Recently, the Federal Board of Revenue (FBR) added auto-filled fields in income tax returns in order to make the compliance process easier on the part of taxpayers. This project targets making fewer mistakes and making sure that major financial information is automatically updated on your return. Nevertheless, this method has its benefits as well as drawbacks.

Information that is Auto-filled Information in your Tax Return.

Salary Income

The amount of you salary plus the amount of tax withheld automatically appear provided your employer is a registered withholding agent.

Limitation: the system may indicate false salary deductions or tax deductions, in case the employer does not deposit the tax of June (should he/she tax it in August or September) in time.

Mobile phone taxes

Tax deducted by telecom companies is automatically keyed in. This encompasses the value of tax and the value of a bill. It should be noted that SIM/connection should be registered on your CNIC otherwise there will be no record.

Profit on Debt

Bank deposits, saving accounts, and government securities, including the taxes withheld, are auto-populated by the reporting of the banks.

Withholding taxes on various payments

Withholding agents deduct taxes that are reflected such as:

• Rental income tax (when tenant is a withholding agent)
• Final and modifiable withholding taxes (for instance, on contracts, property transactions, services)

Challenges in the Current System

Admitted tax (CPR Selection)

In the simplified version, it is not easy to choose the correct CPR (Computerized payment receipt) code and to pay the admitted tax. This usually perplexes the taxpayers.

Editable fields

Even though it is auto-filled, all the filed are editable, and this implies that taxpayers have (and should) cross-check to their withholding certificates, bank statements, and salary slips to eliminate errors.

Expert concerns

Although the initiative of auto update is a move in the right direction, there is a view that it has been introduced too soon. Practical problems, such as late deposits of salary taxes, mismatch of SIM ownership, and confusion with CPR code, were not taken into consideration.

Always double check

Although auto-update feature of the FBR is user-friendly, but it is advised to double check the auto-updated fields in order to avoid errors and discrepancies.

What fields FBR do not auto-update

Despite FBR auto update feature, there are certain fields that you have to enter manually. For instance:

• Business revenue and expenditure (books/records-based)
• Income details of property (rent, expenses)
• Computation of capital gains (usually needs transaction level computation)
• Remittances (characterization and disclosure), foreign assets, foreign income.
• Wealth statement
• Bank balances

Although auto-update is useful but user must know that this may not substitute the documentation of all the fields.

Checking filer/active status

In Pakistan, Active Tax Payer List (ATL) is updated on a regular basis and distinguishes between filers and non-filers as regards to withholding tax. Being on the ATL has a direct influence on the rate of tax deductible on banking transactions, property dealings, vehicles purchases, and other financial transactions.

The simplest way to check your ATL status is the online ATL search that can be found on the official site of the FBR where you can enter your CNIC/NTN and immediately find out about your current status in the tax year in question.

To get quick and mobile-based, the FBR also supports SMS verification. You are required to submit your CINC or NTN (without dashes) by sending it to 9966 and an automated response will be sent to you as to whether you’re in ATL. This choice is practical in cases when the connection to the internet is scarce.

It should be noted that filer status depends on the tax-year. Although you may have been a filer last year, you can be seen as inactive due to the fact that your present year filing is not yet completed.

How Sidekick can Help

The auto-updating information of the IRIS system if FBR has rendered the tax filing process quicker than any time before and also made accuracy and reconciliation significant in the system. At this juncture, Sidekick comes in very rescuely. Most taxpayers are left thinking that the prefilled information is ready and accurate which is not the case. Sidekick enables you to shift system-generated information into a fully ready, well-documented tax return that is in line with the expectations of FBR.

Reconciliation of the auto-populated withholding taxes to your actual documents is one of the most significant services that Sidekick offers. Omission of entries by employers, bank, telecommunication companies or other agents may be omitted, duplicated or wrongly classified. To save one that much money, Sidekick reconciles every auto-refreshing figure with salary slips, bank certificates and withholding statements to guarantee that every rupee deducted has been duly claimed and tweaked appropriately in your return.

The other key area is development of a coherent wealth statement. Sidekick assists in clarifying the acquisition of assets by mapping the income, savings, loans, gifts and expenses in a logical and defendable fashion. This is the consistency between income, withholding and wealth that usually avoids audit triggers and system generated notices.  

Conclusion

To sum up, the shift of FBR to auto-updating tax returns is a good step towards transparency and digitization, but it does not take the burden on the taxpayers to make sure the submissions are accurate and complete. Auto-filled data could have gaps, misclassification or inconsistencies that with proper left unnoticed, would result in notices, penalties or unwarranted complications. A closely checked and well reconciled return is hence necessary. The taxpayers can minimize the compliance risks greatly by harmonizing the income disclosure, withholding tax, and the wealth statement in a consistent way. This process is organized and credible instead of being complicated or overwhelming with professional help of Sidekick. The appropriate advice will make sure that the information generated on the system is interpreted right, adjusted appropriately, and in total compliance with the Pakistani tax laws. Finally, a clean and consistent tax return does not pass IRIS checks but also offers long-term tranquility and financial trustworthiness to the taxpayer.