CAF-2 · Chapter 14

Returns MCQs with Answers

15 multiple-choice questions on Returns for CAF-2 Taxation Principles and Compliance. Try each one before revealing the answer and explanation.

1. Question 1

   Which of the following conditions mandates an individual to file a return of income, even if their taxable income is below the general taxable limit?

   • A) A) Owning a motor vehicle with an engine capacity of 800cc.
   • B) B) Owning a flat with a covered area of 1,500 square feet in a rating area.
   • C) C) Holding a commercial or industrial electricity connection with an annual bill of Rs. 400,000.
   • D) D) Owning immovable property with a land area of 500 square yards or more.
   Show answer & explanation

   Answer: D) D) Owning immovable property with a land area of 500 square yards or more.

   A person is required to file a return if they own immovable property with a land area of 500 square yards or more, a flat with a covered area of 2,000 square feet or more, a motor vehicle above 1000 CC, or hold a commercial/industrial electricity connection where the annual bill exceeds Rs. 500,000.

2. Question 2

   Which of the following individuals is NOT granted immunity from filing a return of income if they are otherwise required to file solely on the basis of owning immovable property or a motor vehicle?

   • A) A) A widow
   • B) B) An orphan below the age of 25 years
   • C) C) A senior citizen above 65 years of age
   • D) D) A disabled person
   Show answer & explanation

   Answer: C) C) A senior citizen above 65 years of age

   The law specifically grants immunity from filing a return solely based on property/vehicle ownership to a widow, an orphan below the age of 25 years, a disabled person, and a non-resident person. A senior citizen above 65 is not granted this specific immunity.

3. Question 3

   What is the legal implication if a business taxpayer fails to declare their business bank account to the Commissioner through the prescribed registration form?

   • A) A) A flat penalty of Rs. 100,000 is imposed immediately.
   • B) B) The taxpayer's registration is immediately cancelled.
   • C) C) Any expense incurred for business purposes shall be treated as inadmissible while computing income from business.
   • D) D) The business's assets are immediately seized.
   Show answer & explanation

   Answer: C) C) Any expense incurred for business purposes shall be treated as inadmissible while computing income from business.

   Every taxpayer must declare the bank account utilized for business transactions; failure to do so means any expense incurred for business purposes shall be inadmissible while computing income from business under section 21.

4. Question 4

   The Commissioner may issue a notice requiring a person to furnish a return of income for past years. If a person has NOT filed a return for any of the last five completed tax years, the Commissioner can issue a notice spanning up to:

   • A) A) The last 5 completed tax years.
   • B) B) The last 7 completed tax years.
   • C) C) One or more of the last 10 completed tax years.
   • D) D) An indefinite period.
   Show answer & explanation

   Answer: C) C) One or more of the last 10 completed tax years.

   Generally, a notice can be issued for the last 5 completed tax years, but if a person has not filed a return for any of the last five completed tax years, the notice may be issued in respect of one or more of the last 10 completed tax years.

5. Question 5

   Under the Income Tax General Order for persons liable to file a return but who failed to do so, the Board can place a restriction on foreign travel. However, this travel restriction does NOT apply to:

   • A) A) Government officials on private tours.
   • B) B) Persons proceeding abroad for Hajj or Umrah.
   • C) C) Any active taxpayer from the previous year.
   • D) D) Directors of public listed companies.
   Show answer & explanation

   Answer: B) B) Persons proceeding abroad for Hajj or Umrah.

   The restriction on foreign travel for non-filers excludes persons holding a National Identity Card for Overseas Pakistanis (NICOP), minors, students, and persons proceeding abroad for Hajj or Umrah.

6. Question 6

   Under the restrictions placed on economic transactions for "ineligible persons" (non-filers), they are strictly barred from:

   • A) A) Purchasing any motor vehicle regardless of its engine capacity or value.
   • B) B) Registering or transferring immovable property having an FBR value/DC rate exceeding Rs. 100 million.
   • C) C) Opening any bank account in Pakistan.
   • D) D) Making cash withdrawals exceeding Rs. 50 million in all bank accounts.
   Show answer & explanation

   Answer: B) B) Registering or transferring immovable property having an FBR value/DC rate exceeding Rs. 100 million.

   An ineligible person is restricted from booking/purchasing motor vehicles exceeding Rs. 7 million, opening securities accounts exceeding Rs. 50 million, making cash withdrawals exceeding Rs. 100 million, and registering/transferring immovable property having an FBR value/DC rate exceeding Rs. 100 million.

7. Question 7

   Alpha (Pvt.) Limited maintains a special tax year ending on 31 March 2026. What is the due date for furnishing its annual return of income for this tax year?

   • A) A) 30 September 2026.
   • B) B) 31 December 2026.
   • C) C) 30 September 2027.
   • D) D) 31 December 2027.
   Show answer & explanation

   Answer: B) B) 31 December 2026.

   For a company with a tax year ending between 1st January and 30th June, the return is due on or before the 31st of December next following the end of the tax year.

8. Question 8

   An individual discovering an omission in their already filed return wishes to file a revised return. Under which condition is the prior approval of the Commissioner NOT required?

   • A) A) If the revised return is filed within 60 days of filing the original return.
   • B) B) If the revision decreases the taxable income by less than 10%.
   • C) C) If the revised return is filed by a salaried individual.
   • D) D) Prior approval is always required without exception.
   Show answer & explanation

   Answer: A) A) If the revised return is filed within 60 days of filing the original return.

   A revised return must generally be accompanied by the approval of the Commissioner in writing; however, this condition shall not apply if the revised return is filed within sixty (60) days of filing the original return.

9. Question 9

   If a taxpayer voluntarily files a revised return and deposits the short-paid tax along with the default surcharge, when will they be completely exempt from paying any penalty?

   • A) A) If they revise the return after receiving a show-cause notice but before the assessment order.
   • B) B) If they revise the return voluntarily before the receipt of a notice for audit.
   • C) C) If they revise the return during the audit proceedings.
   • D) D) A taxpayer is never exempt from the penalty when revising a return.
   Show answer & explanation

   Answer: B) B) If they revise the return voluntarily before the receipt of a notice for audit.

   If a taxpayer files a revised return voluntarily along with the deposit of the tax short paid and default surcharge before receipt of a notice for audit or amendment of assessment, no penalty shall be recovered from him. (If revised during audit, a 25% penalty applies).

10. Question 10

    What is the absolute statutory time limit beyond which a wealth statement CANNOT be revised?

    • A) A) After the expiry of 1 year from the due date of filing the return.
    • B) B) After the expiry of 3 years from the end of the financial year.
    • C) C) After the expiry of 5 years from the due date of filing of return of income for that tax year.
    • D) D) A wealth statement can be revised indefinitely until an audit is conducted.
    Show answer & explanation

    Answer: C) C) After the expiry of 5 years from the due date of filing of return of income for that tax year.

    For the removal of doubt, the law clarifies that a wealth statement cannot be revised after the expiry of five years from the due date of filing of the return of income for that tax year.

11. Question 11

    Which of the following individuals is mandatorily required to furnish a Foreign Income and Assets Statement?

    • A) A) A non-resident Pakistani with foreign assets worth USD 50,000.
    • B) B) A resident individual having foreign income of USD 12,000.
    • C) C) A resident company having a foreign subsidiary.
    • D) D) A resident individual having foreign assets worth USD 80,000.
    Show answer & explanation

    Answer: B) B) A resident individual having foreign income of USD 12,000.

    Every resident taxpayer being an individual having foreign income of not less than USD 10,000 OR having foreign assets with a value of not less than USD 100,000 shall furnish a foreign income and assets statement.

12. Question 12

    Mr. Tariq decided to permanently close his trading business on 20 October 2025. Within how many days is he legally required to give a notice in writing to the Commissioner regarding the discontinuance of his business?

    • A) A) 15 days
    • B) B) 30 days
    • C) C) 45 days
    • D) D) By the end of the tax year.
    Show answer & explanation

    Answer: A) A) 15 days

    Any person discontinuing a business shall give the Commissioner a notice in writing to that effect within fifteen days of the discontinuance.

13. Question 13

    A taxpayer applies for an extension of time to file their income tax return, and the Commissioner grants a 15-day extension. What is the impact of this extension on the payment of the tax due?

    • A) A) The due date for payment of tax is also extended by 15 days without any default surcharge.
    • B) B) The extension does not change the due date for the payment of income tax, and default surcharge shall be chargeable for the delayed payment.
    • C) C) The taxpayer is exempt from paying the tax until the assessment is finalized.
    • D) D) The default surcharge is waived, but a fixed penalty is imposed.
    Show answer & explanation

    Answer: B) B) The extension does not change the due date for the payment of income tax, and default surcharge shall be chargeable for the delayed payment.

    An extension of time granted for furnishing the return shall not change the due date for payment of income tax payable on the basis of the return, and default surcharge shall be chargeable for the delayed payment of tax due.

14. Question 14

    When filing a wealth statement, under what exact condition must a resident individual include the assets and liabilities of their spouse?

    • A) A) The spouse's assets must always be included.
    • B) B) Only if the spouse's assets exceed Rs. 5 million.
    • C) C) Only if the spouse is dependent on the taxpayer.
    • D) D) The spouse's assets are never included in the individual's wealth statement.
    Show answer & explanation

    Answer: C) C) Only if the spouse is dependent on the taxpayer.

    The wealth statement must include the assets of the person’s spouse, minor children, and other dependents. The law specifically clarifies that the assets of the spouse shall only be included in the wealth statement of the person if the spouse is dependent.

15. Question 15

    Mr. Zaid, who has not filed his return of income for many years, has a foreign bank account that he never declared. The Commissioner wishes to issue a notice requiring him to file his return. What is the time limitation for the Commissioner to issue this notice regarding past tax years?

    • A) A) 5 completed tax years.
    • B) B) 10 completed tax years.
    • C) C) 15 completed tax years.
    • D) D) The time limitation does not apply.
    Show answer & explanation

    Answer: D) D) The time limitation does not apply.

    While standard limits are 5 or 10 years, the time-limitation shall not apply if the Commissioner is satisfied, on the basis of reasons recorded in writing, that a person who failed to furnish his return has foreign income or owns foreign assets.