Looking for information regarding filing tax returns for the first time!

[assassin7]

Edit: Some people are saying foreign freelancing income is not taxable. I know that. Please answer the questions regardless of that. Consider that all income is taxable. I need to know answers to the specific questions I posted.

Hello! I am looking for some information regarding filing tax returns for the first time. Income is from online freelancing. Income is more than 400,000 per year so tax is applicable. I do not have a registered sole proprietorship/company. Please answer the following questions:

1. Do I need to mention exact sources of income? For example: name of websites I own to generate income, the kind of work I did to generate income etc.
2. Do I need to state money trail? For example: Some random person on Internet paid me on PayPal for website design. I sent the PayPal $ to some random guy in Pakistan who then made PKR deposit into my bank account.
3. Do I need to mention total income generated over the past year only? Or do I need to mention and pay tax on all the online income I have generated over the years (as this is the first time I will be paying tax)?
4. Is it going to be a legal problem that I've been earning money online for years and never paid taxes before?
5. Are there any tax deductible expenses for an individual? Can you please mention some so I get an idea?

Thank you in advance!

[dilshadfatima]

I have never seen anyone getting taxed for his/her freelance work .

[mohsan87]

No tax on foreign income. If came via proper channel ( banking or Western Union )

[assassin7]

Very rarely individual freelancers (without companies/firms) get paid via proper channels such as Western Union or international wire transfer. Regardless of my profession, I want answers to the questions posted above. Please answer the questions as if my income is taxable.

[amircase82]

Why dont you go to income tax office and ask....after all they are getting paid to tell you these things.....do we pay taxes just to fill up their fat asses.....sorry about my language....but that is just the hard truth....

[assassin7]

Thank you. I found it more convenient to ask an online community. If someone knows the answers to my questions, they will be able to give a good idea about what to expect. Thanks!

[thamoobilla]

Please post your location so that one of the forum members may refer you to a Tax consultant in your locality. Consult and register with PSEB to prevent headaches and get better advice. They have done a lot to make this process relatively headache free for freelancers.

I'll try to answer your points based on what I know for sure. (Only for the ones I'm sure about)

1. -

2. Keep your invoices and receipts scanned and handy.

3. You've been paying taxes since the day you were born , you just need to 'file' for the past two years and pay any outstanding taxes for those two years' income.

4. -

5. I'm sure you have spent on things or services where tax was deducted and you can get a receipt for that and in some cases a tax deduction certificate as well. For example your ISP, mobile operators, restaurants with proper POS systems in place , Cash & carry stores (try to do all your shopping there, everyone deducts GST but only good Cash & Carry stores give details of deducted taxes on receipts)...

I hope you get the idea and this helps in some way.
If I find out more about the remaining points, I will post here.

[mohsan87]

FBR does not accept any argument. the only legal way to receive income from abroad is via proper banking channel or via Western Union. No other excuses. income received via any other way is taxable

[mohsan87]

Section 102 of ITO states

102. Foreign source salary of resident individuals.—
(1) Any foreign-source salary received by a resident individual shall be exempt from tax if the individual has paid foreign income tax in respect of the salary.

(2) A resident individual shall be treated as having paid foreign income tax in respect of foreign-source salary if tax has been withheld from the salary by the individual‘s employer and paid to the revenue authority of the foreign country in which the employment was exercised.

[ashbal]

The foreign income is not taxable at all...but it should be through proper channel as said above by other members