Tax season can be daunting for anyone, but especially for businesses and individuals in Pakistan. Maintaining the Federal Board of Revenue (FBR) requirements involves accurate documentation, timely submissions, and clean financial records. Fortunately, the right accounting software for tax filing, like hisaab.pk, can make this yearly chore a manageable task. From freelancers to business owners, having accounting-specific tools can make them audit-ready throughout the year.
Why Tax Preparation Starts Before Tax Season?
The majority of individuals climb in the last few weeks prior to the deadline. However, anyone with any tax expertise or experience in owning a business understands that it’s a process that takes place all year round, not just in the spring. The income tax return deadline in Pakistan is 30th September annually for individuals and freelancers, and 31st December annually for companies. Failure to do so will result in penalties of PKR 1,000 per day (and the amount increases by the number of days), as well as the reduction of the active filer status, which will increase the amount of withholding tax deductions for all day-to-day transactions.
Once you’ve implemented accounting software in Pakistan from the beginning of the fiscal year (1st July), you will be able to capture all transactions, create financial summaries, and be ready for tax season.
There are several ways that accounting software makes tax filing easier. Here are a few of the ways that accounting software makes tax filing easier.
● Organized Records All Year Round
Tax filing accounting software will organize your income, expenses, and liabilities in an orderly fashion throughout the year. In September, rather than scouring through bank statements and receipts, you just have to log in to your records, and they’re all there. To file an income tax return Pakistan, you will require documents such as bank statements, profit and loss account, balance sheet, and withholding tax certificates. There is software available that will track these in real-time and save hours of manual work.
● Tax-Ready Reports
One of the most effective options provided by contemporary accounting software in Pakistan is tax ready reports Pakistan. These are financial summaries, balance sheets, sales tax summaries, and expense breakdowns. Software is designed to automatically generate these reports and present the data in a format that is compatible with FBR, making it easy to upload to the IRIS portal.
There are specific tax ready reports for businesses with income tax, sales tax, and withholding tax in Pakistan. One single consolidated report can save a lot of time in filing, and also minimize the possibility of human error.
● Anti-Tax Evasion Measures are in Place
The Federal Board of Revenue has issued orders to all businesses that are sales tax registered in Pakistan to make FBR tax invoicing mandatory. This will be done by making the transmission of each sales invoice to the FBR’s portal real-time, and then verifying the invoice before it is sent to the customer, with a unique Invoice Reference Number (IRN). Failure to comply may lead to a penalty of up to PKR 500,000 and may even lead to the suspension of your tax profile.
The modern accounting systems can be seamlessly connected with FBR’s IRIS system through secure API connections. The software automatically generates the invoice data as per FBR norms, sends it, gets the IRN and QR code, and saves the verified invoice in mere seconds. This level of automation will save you time, minimise calculation mistakes, and keep your invoicing up-to-date and compliant. Companies with FBR accounting tools also enjoy a greater speed in audit resolution, as all transactions are digitally recorded and verifiable.
● No Tax Fraud is Committed
In Pakistan, accurate filing of income tax returns is paramount. All income sources, including salary, business, property, freelance sites such as Upwork or Fiverr, and foreign remittances, must be declared in detail in the FBR’s IRIS portal. If your income comes from various sources, then accounting software that supports this makes it easy to make this declaration. At any time during the year, you can view how much income is taxable and what deductions you can take.
Salaried workers: If you are paid by your employer, it’s important to connect your payroll system to your accounting software so that any taxes deducted from your payroll are properly reported on your payroll return, and you don’t end up with an issue that would result in an audit.
● Unified Sales Tax/Withholding Tax Administration
In addition to income tax, businesses in Pakistan need to be aware of and comply with sales tax obligations and withholding tax statements. Having an accounting software solution that supports all three types of taxes: withholding tax, income tax, and sales tax. There is no need to have individual spreadsheets for each category. The software records the input and output taxes, computes the liabilities, and produces a summary report for each filing period.