7 common mistakes to avoid when filing income tax returns with FBR

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Not Declaration All Assets

7 common mistakes to avoid when filing income tax returns with FBR, here is th first big mistake is that people do not declare all their assets. They think that if you declare assets, you will have to pay tax. The fact is that you have to pay tax only if you have created more assets than your income. Assets are not created in a year, but over time, so you must declare all your assets.

Failure to check all bank transactions

The second mistake is that people only write down the bank balance but do not take out a bank statement. In fact, it is important to check every transaction. If there is a large or unusual transaction, the source of it has to be found. For example, if a teacher suddenly gets Rs 15–20 lakh in his account, it is important to see where this money came from—did his son send it, did he borrow it from a relative, or did he receive a gift from someone? All these transactions must be declared clearly.

Non-disclosure of complete income sources:

The third of the 7 common mistakes to avoid when filing income tax returns with FBR people do not disclose their entire income or only disclose a portion. This can lead to problems in the future because the FBR already has the information. Later, when you buy an asset, you have to explain it to the authority and provide a money trail for that asset. If you cannot provide a money trail, you can be taxed, which is usually very high.

Undeclared expenses:

Similarly, another common mistake is not declaring expenses properly. Nowadays, purchases and other payments made from shopping malls are made from separate bank accounts or credit cards, the reporting of which reaches the FBR in real time. Later, the details are also obtained from the banks and shared with the FBR, on the basis of which you can be caught. If your expenses are more than your declared income, it can be easily proven that you have hidden your income. For example, if you have declared that your annual income is only Rs. 7 lakh, but your expenses are more than Rs. 10 or 12 lakh, this may immediately come to the notice of the FBR.

No caution is taken in risky transactions

It has often been seen that the transaction is reported but its evidence is not preserved. This can lead to three to future problems. These include gifts, foreign remittances and loans and also not keeping complete and accurate records.

PRC Not obtained for foreign remittance.

For example, if you have foreign remittance in your account, then it is mandatory to get a PRC. If the amount is more than 5 million, then the source of income of the sender must also be mentioned. If it is less than 5 million, then the FBR will not ask, but if it is more than that, the source must be mentioned.

Gift

Similarly, if someone has given or received a gift, both have to be declared in their respective tax returns. Gifts can only be given to blood relations, giving to anyone other than family is not permissible according to tax laws. But most people give gifts to their friends or take them from them and do not have any proof of it. For example, if someone is gifted a car or jewellery, then it is mandatory to make a gift deed for it and all legal requirements must be fulfilled. Otherwise, this gift amount may be taxed.

Loan

Similarly, if someone is given or taken a loan, both parties have to declare it in their respective tax returns. For this, it is necessary that this transaction is done only through banking channels, cash transactions are not allowed. An agreement should also be made along with it so that it can be presented to the FBR as evidence in the future.