Offences, Penalties, and Prosecutions: You can land in hot water, if you failed to comply with filing tax returns.

People are confused and get confused in the variation between Paying Taxes and Filing Taxes. Both these are two different terms with distinguished concepts. Regarding this matter people somewhat escape the liability which is ‘tax filing’.

People, to their ill-belief, believe that, when they are paying taxes at source than there aroused no question in filing the taxes. To their dismay and misconception, they are contradicting with the puzzled context.

This is the dilemma of our culture and society, they don’t go into the depth of anything and perhaps conclude it in their own confined perception. Let us classify and highlight this context in the most compelling tone.

Assume, you pay the tax on your income and on other miscellaneous sources to the government but along with that you don’t document it to the government you believe that there is no need to do it. But in the meanwhile, you don’t even know that if you tend to document it so in the forthcoming time you can avail multiple benefits with contrast to your previous state of not documenting it to the government.        

Generally, paying taxes is equivalent to paying the tax amount to the government that you owe to them in the category of salary, business income, utilities, vehicles, property and other sources. On the other hand, tax filing is equivalent to documentation of your taxes paid throughout the year and also apply for tax refund in case of excess tax paid.    

Paying taxes and filing taxes are the faces of the same coin, there is no other way around. You cannot get away scot-free with one clause as both are proportional to each other. Almost everyone pays taxes directly and indirectly but not everybody file taxes and that is the bone of contention for Pakistan’s tax culture.  

There are people who are intentionally  not filing tax returns and there are also such people who are unintentionally not filing taxes. There lies a big difference among them. Tax filing leads to accountability and transparency of an individual and other entities. The purpose of tax filing is to promote a tax culture into any given society for the betterment and welfare of the society in return. 

In the case of non-filing, it could lead to consequences vice versa every action has an equal and opposite reaction. If you tend to not comply with FBR’s notices of tax filing, escape the tax filing, and/or fabricate the tax filing particulars then you not only commit the offence but you also have to pay the penalty and face legal consequences in this regard.    Now we are going to discuss in detail about the offences, penalties, and prosecutions one would have to face if he/she doesn’t file, comply, and/or avoid tax returns. Whichever the case could be

Offenses	Penalties	Section
Where any person fails to furnish a return of income within the due date.	Such person shall pay a penalty equal to 0.1% of the tax payable in respect of that tax year for each day of default subject to a maximum penalty of 50% of the tax payable provided that if the penalty worked out as aforesaid is less than 40,000 rupees or no tax is payable for that tax year such person shall pay a penalty of 40,000 rupees.   Provided that If seventy-five percent of the income is from salary and the amount of income under salary is less than five million Rupees, the minimum amount of penalty shall be five thousand Rupees	As required under section 114 and 118.
Where any person fails to furnish a statement within the due date.	Such person shall pay a penalty of Rs.5000 if the person had already paid the tax collected or withheld by him within the due date for payment and the statement is filed within ninety days from the due date for filing the statement and, in all other cases, a penalty of Rs.2500 for each day of default from the due date subject to a minimum penalty of Rs. 10,000	As required under section 165, or 165A or 165B.
Where any person fails to furnish a wealth statement or wealth reconciliation statement.	Such a person shall pay a penalty of 0.1% of the taxable income per week or Rs. 100,000 whichever is higher.	As required under section 114 and 116.
Where any person fails to furnish a foreign assets and income statement within the due date.	Such persons shall pay a penalty of 2% of the foreign income or value of the foreign assets for each year of default.	As required under section 116A.
Any person who fails to deposit the amount of tax due or any part thereof in the time or manner laid down under this Ordinance or rules made thereunder.   Provided that if the person opts to pay the tax due on the basis of an order under section 129 on or before the due date given in the notice under sub-section (2) of section 137 issued in consequence of the said order, and does not file an appeal under section 131 the penalty payable shall be reduced by 50%.	Such a person shall pay a penalty of five% of the amount of the tax in default. For the second default an additional penalty of 25% of the amount of tax in default. For the third and subsequent defaults an additional penalty of 50% of the amount of tax in default.	As required under section 137.
Any person who repeats erroneous calculations in the return for more than one year whereby the amount of tax paid is less than the actual tax payable under this Ordinance.	Such a person shall pay a penalty of 30,000 rupees or 3% of the amount of the tax involved, whichever is higher.	As required under section 174 and 108.
Where a person fails to produce the record of documents on receipt of first notice.	Such a person shall pay a penalty of 25000 rupees.	As required under section 177.
Where a person fails to produce the record of documents on receipt of second notice.	Such a person shall pay a penalty of 50,000 rupees.	As required under section 177.
Where a person fails to produce the record of documents on receipt of third notice.	Such a person shall pay a penalty of 100,000 rupees.	As required under section 177.
Any person who fails to furnish the information required or to comply with any other term of the notice served under section 176 [or 108].	Such person shall pay a penalty of 25000 rupees for the first default and 50,000 rupees for each subsequent default.	As required under section 176.
Where a person has concealed income or furnished inaccurate particulars of such income, including but not limited to the suppression of any income or amount chargeable to tax, the claiming of any deduction for any expenditure not actually incurred or any act referred to in sub-section (1) of section 111, in the course of any proceeding under this Ordinance before any Income Tax authority or the appellate tribunal.	Such person shall pay a penalty of 100,000 rupees or an amount equal to the tax which the person sought to evade whichever is higher. However, no penalty shall be payable on mere disallowance of a claim of exemption from tax of any income or amount declared by a person or mere disallowance of any expenditure declared by a person to be deductible, unless it is proved that the person made the claim knowing it to be wrong.	As required under section 20,111 and general.

Offenses	Prosecutions
Any person who makes a statement in any verification in any return or other document furnished under this Ordinance which is false and which the person knows or believes to be false, or does not believe to be true.	Prosecution for false statement in verification- the person shall commit an offense punishable on conviction with a fine up to 100,000 rupees or imprisonment for a term not exceeding three years, or both.
Where, in the course of any proceedings under this Ordinance, any person has either in the said proceedings or in any earlier proceedings concealed income or furnished inaccurate particulars of such income and revenue impact of such concealment or furnishing of inaccurate particulars.	Prosecution for concealment of income is 500,000 rupees or more shall commit an offense punishable on conviction with imprisonment up to two years or with fine or both.
Any person who fails to declare an offshore asset to the Commissioner or furnished inaccurate particulars of an offshore asset and revenue impact of such concealment or furnishing of inaccurate particulars is ten million rupees or more	Prosecution for concealment of an offshore asset- the person shall commit an offense punishable on conviction with imprisonment up to three years or with a fine up to 500,000 Rupees or both.
A person who fails to maintain records as required under this Ordinance shall commit an offense punishable on conviction.	Prosecution for failure to maintain records  (a) where the failure was deliberate, a fine not exceeding 50,000 rupees or imprisonment for a term not exceeding two years, or both; or (b) in any other case, a fine not exceeding 50,000 rupees.
A person who – (a) makes a statement to an income tax authority that is false or misleading in a material particular; or (b) omits from a statement made to an income tax authority any matter or thing without which the statement is misleading in a material particular,	Prosecution for making false or misleading statements the person shall commit an offense punishable on conviction – (i) where the statement or omission was made knowingly or recklessly, with a fine or imprisonment for a term not exceeding two years, or both; or (ii) in any other case, with a fine.
Any person who, without reasonable excuse, fails to comply with a notice under sub-section (2) of section 116A.	Prosecution for non-compliance with notice under section 116A – that person shall commit an offense punishable on conviction with imprisonment up to one year or with a fine up to 50,000 Rupees or both.

You only can remain safe from committing offence, getting penalized, and/or prosecuted. If you comply with income tax filing properly, on time, and abide by all the regulatory clauses therein Income Tax Ordinance 2001. Befiler is the only dedicated digital tax filing platform, which can assist you in safe siding yourself in real-time approach and flexible accessibility. You can file your tax returns, get the wealth statement prepared remotely with our devoted tax professional staff