This updated edition explains the structure, policies, and procedures of Pakistan’s income tax regime in a reader-friendly and step-by-step manner. It opens with preliminary definitions and moves on to the functions of tax authorities, categories of taxpayers and the significance of registration and filing of returns—both online and manually—covering procedures, benefits, legal obligations, and consequences of non-compliance.
Chapter-I Preliminary
1. Short Title, Extent & Commencement 
2. Definitions 
3. Ordinance to override other laws 
Chapter-2 THE INCOME TAX AUTHORITIES & INCOME TAX POLICIES
- Central/Federal Board of Revenue 
- Income Tax Ordinance, 2001 
- Complicated income tax system 
- The core reasons for increase of non-filers 
- Categories of taxpayers, -filers and non-filers 
- Procedure to become a compliant taxpayer 
- Benefits of filing an income tax return 
Chapter-3 INCOME TAX BASICS
80-85 Person 
4. Taxable Income 
11. Heads of Income 
101. Pakistan-source Income 
- Foreign-source Income 
- Taxation of Individuals 
74. Tax Year 
Chapter-4 TAXPAYERS’ REGISTRATION
181. Taxpayers registration 
- Taxpayer’s registration basics 
- Requirements for registration 
- Registration process 
- Online registration 
- Registration at facilitation center 
- Modification of income tax registration 
181A. Active Taxpayers List 
181AA. Compulsory registration in certain cases 
181D. Business license scheme 
Chapter-5 FILING OF INCOME TAX RETURN
114. Return of income filling of 
74. Tax year 
- Application to the Commissioner to select tax year 
- Step-by-step to file an income tax return 
- Return may be filed online 
114. The persons who are required to furnish a return 
- Contents and requirements of filing a return 
- The Commissioner may issue notice to furnish a return 
- The return may be revised voluntarily 
- Preparation of return 
- Due dates for filing return 
- Active (Late Filer) 
114B. The Board’s powers to enforce the non-filers to file a return 
- The non-filers shall face the consequences 
- The conditions for issuance general order to the non-filers 
114C. Restrictions on economic transactions by certain persons the expression. 
- “Taxing informal and hard-to-tax sectors a policy guide”, 
- The expression ‘eligible person’ defined 
182A. Return not filed within due date 
115. The persons who are not required to furnish a return 
119. Extension of time for furnishing a return etc 
118. Method of furnishing return and other documents 
- Penalty for not furnishing a return 
114A. Business bank account 
143. Return to be furnished by a non-resident ship owner/charterer 
144. Return to be furnished by aircraft owner/charterer 
Chapter-6 WEALTH & FOREIGN INCOME/ASSETS STATEMENT
116. Wealth statement 
- A non-resident may file a wealth statement in Pakistan 
- Contents of a wealth statement 
- Revised wealth statement 
- Components of wealth reconciliation statement 
- Resident taxpayer shall furnish Foreign Income/Assets Statement 
- The commissioner may require to furnish statement 
116A. Foreign income/assets statement 
Chapter-7 TOTAL AND TAXABLE INCOME & INCOME TAX THEREON
9-10. Total and taxable Income 
11. Heads of Income 
- Computation of income based on residential status 
81-84. Residential status under the Ordinance 
- Tax liability based on receipt of income 
- Income receivable outside territories 
9. Computation of taxable income 
- Concept of income for the purposes of income tax 
Chapter-8 CHARGE OF TAX
4. Tax on taxable income 
- Determination of taxable income 
- Sources of taxable income 
- Guide to calculate taxable income 
- Certain classes of income having specific provisions 
- Principles of chargeability of tax 
4B. Super tax for rehabilitation of temporary displaced persons 
4C. Super tax on high earning persons 
Chapter-9 HEADS OF INCOME
Part -1 Salary
12. Salary 
- Income of resident person 
101. Taxation of foreign source income of residents 
102. Foreign source salary of resident individuals 
51. Foreign-source income of returning expatriates 
- The expression ‘salary’ meaning of 
- Payment on termination of employment 
110. Salary paid by private companies 
13. Perquisites to be included in the employees’ salary 
- Fair market value of perquisites provided 
14. Employees share scheme 
- Determination of income salary 
- Director’s fee is taxable 
60-61, 63. Deductible allowances and tax credit 
103. Foreign tax credit 
149. Deduction of tax at source from salary 
Part -2 Income from property:
15. Income from property 
- Rent received from property is chargeable to tax 
- Rent received from leased building is chargeable to tax from other sources 
- Fair Market Value rent 
- Non-adjustable amount received in relation to a building 
66. Income from joint property owner’s 
- Geographical source of income 
- Tax deduction from property income 
- Prescribed persons 
15A. Deductions in computing income chargeable of Income from Property 
16. Non-adjustable amount received in relation to building 
155. Deduction of tax 
Part - 3 Income from business
18. Income from business 
101. Income shall not be chargeable to tax 
102. incomes from business shall be Pakistan-source income 
103. Significant economic presence 
- Pakistan-source income 
20. Deductions-general principles 
- Deductions not allowed 
67. Apportionment of deductions 
22. Depreciation 
- Depreciation shall be allowed for deduction 
- Particulars required to be furnished for claiming depreciation etc 
76. Cost 
- The expression Cost and Written Down Value defined 
- Computation of consideration 
75. Disposal and acquisition of assets 
78. Non-arm’s length transactions 
79. Non-recognition rules 
- Asset transferred exported out of Pakistan 
23. Initial allowance 
23B. Accelerated depreciation to alternate energy projects 
24. Intangibles 
25. Pre-commencement expenditures 
26. Scientific research expenditures 
27. Employee training and facilities 
28. Profit on debt, financial costs and lease payments 
29. Bad debts 
29A. Provisions regarding consumer loans 
30. Profit on non-preforming debts of a banking company/DFIs 
31. Transfer to participatory reserves 
69. Receipt of income 
70. Recouped expenditures 
71. Currency conversion 
72. Cessation of source of income 
73. Rules to prevent double derivation and double deductions 
5A. Tax on undistributed profits 
175C. Posting of officer of IR 
- Intrusive on-site Monitoring. 
Books of accounts to be maintained of income from business
R.29. Books of accounts etc. to be maintained 
- Every taxpayer other than a company shall maintain minimum books. 
Part-4 Capital Gains
37. Capital gains 
- Capital gains on disposal of an asset is chargeable to tax 
- Computation of gain on the disposal of an asset 
77. Consideration received - meaning of etc. 
- Advance tax shall be deducted 
- Value of shares acquired shall be at Fair Market Value 
101A. Gain on disposal of assets outside Pakistan 
- Income of non-resident company shall be treated to be located in Pakistan 
- Statement shall be furnished to the Commissioner 
37A. Capital gain on disposal of securities 
- Exemption from capital gain tax 
- Computation of capital gain 
- Terms used are defined 
- Derivative products 
- Gain on disposal of certain debt securities 
- Capital gains on debt securities held by a non-resident company 
- Loss of disposal of securities 
- Capital gains on immovable properties 
- Properties disposed off outside Pakistan 
- Capital gains on disposal off SCRAs and RDAs 
- Payment of tax on capital gains 
- Capital gain tax 
155. Clearing Co. of Pakistan (NCCPL) 
- Computation, determination, collection and despot of CCGT 
- Salient features of CCGT Regime 
Part-5 Income from Other Sources
39. Income from other sources 
- Income chargeable to tax under the head ‘Income from Other Sources’ 
- Income not changeable to tax under head income from other sources 
40. Deductions allowed in computing income from other sources 
Chapter-10 SET OFF AND CARRIED FORWARD OF LOSSES
56. Set off of losses 
- Adjustment of business loss shall not be allowed 
56A. Set off losses of companies operating hotels 
57. Carry forward of business losses 
- loss sustained by a banking company, resident company, PIA 
- Loss set off procedure 
- Where the loss has not been set off 
- Sick industrial units are allowed carry forward of business losses 
- Treated to be the income of the amalgamating company 
57A. Set off business loss consequent amalgamation 
- Accumulated losses of banking company 
58. Carry forward of speculation business losses 
59. Carry forward of capital losses 
58A. Limitation of set off and carry forward of losses 
104. Foreign losses 
Chapter-11 GROUP TAXATION AND RELIEF
59AA. Group taxation 
- Option to be taxed as one Unit 
59B. Group relief 
- Losses surrendered my be set off 
- Limitation for surrender of losses 
- Subsidiary company may carry forward losses 
- Companies in a group disentitled to avail group relief 
- Disposal of shares by holding company 
- Transfer of cash to the loss surrendering company 
- Sale and purchase of shares 
Chapter-12 TAX ACCOUNTING
32. Method of accounting 
- The Commissioner may allow change in method of accounting 
33. Cash-basis accounting 
34. Accrued basis accounting 
- Chief features of accrual accounting 
35. Stock-in trade – 
- Computation of stock-in-trade etc. 
- The expressions defined 
36. Long term contracts 
Chapter-13 PRINCIPLES OF TAXATION
Part - 1 Principles of Taxation of Individuals
86. Principle of taxation of individuals 
- Determination of income of individual 
87. Deceased individuals 
88. An individual as a member of AOP 
- Computation of income of the individual 
89. Author 
90. Income splitting-Transfer of assets 
91. Income of a minor child 
Part - 2 Principles of Taxation of Association of Persons
92. Principles of taxation of AOP 
- AOP shall be taxable separately 
- Financial statement duly audited shall be filed 
- Share received by a member shall be exempted 
Part - 3 Principles of Taxation of Companies
94. Principles of taxation of companies 
- A company shall be taxed separately 
95-96. Disposal of business by individual to wholly owned company by; 
97. Disposal of assets between wholly-owned companies 
97A. Disposal of assets under a scheme of arrangement/reconstruction 
Part - 4 Common provisions applicable to AOP and Companies
98. Change in control of an entity 
Part - 5 Tax Liability in Certain Cases 
98A. Change in the constitution of an AOP 
98B. Discontinuation of business of dissolution of an AOP 
98C. Succession to business otherwise than o death 
Chapter-14 DEDUCTIBLE ALLOWANCES AND TAX CREDITS
60. Deductible allowances 
61. Charitable donations etc. 
63. Contribution to an Approved Pension Funds 
63A. Tax credit for interest paid on Low Housing Loans 
64B. Tax credit for employment generation by manufacturer 
64D. Tax credit for point of sale machine 
65. Misc. provisions relating to tax credit 
65B. Tax credit for investment 
65E. Tax credit for industrial undertakings 
65F. Tax credit for certain persons 
65G. Tax credit for specified industrial undertakings 
Chapter-15 MINIMUM TAX & Alternative CORPORATE TAX
113. Minimum tax on the income of certain persons 
- Carried forward the excess minimum tax paid 
- Terms used defined 
113C. Alternative Corporate Tax 
- Excess tax paid may be carried forward 
- Accounting income 
- The Commissioner my compute accounting income 
Chapter- 16 Part- 1 ADVANCE TAX & DEDUCTION OF TAX AT SOURCE
147. Advance tax paid by the taxpayer 
147A. Advance tax from provincial sales tax registered person; 
Part - 2 ADVANCE TAX PAID TO A COLLECTION AGENT
148. Imports-Advance tax paid to a collection agents 
Part - 3 DEDUCTION OF TAX AT SOURCE
149. Salary 
150. Dividends 
151. Profit on debt 
5AA. Tax on return on investment in Sukuk 
7B. Tax on profit on debt 
151A. Gain arising on disposal of certain debt securities 
152. Payments to non-residents 
6. Tax on certain payments to on-residents 
6A. Tax on payments for digital transactions in e-commerce platforms 
153. Payments for goods, services and contracts 
154. Exports 
154A. Export of services 
155. Rent of immovable property 
156. Prizes and winnings 
156A. Petroleum products 
158. Time of deduction of tax 
Part - 4 Transitional Advance Tax Provisions:
231AB. Advance tax on cash withdrawal 
231B. Advance tax on motor vehicles 
231C. Advance tax on foreign domestic workers 
233. Brokerage and commission 
234. Tax on motor vehicle 
235. Electricity consumption 
236. Telephone internet users 
236A. Advance tax at the time of sale by auction 
236C. Advance tax on sale or transfer of immovable property 
- Overseas Pakistanis to pay tax as filers on property deals 
- FAQS on filer/non filer rate of tax on property deals 
7E. Tax on deemed income 
75A. Purchase of assets through banking channel or digital means 
236CA. Advance tax on TV plays and advertisements 
236CB. Advance tax on functions and gatherings 
236G. Advance tax on sales to distributors, dealers and wholesalers 
236H. Advance tax on sales to retailers 
236K. Advance tax on purchase or transfer of immovable property 
236O. Advance tax under this chapter 
236Y. Advance tax on persons remitting amounts abroad through credit or debit or prepaid cards 
236Z. Bonus shares issued by companies 
Chapter- 17 COLLECTION AND RECOVERY OF TAX
137. Due date for payment of tax 
138. Recovery of tax out of property and through arrest of taxpayer 
138A. Recovery of tax by District Officer (Revenue) 
139. Collection of tax in the case of private companies and AOPs 
140. Recovery of tax from persons holding money on behalf of a taxpayer 
142. Recovery of tax by non-resident member of an AOP 
Chapter- 18 GENERAL PROVISIONS RELATING TO THE ADVANCE PAYMENT OF TAX OR THE DEDUCTION OF TAX AT SOURCE
160. Payment of tax collected or deducted 
161. Failure to pay tax collected or deducted 
162. Recovery of tax from the person from whom tax was not collected/deducted 
163. Recovery of amounts payable under this Division 
164. Certificate of collection or deduction of tax 
165. Statements 
165A. Furnishing of information by banks 
165B. Furnishing of information by financial institution including banks 
165C. Furnishing of information by online market place, payment Intermediary and courier service 
166. Priority of tax collected or deducted 
167. Indemnity 
168. Credit of tax collected or deducted 
169. Tax collected or deducted as a final tax 
8. General Provisions relating to taxes imposed under sections 5, 5A, 5AA, 6, 6A, 7, 7A, 7B and 7E 
Chapter- 19 SPECIAL PROVISIONS FOR BUSINESSES
Part - 1 Insurance Business
99. Special provisions relating to insurance business 
- Components of profit 
- Underwriting income 
- International tax consideration 
- Reinsurance 
- Computation of income of an insurance company 
Part - 2 Tax on Profit and Gain of Oil, Natural Gas, And Other Mineral Deposits
100. Special provisions relating to the production of oil and natural gas and exploration and extraction of other mineral deposits 
Part – 3 Special Provisions Relating to Banking Business
100A. Special provisions relating to banking business 
- Computation profits and gains of banking company 
- Core functions of banking companies 
- Statutory status of banking companies 
- Major components of income of banking companies 
- Anti-avoidance 
- Subsidiaries and branches of foreign banks 
175AA. Exchange of banking and tax information related to high risk persons 
Part – 4 Special Provisions Related to Other Businesses
100B. Special provisions relating to capital gain tax 
100D. Special provisions relating to builders and developers 
7C. Tax on builder 
7D. Tax on developers 
100E. Special provisions relating to Small and Medium Enterprises 
Chapter- 20 INTERNATIONAL
Part - 1 Geographical Source of Income
101. Geographical source of income 
- Foreign-source income 
- Significant economic presence of a non-resident 
101A. Gain on disposal of assets outside Pakistan 
Part - 2 Taxation of foreign-source income of resident
102. Foreign source salary of resident individuals 
103. Foreign tax credit 
- Foreign t income tax 
- Income of NRPs from business connection 
104. Foreign losses 
Part – 3 Taxation of Non-Residents
105. Taxation of Permanent Establishment in Pakistan of NRP 
106. Thin capitalization 
106A. Restriction on deduction of profit on debt payable to associate enterprise 
Part – 4 Anti-Avoidance
106B. Transactions under dealership arrangements 
Chapter- 21 Part -1 ASSESSMENTS
120. Assessments 
121. Best Judgment Assessment 
122. Amendment Assessment 
- The powers of Commissioner IR are not without boundaries 
122A. Revision by the Commissioner 
122D. Agreed assessment in certain cases 
123. Provisional assessment in certain cases 
124. Assessment giving effect to an order 
124A. Powers of tax authorities to modify orders etc. 
125. Assessment in relation to disputed property 
126. Evidence of assessment 
122B. Revision by the Chief Commissioner 
Part – 2 APPEALS, REFERENCES & ALTERNATE DISPUTE RESOLUTION
127. Appeals to Commissioner (Appeals) 
128. Procedure in appeal 
129. Decisions of appeal 
130. Appellate Tribunal 
131. Appeals to the Appellate Tribunal (AT) 
132. Decisions of appeals by the AT 
Part – 3 Reference to High Court
133. Reference to High Court 
Part – 4 Alternate Dispute Resolution
134A. Alternate Dispute Resolution 
Chapter- 22 REFUNDS, ADDITIONAL PAYMENTS & INCOME TAX REFUND BONDS
170. Refunds 
170A. Electronic processing and electronic issuance of refunds by the Board 
171. Additional payment for delayed refunds 
171A. Payment of refund through income tax refund bonds 
SCHEDULES