How much wealth should I declare when filing my first return
What is Wealth?
Wealth refers to all the financial or valuable assets that you have or own including Immovable Property (land, house, flat,)
Bank balances (current and savings account including Defence, pensioners, Behbood) Investments (shares, bonds, mutual funds)
- Cash (cash in hand)
- Gold and jewellery
- Household valuables items (e.g. furniture and fixture, electronics)
- Other valuables (e.g. precious stones, pieces of art, antique)
Rules for declaration in first-time tax return
When you file your tax return for the first time, you are required to declare your opening wealth.
Declare at cost:
Write the value of any asset you own at the price at which you bought it
When you declare your assets, you have to disclose their cost, i.e. the price at which you bought the asset, rather than their current market value.
Examples:
If you purchased the asset:
If you bought 5 Tola of gold for Rs. 100,000 and its value is now Rs. 1,500,000, you still have to show only Rs. 100,000 in your return.
If the asset was gifted or inherited:
In this case, the cost of the asset will be considered to be the price the donor or predecessor has paid for it.
For example, if you inherit a property from your father in 2025 whose original purchase price in 2000 was Rs. 125,000, you would only declare the value of the property as Rs. 125,000.
Why is Opening Wealth important?
To justify future investment.
If you have under-declared assets and later buy a new property or asset, it will be difficult to explain the purchase. But if you have correctly disclosed all your assets, you can easily explain that the purchase was made from your opening wealth or saving. However, if you have over-declared assets, the FBR will ask where the excess money came from.
Under-declaration problem
Practical Examples
You stated in your return on June 30, 2024 that you have only Rs 2 million.
In 2025, you purchased a property worth Rs 5 million.
Now the FBR will ask: Where did the additional Rs 3 million come from?
If you do not have proof, the FBR may assume that this amount is concealed income. In this case, a notice will be issued and you will have to pay tax on the entire 30 million, even though that amount is actually your white money.
Example 2: Over-declaration problem
Your total income in the last 10 years is Rs 6 million.
But you declare assets of Rs 20 million in your return which include cash in hand, bank balances, jewellery etc.
The FBR will ask: Your total earning is only Rs 6 million, where did the rest of the money come from?
Then you will have to provide evidence of jewellery, cash or property receipts, bank statements, gift or loan documents, etc.
How much wealth should I declare when filing my first return?
It depends on your age, duration of employment or business, and annual income.
Your declared assets cannot exceed your total earning
Suppose a government employee who joined in 1995, his salary at that was Rs 10,000. while in 2025 it increased to Rs 175,000. If we calculate the total salary based on 30 years of service, it comes to about Rs 22 million
Now, if we assume that he spends only 25 percent of his monthly salary and saves the rest, he can declare about Rs 17 million of his assets by saving. However, the value of his assets can never exceed his maximum earnings of Rs 22 million.
What will be the consequence if assets are under- or over-declared?
Under section 111 of the Income Tax Ordinance, the FBR has the right to ask you for an explanation about any investment or asset.
Wrong practice and its consequences
(a) Under declaration:
You show less assets, later make a big purchase.
FBR will issue a notice and may impose additional tax (e.g. up to 35%).
The matter may also go to the Commissioner or the court.
(b) Over Declaration:
You show assets that you did not actually have.
This act is considered an attempt to whiten black money.
FBR will ask questions based on your income and lifestyle.
You will have to provide evidence: receipts, bank statements, receipts of purchase and sale of jewellery, etc.
Importance of Evidence
It is necessary to have acceptable evidence for each asset, for example:
- Bank Statement
- Invoices of jewellery or gold
- Gift or loan agreements (Gift/Loan Deeds)
- Property purchase/sale documents
- Preparing fake documents may provide temporary benefits, but evidence of the actual buyer or seller will be sought, which will be difficult to prove.
Summary
- Declare opening wealth accurately, on time and with evidence.
- Do not hide less, do not show more.
- Keep complete documents ready to answer FBR questions.
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