How to Prepare and Reconcile Wealth Statement? Wealth means the total assets you have your net worth. This includes all valuables you own in Pakistan or abroad. such as bank balances, cash, jewellery, gold, residential or commercial property, agricultural land, business capital, household valuables, vehicles, shares, bank deposits, prize bonds, advances or prepayments, insurance claims, livestock.
All these valuables are mandatory to be disclosed in the wealth statement. Especially when you file your income tax return for the first time, you have to declare all your assets in full.
What Is Difference Between Income Tax Return and Wealth Statement?
The income tax return has two parts:
The first part is called the income statement, in which you have to disclose the details of all your earnings whether it is from salary, business, property, capital gains, bank profits or any other source.
The second part is the wealth statement which contained list of all personal valuables and liabilities, personal expenses incurred and Wealth Reconciliation Statement.
Net assets represent all valuables minus liabilities owned by the taxpayer at the end of that fiscal year (e.g. 30-06-2025).
| Total Assets within Pakistan | = X |
| Total Assets outside Pakistan | = X |
| Total Assets | = XX |
| Total Liabilities | = Y |
| Net Assets – Current Year | = XXX |
Wealth Reconciliation Statement:
This part is the most critical part which needs to be carefully filed. The formula for this statement is the:
Net Assets Current Year = x
Net Assets Previous Year = (x)
Increase / (Decrease) in Assets = x/(x)
The net effect that is coming out will either show a decrease or increase in Wealth.
Inflows
These flows first include the earnings you have already declared in your tax return, and the same amount must be declared here.
Taxable income: that can be taxed under the law.
Exempt Income: that is exempted from tax.
Final/fixed tax:
A tax that is already deducted or collected and after which no further tax is due.
Adjustments in Inflows
All amounts that are not part of income will be shown in adjustments, including:
A gift, Gain on sale of assets, Loan, Foreign remittances or Any other amount
Adjustments in Outflows
Similarly, Outflow is also on the same principle that is, the money that you spent or paid during the year, for example:
Personal expenses, Loan or Gift given or any other expenditure
How reconciled Wealth Statement?
If the wealth statement is prepared correctly, there should be a difference of zero in the Unreconciled Amount. Until it is zero, the wealth statement will not be considered correct and the return will not be filed or submitted.
Negative Amount
If there is a negative value it means that the income is more than the personal expenses, valuables or any other payment like gift, loan etc. which are not declared.
For example, if the profit from the business during the year is Rs. 12,00,000 and the expenses are only Rs. 2,00,000, then the remaining difference i.e. Rs. 10,00,000 may indicate that either the expenses have been under-reported or an asset, such as a bank balance, property, or any other payment such as a loan or gift, has not been reported.
Positive Amount
If the difference is positive, it means that assets or expenses have been more than the declared earnings.
For example, if you have declared net business profit of Rs 600,000 (on which no tax is applicable) but in the same year you have bought a property worth Rs 2.6 million there is a difference of 2 million will arise.
How to Prepare and Reconcile Wealth Statement when difference is Positive?
If this is your income, it must be declared it, and the tax due on it must also be paid.
If this amount is exempt, you will have to provide an exemption certificate as an evidence.
If this represent the foreign remittances, then the PRC from your bank is mandatory.
Loan:
If this money was spent by taking a loan, then all the conditions of the loan must be met. The loan must have been transferred through a bank, and the lender must also declare this loan in his tax return.
Gift
If this money was received as a gift, then the conditions of the gift must be met, such as the existence of a gift deed and the transfer of the money through a bank.
Repayment of a previously given loan:
If a loan given to someone has been repaid in the past, then it is necessary that that loan be declared in the previous year’s wealth statement. If it was not declared earlier, it can be included this year through an adjustment.
Remember, it is very important to have all supporting documents, otherwise it may cause problems for you. For more information Please contact us through our website by filling out the Contact Us form, or reach out via our social media accounts
