How to File Nil Income Tax return 2025 Navigating Income Tax Returns and Asset Declaration

This guide provides a comprehensive walkthrough on filing a nil income tax return for the tax year 2025 in Pakistan, specifically tailored for individuals with no income such as housewives, students, or unemployed persons. It details the step-by-step process on the FBR IRIS portal, covering login procedures, password resets, and navigation through the tax return forms. The explanation extensively covers reporting various deductions and assets, including details for adjustable tax, different types of properties (agricultural, residential), and other personal possessions, and ends with the submission process and how to address unreconciled amounts for a successful filing.

Complete Guide to Nil Income Tax Filing

To discuss Nil Tax Filing, it is important to understand what a Nil Income Tax Return is, who is eligible to file it, and the detailed process involved according to the provided sources.

A Nil Income Tax Return is filed by individuals who have no source of income for a given tax year, such as housewives, students, or unemployed persons. The purpose of filing a nil return is that the individual has no income to declare.

Here is a comprehensive breakdown of the Nil Tax Filing process:

Accessing the FBR Portal and Login To begin, you must go to the FBR IRIS portal by searching “GRS FBR” on Google and clicking the first link, irs.fbr.gov.pk. Upon reaching the IRIS website, you may encounter a pop-up for IRIS login authentication, which you can close. You will then provide your login credentials: your CNIC in the registration number field and your password. If your password has expired, which happens after 60 days due to recent changes, you will be prompted to reset it. The password reset requires entering your old password, followed by a new password and its confirmation. Once the password is reset, you can log in with your new password.

Opening the Income Tax Return Form After logging in, the IRIS dashboard will appear. You have two options to open the income tax return form: either by selecting “File your income tax return” under “Required Documents For normal return” or by clicking on “Simplified IT Returns for Non Business Individuals”. For a nil return, selecting the “File your income tax return” option is suitable. The system automatically sets the Tax Period to 2025, which typically runs from July 1st to June 30th. For the Tax Year 2025, the period is from July 1st, 2024, to June 30th, 2025, with a filing deadline of September 30th, 2025.

Residential Status The system will ask if you were present in Pakistan for 183 days or more during the Tax Year 2025. If you were, you are considered a resident and will file as such. A resident person pays tax on both Pakistani and foreign source income, whereas a non-resident only pays tax on local income earned in Pakistan. For filing a nil income tax return, if the person was in Pakistan for 183 days or more, you would select “yes”.

Sources of Income The system then indicates if its records show any preselected income sources for the tax year. For a nil income tax return, none of the income categories like salary, pension, rent from property, or payment for services should be selected because there is no income. If tax had been deducted against any of these, the respective tab would automatically be selected. Since you are filing a nil return, you would uncheck any preselected options. However, if you click on “Payment for Service” intending to proceed, the system will redirect you to an older version of the return form because the simplified form is specifically for salary, pension, and rent from property. To proceed with a nil return, which is considered outside these specific categories, you will click “Accept and Continue” to go to the older version.

The Older Version of the Returns Form In the older version, various tabs are available, but for a nil return, the primary concern will be “Tax Chargeable / Payments”. Other income heads like salary, property, business, capital gain, other source, foreign source, or agricultural income are not relevant.

Adjustable Tax Even when filing a nil income tax return, you must address the “Adjustable Tax” section. This is because taxes might have been deducted on various transactions despite having no formal income. These can include:

• Tax on cash withdrawal from a bank account (0.6% for non-filers withdrawing over PKR 500).
• Motor Vehicle Registration Fee under Section 231B, if you bought a car.
• Private Vehicle Tax under Section 234, if you paid token tax on a car.
• Cellphone bill under Section 236 subsection one and clause A, as tax is often deducted on mobile SIM usage.
• Sale/Transfer of immovable property under Section 236C, if property was sold or purchased within the tax year.
• Remitting amounts abroad through credit/debit/prepaid cards under Section 236, as tax is deducted on foreign payments (e.g., Google storage, Facebook ads).

To enter details for a cellphone bill, you need a tax deduction certificate, which can be obtained from the mobile app of your network provider, a franchise, or by emailing/calling them. The certificate will show the amount of tax collected. You will click the plus sign next to “Cellphone bill under section 236 subsection one and clause a”. You then enter your cell number as the utility reference/consumer number. In the “Contents” box, you select “prepaid” and mention your network provider (e.g., Mobiling, Jazz). After submitting, you enter the “receipt/value” (the amount against which tax was deducted, e.g., PKR 4404 for mobile usage) and the “tax collected/deducted” amount (e.g., PKR 645). After entering, you click “calculate”. The system may automatically fetch details of tax deducted from the FBR, adding them to the adjustable or final fix tab.

Checking Deducted Taxes (MIS Section) If you are unsure which taxes have been deducted, you can check the MIS (Management Information System) section of the IRIS dashboard. To do this, close the draft return by clicking the “close” button (you may lose unsaved changes). From the IRIS dashboard, navigate to “MIS” (often a small blue bar on the right side next to “invoice management”). Under “All Options Information Center,” click on “Payment Details”. You can then specify the tax year (e.g., 2025) and click “search” to see details of deducted taxes like cash withdrawal and tax on remitting amounts abroad. You can also download an Excel template of these details. The Excel sheet will show details like the section under which tax was deducted, taxable amount, paid amount (tax amount), payment date, and source of payment.

Wealth Statement After completing the income and tax details, the second part of the income tax return is the “Wealth Statement”. This section requires details of personal expenses and personal assets/liabilities.

Personal Expenses: You will click on “Personal Expenses”. Common expenses include rent, rates/taxes/charges, vehicle running/maintenance, traveling, electricity bills, water bills, gas bills, and telephone bills. For a nil income tax return, even if you do not have exact figures for all expenses, you can add a clubbed amount under “Other Personal / Household Expenses”. For example, if household expenses are PKR 100,000, you enter that. Since you have nil income, the system expects family members to contribute to these expenses. If, for instance, a family member contributed PKR 150,000, and your expenses were PKR 101,404, the difference (PKR 45,596) will be shown in surplus, increasing your cash in hand or assets.

Personal Assets / Liabilities: This section requires you to declare details of your assets and liabilities.

• Agricultural Property: If you own agricultural land, click the plus sign to add details. You will need to provide the property address, specify it as “agri land,” its area (e.g., in canals), tehsil, and district. If the property was inherited, its value will be zero as no cost was borne to acquire it; you should write “inherited” in the contents. Otherwise, you will declare its cost. The fair market value can be determined using FBR property valuation tables or DC rates.
• Commercial/Industrial/Residential Property Non-Business: For residential properties like a house, flat, or plot, or commercial properties like a shop or plaza. Click the plus sign, enter the complete address, specify if it’s commercial/residential/plot, its area (e.g., in marlas), and the city. If inherited, its value will be zero.
• Equipment Non-Business: Small pieces of equipment not used for business (e.g., grass cutting machine, mechanical ladders). You just enter the value; there is no plus tab for further details.
• Animal Non-Business: Animals not used for business (e.g., cows/buffaloes for homemade milk, expensive pets). You enter their value.
• Investment Non-Business Account / NT / Bond / Certificate / Debenture / Deposit / Fund / Instrument / Policy / Shares / Stock / Unit Etc.: This includes savings or current bank accounts. Click the plus sign, provide the IBAN or account number, account type, bank name, branch, and city. The closing balance from your bank statement as of June 30th of the tax year should be entered as the value.
• Non-Business Advance / Loan / Deposit / Prepayment / Receivable / Security: If you have given a loan to someone, provided security, or made prepayments (e.g., for a plot), you can add details. This requires the CNIC/registration number of the person/company, their name, and a description of the transaction.
• Motor Vehicle Non-Business: Vehicles for personal use (bike, car, van). Click the plus sign, enter the vehicle’s registration number, and in the contents, specify if it’s private/commercial, make, model, and engine capacity. Then enter its value.
• Precious Possession: Gemstones, jewelry (gold, silver, diamond). Click the plus sign, state the nature of the asset (e.g., “Jewellery”), and in contents, describe it (e.g., “Gold 10 Tola”). If it was received as dowry or gift, its value will be zero as no cost was incurred. You can edit the description to include “Dori” (dowry).
• Household Effect: Furniture, kitchen items, dishes, personal items, furnishing. You enter an estimated value for these items.
• Personal Items: Mobile, laptop, airpods, airbuds. Enter their value.
• Cash Nonce Business: Cash held after deducting all expenses. Enter the value.
• Any Other Assets: Any asset not covered in the above categories, such as a plot being paid for in installments. Click plus, add details in the content (e.g., “Five Marla Plot on Installment, Society Name”), and enter the amount of installments already paid.
• Assets Held on Others Name: Assets bought in the name of a spouse or dependents. Click plus, enter the dependent’s CNIC/name, and a description of the asset.
• Assets Held Outside Pakistan: For non-residents, this could include foreign bank accounts or properties.
• Capital / Voting Rights in Foreign Company: Shares bought in a foreign company. Requires company name, incorporation number, country, date of incorporation, percentage of shares, and declared income.
• Credit Non-Business Advance / Borrowing / Credit / Deposit Loan / Mortgage / Overdraft / Payable: Loans taken from family members, banks, or leased assets. Click plus, enter creditor’s CNIC/registration number, name of creditor, bank/branch name, type of loan (e.g., house loan, car loan), and the loan amount.

Reconciliation of Net Assets This section calculates your “Net Assets” (Assets minus Liabilities). For a first-time filer, “Net Assets Previous Year” will be nil. The goal is to make the “Unreconciled amount” zero. If there is an unreconciled amount (e.g., from an opening balance not accounted for from a previous year’s return), you must adjust it. For first-time filers, you can copy the unreconciled amount and paste it into “Net Assets Previous Year” to balance it out.

Inflows and Outflows The reconciliation section also accounts for inflows and outflows.

• Foreigner Remittance: Money received from abroad (e.g., from family members). You can mention the amount, and a Proceeds Realization Certificate (PRC) can be obtained from the bank for verification.
• Inheritance/Gift: If you received inherited property or gifts, their value (often zero for inheritance if no cost was borne, or the value of the gift if it’s declared by the giver in their returns) can be mentioned.
• Gain/Loss on Disposal of Assets: Gains or losses from selling movable assets (excluding immovable property which falls under capital gains).
• Personal Expenses (Outflows): This links to the personal expenses sheet and may show a negative amount if family contributions exceeded declared expenses.
• Adjustments in Outflows: Losses due to unforeseen events (e.g., fire, damaged mobile).
• Assets Transfer/Sold/Gifted/Donated during the Year: Value of assets donated, gifted, or sold.

Capital Assets (Section 7E) If you own any property, you also need to fill the “Capital Assets” form, specifically dealing with Section 7E of the Income Tax Ordinance.

• Definition of Capital Asset: Generally, it includes property of any kind, whether used for business or not. However, it excludes stock-in-trade, raw materials for business, shares/stocks/securities, properties subject to depreciation/amortization deduction, and movable assets like vehicles. Essentially, it primarily refers to immovable property.
• Taxability under Section 7E: Section 7E applies from Tax Year 2022 onwards. A resident person is deemed to have derived income equal to 5% of the fair market value of capital assets situated in Pakistan and held on the last day of the tax year. This deemed income is taxed at a rate specified in Division 8C of Part One of the First Schedule (effectively 1% of the fair market value, as 5% of the fair market value is taxed at 20%).
• Exclusions from Section 7E: Certain properties are exempt:
• A single capital asset owned by the resident person (e.g., one house or one plot).
• Self-owned business premises from where business is carried out and the person is on the Active Tax Payer List (ATL).
• Self-owned agricultural land where agricultural activity is carried out (excluding farmhouses).
• Capital assets allotted to martyrs’ dependents of Pakistan Armed Forces, or persons who die in service of federal/provincial governments or armed forces, or war-wounded persons.
• Ex-servicemen and serving personnel of armed forces, or federal/provincial government employees, who are original allottees of the capital assets.
• Any property from which income is chargeable to tax under the ordinance (e.g., rented property already taxed).
• Capital assets acquired in the first year of acquisition where tax under Section 236 (e.g., property purchase tax) has been paid.
• Aggregate fair market value of capital assets (excluding the above clauses) does not exceed PKR 25 million (PKR 2.5 crore).
• Capital assets owned by provincial/local governments, local authorities, development authorities, builders, and developers (if registered with Directorate General of Designated Non Financial Businesses and Professions).
• Declaring Capital Assets: For each property, you need to provide measurement unit (e.g., marla, acre, canal), total area, complete address, town/tehsil, and city/district. You must also declare whether it is exempt from tax under Section 7E and provide the reason for exemption. You will declare its “Cost / Declared Value” and “Fair Market Value”. The fair market value can be determined using FBR Property Valuation Excel files, which provide rates for major cities. If the fair market value of a non-exempt property exceeds PKR 25 million, deemed income under Section 7E will be calculated.

Final Steps After completing all sections, including adjustable tax, wealth statement (personal expenses, assets, liabilities, and reconciliation), and capital assets, you click “Calculate”. Then, proceed to the “Attribute” section. For a nil income tax return, business sectors should be left blank. You must select your “Residence Status” (resident or non-resident) based on your presence in Pakistan. Finally, save the return and click “Submit”. You will be prompted to verify and confirm your undertaking that the information provided is correct. Enter your four-digit PIN (received from FBR when your NTN was created) and click “Submit”. Once submitted, your return moves from “Draft” to “Complete Task” on the IRIS dashboard. You can view and print your submitted return from the “Declaration” section under “Complete Task”.

Pakistan Income Tax Filing Guide for Nil Income

Filing an Income Tax Return involves a detailed process for individuals in Pakistan, even for those with “nil” income, such as housewives, students, or unemployed individuals. The Federal Board of Revenue (FBR) mandates regular changes, for instance, requiring password resets every 60 days for its online portal.

Overview of Income Tax Return Filing

The process typically begins on the FBR’s IRS portal. After logging in with National Tax Number (NTN) credentials (CNIC and password), individuals access the Ayres dashboard. From here, they can select to file their income tax return, often choosing the “Normal Return” option for individuals.

The tax period for most individuals usually runs from July 1st to June 30th. For Tax Year 2025, this period is from July 1st, 2024, to June 30th, 2025, with a filing deadline of September 30th, 2025.

An important aspect to determine before proceeding is the filer’s residency status. An individual is considered a resident if they were present in Pakistan for 183 days or more during the tax year. Residents are liable to pay tax on both Pakistani and foreign sources of income. Conversely, a non-resident is someone who was outside Pakistan for 183 days or more and is only required to pay tax on income earned within Pakistan. For “nil income tax” filers, if they were in Pakistan for 183 days or more, they select “yes” for resident status.

Upon proceeding, the system may indicate pre-selected income sources based on FBR records, such as salary, pension, rent from property, or payment for services, if tax was deducted against them. However, for “nil income tax” returns, these options are typically unchecked. If “Payment for Service” is selected (even for “nil” filers to access an appropriate return version), the system may redirect the user to an older version of the return form, which is necessary for business income, service income, or “nil” returns.

Key Sections of the Income Tax Return Form

Once redirected to the old version of the return form, several tabs become accessible. For “nil income tax” filers, the focus is generally not on traditional income heads like salary, property, business, capital gain, other sources, or foreign/agricultural income, as there is no income to declare. Instead, the key tabs for a “nil” return are:

• Tax Chargeable / Payments: This section is crucial for reporting any adjustable taxes. Even without traditional income, tax might have been deducted on various transactions. These adjustable taxes can include:
• Cash withdrawals from banks (e.g., 0.6% for non-filers withdrawing over PKR 50,000).
• Motor vehicle registration fees.
• Private vehicle token tax.
• Cellphone bills (tax collected under Section 236 subsection one and Clause A). Tax deduction certificates can be obtained from mobile apps, franchises, or via email/call. The tax deduction certificate shows details like the amount collected, the period, and the section under which tax was deducted. When entering cellphone bill details, the cell number, utility type (prepaid), and network provider (e.g., Mobilink, Zong, Telenor) are required.
• Sale/transfer of immovable property.
• Purchase/transfer of immovable property.
• Amounts remitted abroad through credit/debit/prepaid cards (e.g., for Google storage, Facebook/Google ads). The system may automatically fetch details of taxes deducted by the FBR for these transactions.
• To verify which taxes have been deducted, users can navigate to the “MIS” (Management Information System) section on the IRS dashboard, then to “Payment Details”, and search by tax year. This provides an Excel template download of all tax deduction details, including the section under which tax was deducted and the paid amount.
• Computations: After filling in adjustable taxes, this tab displays the total income (which will be zero for a “nil” return), deductible allowances, and normal income tax chargeable. Importantly, any withholding income tax (from cash withdrawals, foreign payments, cellphone bills) will appear here as a “Refundable Income Tax” amount, as there is no liability against it.
• Wealth Statement (Section 116): This is a critical part of the return, requiring individuals to detail personal expenses, personal assets/liabilities, and reconcile their net assets.
• Personal Expenses: This includes various expenditures like rent, vehicle running/maintenance, travel, utility bills (electricity, water, gas, telephone), asset insurance, medical expenses, educational fees, club memberships, functions, donations, Zakat, markup on loans, life insurance premiums, and other personal/household expenses (e.g., groceries). Even if an individual has “nil” income, they are expected to declare household expenses, which are often covered by family contributions.
• Personal Assets / Liabilities: This section requires declaration of various assets and liabilities:
• Agricultural property. When adding inherited property, its value is declared as zero because no cost was incurred to acquire it.
• Commercial, industrial, or residential property (non-business), including houses, flats, or plots. Similar to inherited agricultural land, inherited residential/commercial properties are also declared with a zero value.
• Business capital (not applicable for “nil” filers).
• Equipment non-business (e.g., grass cutting machine, mechanical ladders used for personal use).
• Animals non-business (e.g., cows, buffaloes for milk, expensive pets).
• Investments non-business (e.g., savings accounts, current accounts, bonds, certificates, shares, policies). Bank account details, including IBAN and closing balance as of June 30th, are added here.
• Non-business advances, deposits, prepayments, or receivables (loans given to others, security deposits).
• Motor vehicles non-business (cars, bikes, vans for personal use).
• Precious possessions (gemstones, jewelry like gold, silver, diamonds). Gold received as dowry (string) is declared with a zero value as no cost was incurred.
• Household effects (furniture, kitchen items, dishes).
• Personal items (mobile, laptop, airpods).
• Cash non-business (cash in hand after expenses).
• Any other assets not fitting previous categories (e.g., plot installments).
• Assets held in others’ names (e.g., property purchased in spouse’s or children’s names, with installments paid by the filer).
• Assets held outside Pakistan (for non-residents, includes bank accounts, cash, foreign property, shares in foreign companies).
• Liabilities: This includes non-business credits, advances, borrowings, deposits, loans (e.g., car loan from a bank), mortgages, or overdrafts. Foreign liabilities are also declared here. The “Net Assets” are calculated as assets minus liabilities.
• Reconciliation of Net Assets: This section reconciles the current year’s net assets with the previous year’s, accounting for inflows and outflows.
• Inflows: This includes income declared, foreign remittances (money received from abroad, often requiring a Proceeds Realization Certificate or EPRC), inheritances (zero value if no cost incurred), gifts received (e.g., property or cash from family, where the value is declared), gains on disposal of assets (excluding immovable property, like selling a car or household items), and other receipts.
• Outflows: This primarily lists personal expenses (taken from the personal expenses sheet), adjustments, gifts given (assets or cheques to close relatives), loss on disposal of assets (e.g., selling a house at a loss), and assets transferred/sold/gifted/donated during the year.
• The goal is to make the “Unreconciled amount” zero. If the previous year’s return was not filed, the “Net Assets Previous Year” may appear as zero, leading to a large unreconciled amount. This can be resolved by copying the unreconciled amount (without the minus sign) into the “Net Assets Previous Year” field, essentially bringing the opening balance to a reconciled state for a first-time filer.
• Capital Assets (Section 7E): This form is specifically for declaring any property owned by the filer that is situated in Pakistan. This section is crucial if one intends to sell a property later, as a Section 7E certificate is required.
• Definition: A capital asset generally refers to property of any kind, whether connected with a business or not, but explicitly excludes stock-in-trade, raw materials for business, shares/stocks/securities, assets subject to depreciation/amortization, and movable assets like vehicles. Essentially, for Section 7E, “capital asset” primarily means immovable property.
• Tax Imposition: Section 7E imposes a tax at 20% on 5% of the fair market value of capital assets held on the last day of the tax year by resident persons. This effectively means a 1% tax on the fair market value.
• Exemptions: Several exclusions apply to Section 7E tax:
• Owning only one capital asset (e.g., one house or plot).
• Self-owned business premises where business is conducted and the person is on the Active Taxpayer List (ATL).
• Self-owned agricultural land where agricultural activity is carried out (excluding farmhouses). A farmhouse is defined by a minimum area of 2000 square yards and a covered area of 5000 sq ft.
• Capital assets allotted to martyrs or their dependents from Pakistan Armed Forces, Federal, or Provincial Governments.
• Capital assets allotted to war-wounded persons from Armed Forces, Federal, or Provincial Governments.
• Original allotments of capital assets to ex-servicemen or serving personnel of Armed Forces, Federal, or Provincial Governments.
• Any property from which income is already chargeable to tax under the Income Tax Ordinance (e.g., rental property).
• Property acquired during the year if tax has been paid under Section 236.
• Where the aggregate fair market value of capital assets (excluding the exempted clauses) does not exceed PKR 25 million (2.5 crores).
• Capital assets owned by Provincial Governments or Local Governments.
• Capital assets owned by local authorities, development authorities, builders, and developers for land development and construction, provided they are registered with the Directorate General of Designated Non-Financial Businesses and Professions (DNFBP).
• Valuation: The fair market value of properties can be determined using either the Deputy Commissioner (DC) rate (for rural/far-flung areas) or the FBR Property Valuation Excel file (for 40 major cities), which provides FBR-defined rates per marla or acre.
• Attribute: This section is used to declare details such as the number of children (for home educational fees, though this field is left blank for “nil” filers) and, most importantly, the “Residence Status”. As established earlier, resident status is selected if the individual was in Pakistan for 183 days or more.

Submission of the Return

After completing all relevant sections and ensuring the reconciliation of net assets is zero, the return is saved. The final step is to click “Submit” and enter a four-digit PIN that was received from FBR during NTN creation. Once submitted, the return moves from “Draft” status to “Complete Task,” and a printable PDF version of the return becomes available.

Understanding Tax Deductions for Nil Income Filers

In discussing Tax Deductions, it’s important to understand several related concepts and how they are handled in the Income Tax Return filing process, especially for individuals with nil income [i].

For individuals filing a nil income tax return, while they may not have traditional income, tax might still have been deducted on various transactions. These deductions are often referred to as “Adjustable Tax” or “Withholding Income Tax” [i, k]. The system might even pre-select certain income sources if tax was deducted against them, such as salary, pension, rent from property, or payment for services [i].

Here are the key aspects of Tax Deductions:

• Adjustable Tax: This is a crucial section in the Income Tax Return form where individuals report any taxes that have been deducted from their transactions [i, k]. Even if you have no declared income, tax could have been withheld on various activities [i, k].
• Common Examples of Adjustable Taxes:
• Cash Withdrawals from Banks: If you are a non-filer and withdraw PKR 50,000 or more from a bank, a 0.6% tax is withheld [i, l]. The details of this deduction, including the amount and the section (e.g., Section 231A), must be entered [i, l].
• Motor Vehicle Registration Fee: Advance tax is levied on motor vehicle registration, and its amount needs to be declared [i, l].
• Private Vehicle Token Tax: If you’ve paid token tax for your vehicle, these details must be mentioned [i, l].
• Cellphone Bills: Tax is collected under Section 236, subsection one, and Clause A on cellphone usage [i, l]. Tax deduction certificates for cellphone bills can be obtained from mobile apps, franchises, or by emailing/calling the network provider [i, l]. When entering these details, you need to provide the cell number, utility type (e.g., prepaid), and network provider (e.g., Mobilink, Zong, Telenor) [i, l]. The certificate will show the collected amount, period, and section of deduction [i, l].
• Sale/Transfer of Immovable Property: Tax deducted on the sale of property needs to be reported [i, l].
• Purchase/Transfer of Immovable Property: Similarly, tax deducted on the purchase of property is declared here [i, l].
• Amounts Remitted Abroad Through Credit/Debit/Prepaid Cards: For foreign payments, such as for Google storage, Facebook ads, or Google ads, tax is deducted by your bank under Section 236 [i, l]. The system may automatically fetch these details, but they can also be added manually [i, l].
• Verifying Tax Deductions: To verify which taxes have been deducted against your name, you can access the Management Information System (MIS) section on the FBR’s IRS dashboard [i, l].
• Navigate to “Payment Details” within MIS [i, l].
• You can search by tax year to view all tax deduction details [i, l].
• An Excel template download is available, providing information on the section under which tax was deducted, the paid amount, and other relevant details [i, l]. For instance, it will show cash withdrawals or tax on remitting amounts abroad [i, l]. This downloaded data can then be used to populate the adjustable tax section in your return [i, l].
• Withholding Income Tax in Computations: After entering all adjustable taxes, the “Computations” tab will display the total income (which will be zero for a nil return) and any deductible allowances [i, m]. Significantly, any withholding income tax (from cash withdrawals, foreign payments, cellphone bills) will appear as a “Refundable Income Tax” amount [i, m]. This is because for a nil income filer, there is no tax liability against which these deductions can be offset, making them eligible for a refund or carried forward if there were a liability [i, m]. For example, if 1380 PKR was withheld from cash withdrawals, foreign payments, and cellphone bills, this amount will be shown as refundable income tax [i, m].
• Auto-Fetching of Deductions: The FBR system has started automatically populating details of taxes deducted into the adjustable or final fixed tax tabs [i, k]. However, it is still crucial to review these and manually add any missing deductions.

In essence, even without taxable income, individuals must meticulously declare all taxes deducted at source on various transactions to ensure a complete and accurate Income Tax Return [i, k].

Property Declarations and Capital Assets for Income Tax

Property Declarations are a crucial part of filing your Income Tax Return, as they detail all immovable assets you own, their value, and any associated tax implications. These declarations are typically made in two key sections of the tax return: the Wealth Statement’s Personal Assets/Liabilities section and the Capital Assets section.

Here’s a comprehensive discussion of property declarations:

I. Property Declarations in the Wealth Statement (Personal Assets/Liabilities)

The Wealth Statement is where individuals declare their personal assets and liabilities. This includes various types of property.

• Types of Property Declared:
• Agricultural Property: If you own agricultural land, its details must be provided. This includes the address (village, mouja, field, Khatuni number), the area (in acres or canals), and the district/city.
• Commercial, Industrial, Residential Property (Non-Business): This category covers houses, flats, plots, shops, plazas, or factory buildings not primarily used for business purposes. You need to provide the complete address, the type of property (commercial, residential, or plot), its area (e.g., in marlas), and the city.
• Other Assets (e.g., Plots on Installment): If you’ve acquired a plot in a society and are paying for it in installments, you can declare its details here, specifically noting that it’s “on installment”.
• Valuation of Property:
• For purchased properties, you declare the cost or declared value.
• For inherited properties, you must specifically state “inherited” in the contents, and their declared value for tax purposes will be zero, as no cost was incurred to acquire them.
• Properties gifted to you should also have their value mentioned, and if you gift a property, it would exit your personal assets.
• Properties with Special Ownership Conditions:
• Assets held in others’ names: If you’ve purchased assets like plots in the name of your spouse or dependents but are paying for them, you need to declare their value. This requires providing the CNIC of the dependent, their name, and a description of the asset.
• Assets held outside Pakistan: For non-residents or individuals with foreign property, details of these assets can be declared in this section.
• Changes in Property Ownership:
• The form also allows you to declare assets transferred, sold, gifted, or donated during the year, indicating changes in your property portfolio.

II. Property Declarations in the Capital Assets Section (Section 7E)

The Capital Assets section is specifically designed to declare properties that may be subject to Section 7E of the Income Tax Ordinance, which deals with tax on deemed income from certain capital assets. This section is mandatory for any property in your name.

• What Constitutes a Capital Asset for 7E:
• A “Capital Asset” generally includes property of any kind held by a person, whether or not connected with a business.
• Exclusions from Capital Asset Definition for 7E:
• Stock-in-trade, raw materials for business.
• Shares, stocks, or securities.
• Property eligible for depreciation or amortization deductions.
• Movable assets not included in the above clauses (e.g., vehicles).
• Essentially, Section 7E primarily applies to immovable property.
• Details Required in Capital Assets Form:
• For each property, you need to declare:
• Measurement and Total Area (e.g., Marla, acre, canal, square yard, square feet).
• Complete Address, including town/tehsil and city/district.
• Cost or Declared Value.
• Fair Market Value: For properties in major cities, the FBR Property Valuation Excel tool provides standardized rates, and you may need to refer to relevant SROs (Statutory Regulatory Orders) for precise per marla/acre rates in your city.
• Whether Exempted from Tax under Section 7E: You must select “Yes” or “No” and provide a “Reason for Exemption” if applicable.
• Construction Status and Covered Area (for constructed properties).
• Key Exemptions and Exclusions from Section 7E Tax:
• Ownership of a Single Capital Asset: If you own only one house or one plot, it is typically exempt from 7E tax.
• Self-Owned Business Premises: Industrial or commercial property used for business, provided your name appears on the Active Taxpayer List (ATL).
• Self-Owned Agricultural Land: If agricultural activities are genuinely carried out on the land, it is generally exempt, but farmhouses built on such land are not exempt. A farmhouse has a specific definition regarding minimum area and covered area.
• Properties Allotted to Specific Individuals: Capital assets allotted to martyrs, their dependents, war-wounded persons, ex-servicemen, or serving personnel of Armed Forces, Federal, or Provincial Governments (if original allotments) are exempt.
• Properties with Existing Tax Liability: Any property from which income is already chargeable to tax under the Ordinance (e.g., rental income where tax is paid) is exempt.
• Newly Acquired Property (First Year): Property acquired during the tax year where tax under Section 236 (on purchase) has been paid is exempt for that first year.
• Aggregate Value Threshold: If the aggregate fair market value of your capital assets (excluding certain defined clauses) does not exceed PKR 25 million (2.5 crore rupees), they are exempt from 7E tax.
• Government-Owned Properties: Capital assets owned by Provincial Governments, Local Governments, or Development Authorities are exempt.
• Builder/Developer Properties: Capital assets held by builders and developers for land development and construction are exempt, provided they are registered with the Directorate General of Designated Non-Financial Businesses and Professions (DNFBP).
• Tax Calculation on Deemed Income (Section 7E):
• If a property is subject to Section 7E, a deemed income equal to 5% of its fair market value is calculated.
• Tax is then imposed at a rate of 20% on this deemed income, which effectively translates to 1% of the fair market value of the taxable capital asset.
• This tax is only applied if the fair market value of the capital assets (not covered by exclusions) exceeds the PKR 25 million threshold.
• If your tax liability arises, you would generate a PSID (Payment Slip ID) to deposit the tax.

III. Verification of Deducted Taxes on Property Transactions

While not a declaration of property ownership itself, it’s important to report any taxes already deducted on property transactions within the Adjustable Tax section of your return.

• This includes tax withheld on sale/transfer of immovable property (Section 236C) and purchase/transfer of immovable property (Section 236).
• You can verify all taxes deducted against your name by accessing the Management Information System (MIS) section on the FBR’s IRS dashboard, under “Payment Details”. An Excel template can be downloaded from MIS to view details like the section under which tax was deducted and the amount paid.

Wealth Statement: Asset Reconciliation Explained

Asset reconciliation is a fundamental aspect of preparing your income tax return, specifically within the Wealth Statement. This process ensures that the net assets you declare at the end of the current tax year align logically with your net assets from the previous year, adjusted by your reported inflows and outflows during the year.

The primary goal of asset reconciliation is to achieve a zero “unreconciled amount”, as your tax return cannot be submitted until this balance is achieved. This section essentially acts as a check to ensure the consistency and accuracy of your financial declarations.

Here’s a breakdown of the key components involved in asset reconciliation:

I. Net Assets Calculation

• Net Assets Current Year: This figure represents your total assets minus your total liabilities for the current tax year. It is automatically derived from the “Personal Assets/Liabilities” section of your Wealth Statement where all your properties, bank balances, vehicles, and other valuable possessions are listed, along with any loans or payables.
• Net Assets Previous Year: This amount should automatically populate from the wealth statement filed in the preceding tax year. However, if it is your first time filing an income tax return, this field will show as zero. The system will bring forward the previous year’s net assets if a return was previously submitted.

II. Adjustments in Inflows

These are the increases in your net assets that have occurred during the tax year.

• Foreign Remittance: If you have received money from abroad, for example, from parents, a spouse, or relatives living in another country, this amount is declared here. The sources mention that a “Proceeds Realization Certificate” (PRC) or bank statements can serve as proof for these remittances.
• Inheritance: Assets or money received through inheritance are included here. While inherited property has a zero value in the personal assets section because no cost was incurred, the value of the inheritance still contributes to your inflows in reconciliation.
• Gift: Any gifts received, whether cash or property, must be declared. For property gifts, details such as the giver’s CNIC and a description of the gifted asset are typically required.
• Gain on Disposal of Assets (excluding immovable property capital gains): This refers to any profit made from selling movable assets like vehicles, household effects, or personal items. Profits from the sale of shares are usually reported under “capital gains” elsewhere and are excluded from this category.
• Income Attributable to Receipts: This category can include various receipts. For instance, it specifically mentions income for builders and developers, but also “others,” like government support price received by farmers.

III. Adjustments in Outflows

These are the decreases in your net assets during the tax year.

• Personal Expenses: This figure is directly carried over from the “Personal Expenses” section of your Wealth Statement. It represents your total declared living expenses for the year, such as rent, utilities, vehicle maintenance, medical, and household expenses. It can sometimes appear as a negative value if the family’s contributions to expenses exceed the stated expenses.
• Loss on Disposal of Assets: If you sold any assets at a loss (e.g., selling a car for less than its purchase price, or if property or jewelry was lost due to fire or damage), that loss is declared here.
• Gift: If you have gifted any property, assets, or money to someone (e.g., close relatives like parents, siblings, or children), the value of this gift is recorded here. This effectively removes the asset from your declared personal assets.
• Assets Transfer / Sold / Gifted / Donated during the year: This is a general category for assets that have left your possession through various means like sale, gift, or donation. For charitable donations to NGOs, the details would be mentioned here.

IV. Unreconciled Amount and its Resolution

The “unreconciled amount” is the difference between your net assets from the previous year plus total inflows, and your current year’s net assets plus total outflows.

• Goal: The target is always to make this figure zero. Your return cannot be successfully submitted until it reaches zero.
• Resolution Strategy: If a positive unreconciled amount appears, it means you have more assets than your declared income and sources can logically explain. A common method to balance this, especially for first-time filers with a zero previous year net asset, is to adjust the “Cash Non-Business” field within your personal assets. The system allows you to copy the unreconciled amount and paste it into “Cash Non-Business” to reconcile the statement. Conversely, if the amount is negative, implying more outflows or liabilities than explained, adjustments may also be made to “Cash Non-Business” or other asset values to balance it.

By meticulously tracking and accurately reporting all these inflows and outflows, the reconciliation of net assets provides a comprehensive financial overview and helps ensure compliance with tax regulations.

By Amjad Izhar
Contact: amjad.izhar@gmail.com
https://amjadizhar.blog

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