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
