FBR to use AI to check tax returns: what Pakistani taxpayers should know

Pakistan's Federal Board of Revenue (FBR) will use artificial intelligence to scrutinize income tax returns and flag discrepancies in declared income, assets and records, FBR sources said. Taxpayers who made mistakes can correct their returns before Oct. 15 to avoid financial penalties.

How will the FBR use AI to check tax returns?

The FBR has obtained data on properties and assets owned by individuals nationwide. It will automatically compare that information with what taxpayers declare in their returns. AI will then cross-check the data to identify inconsistencies between declared income, assets and the information available to the authority.

The system is also meant to identify concealed assets and potentially tampered records. Taxpayers who commit violations face financial penalties, the sources said.

Can taxpayers correct mistakes in their returns?

Taxpayers who have made mistakes in their returns can correct them before Oct. 15, according to the FBR sources. They have also been advised to seek help from qualified and experienced professionals when preparing returns.

The sources urged taxpayers to ensure their returns accurately reflect their income and assets. The FBR is stepping up automated checks to find gaps between taxpayer declarations and its own records.

What are the penalties for not filing an income tax return in Pakistan?

Section 182 of the Income Tax Ordinance, 2001, sets penalties for various tax offenses. A person who commits an offense listed in its table "shall be liable to the penalty mentioned against that offence," in addition to any other punishment under the ordinance or other laws.

For failing to file a return under Section 114 by the due date, the penalty is the higher of two amounts. One is 0.1% of the tax payable for the relevant tax year for each day of default. The other is 1,000 Pakistani rupees ($3.60) for each day of default.

The law also sets a minimum penalty of 10,000 rupees for individuals who derive at least 75% of their income from salary, and 50,000 rupees in other cases. The maximum penalty under this provision cannot exceed 200% of the tax payable in a tax year.

Do these penalties apply to concealed assets and inaccurate returns?

These penalties apply specifically to failure to file a return on time. Penalties for concealing assets, providing inaccurate information or committing other violations depend on the applicable provisions of the law.