can be super complicated, which can make things confusing and cause delays.
- Money problems: Some people might have a tough time financially, making it hard to get all the documents together and pay taxes on time.
- Forgetting or putting it off: Sometimes it’s just plain old neglect or procrastination that leads to snagging the deadline.
- Business stuff: Businesses usually have complicated finances and record-keeping, which can really slow down getting those tax returns ready.
It’s key to remember that while these reasons might explain why things are late, they don’t really make it okay since there are penalties and interest charges for those who file late.
How to Avoid Late Filer Status in Pakistan
Late filers in Pakistan should watch out. They face big penalties and serious problems. If you’re late, you might pay higher tax, plus there’s monetary fines. These fines can change based on how much tax you owe and how long you’ve delayed. Not just that, but late filers could miss out on certain government benefits and schemes. Getting loans or other financial services might get tougher too.
If someone keeps filing late, well, things can get really bad. Legal actions might happen, even prosecution if it’s super serious. It’s important to know that these penalties for being late aren’t just there for fun. They aim to keep folks in line and make sure taxes are paid on time.
How to Change Late Filer Status to Filer
If you tax filer status is coming late filer then you don’t need to worry much. You should file your 2024 income tax return before 30th September 2024 and automatically in March 2025 your status will be change to Active. To keep this status as “active” you need to file your all future tax returns on time.
Wrap-Up
In the end, I must say that there is a significant difference between a filer, non-filer and late filer. Filer is a person who file his income tax return on time, a non-filer is a person who don’t file his tax return and a late filer who submit his income tax returns after due date.
If this article helps you in understanding these concepts then must share this with your friends and also comment your feedback below.
Also Read:
- Common Income Tax Return Mistakes to Avoid in Pakistan
- How to Make NTN in 2023 for Salary and Business
- Filer and Non-Filer Tax Rates in Pakistan – Benefits of Becoming Tax Filer
- Revised Tax Rates for Salary, Business Individuals for 2024-25
