The percentage of people acquainted with the concept of tax filing in Pakistan is significantly low. In the recent years, the governments in power have attempted to introduce various incentives to encourage people to become filers. To help you better understand why you should become a filer, this blog gives a summary of benefits of becoming a filer.
Saving on Banking Transactions
- The Govt. has introduced withholding tax on cash withdrawals exceeding Rs. 50,000, but the withholding tax rates for filers and non-filers are different. A non-filer is subject to withholding tax rate of 0.6% on cash withdrawals compared to 0.3% for a filer. Thus, on a cash withdrawal of Rs. 100,000, a filer would be subject to withholding tax of Rs. 300 vs. Rs. 600 for a non-filer. Additionally, the filer can easily adjust this tax deduction against his other tax liabilities like tax on salaries. So effectively, the filer pays no tax on cash withdrawals but a non-filer does.
- Similarly, for banking transactions other than cash withdrawals, a non-filer is again subject to withholding tax rate of 0.6%. Whereas, a filer is not subject to any tax on these transactions. So for example if a non-filer makes a payment to someone even through a cross cheque of say Rs. 100,000, he / she will again be levied a withholding tax of Rs. 600 on the said transaction. A filer is subject to only 10% withholding tax on bank-related profits, whilst a non-filer is subjected to pay higher tax deduction at 17% on banking profits.
Sell and Purchase of Vehicles and/or Property
- Only a filer can purchase property worth more than Rs. 5,000,000.
- Only a filer can purchase a new or imported car.
- A non-filer pays 50% or more tax on account of annual token tax and tax on vehicle registration.
- Tax on property transfer for non-filer is 2% compared to 1% for a filer.
Lesser Tax Deductions on Profits on Savings, Investments and Capital Gains
- A filer is subject to 10% tax on profits on bank deposits and saving schemes compared to 17.5% for a non-filer
- A filer saves tax on dividends as well. A non-filer is subject to 15% tax, whilst a filer will pay only 12.5% tax on dividends.
- A major tax saving occurs on prize bonds where filer has to give only 15% of tax on earning of price bonds whilst non-filer subjects to pay 25% of taxes.
The above listed benefits highlight that tax filing is the best way to save yourself from paying higher taxes on an array of transactions. Apart from that, by filing your tax, you contribute towards the stability and improvement of your country’s economy, while also saving yourself from getting legal notices, or call for inquiries from the FBR.
If you would like to receive more information on any of the tax related matters, feel free to comment below. Share this blog with your friends, family, and social groups who might be still weighing the odds of becoming a filer, and tell them why they should definitely become one.