Central Board of Revenue

Azad Jammu and Kashmir

Income Tax

Before Registration and Filing of your Income Tax Return, it is recommended that one should establish basic understanding regarding these processes. Knowledge of basic concepts would not only ensure that the tasks are performed easily but also in the prescribed manner.

TAXABLE INCOME

Taxable Income means Total Income reduced by donations qualifying straight for deductions and certain deductible allowances.

TOTAL INCOME

Total Income is the aggregate of Income chargeable to Tax under each head of Income.

HEAD OF INCOME

Under the Income Tax Ordinance, 2001, all Income are broadly divided into following five heads of Income:

  • Salary;
  • Income from property;
  • Income from business;
  • Capital gains; and
  • Income from Other Sources

RESIDENT

  • An individual is Resident for a Tax Year if the individual:
    • Is present in Pakistan for a period of, or periods amounting in aggregate to, one hundred and [eighty-three] days or more in the tax year;
    • Is present in Pakistan for a period of, or periods amounting in aggregate to, one hundred and twenty days or more in the tax year and, in the four years preceding the tax year, has been in Pakistan for a period of, or periods amounting in aggregate to, three hundred and sixty-five days or more; or
    • Is an employee or official of the Federal Government or a Provincial Government posted abroad in the Tax Year.
  • An Association of Persons is Resident for a Tax Year if the control and management of its affairs is situated wholly or partly in Pakistan at any time in that year;
  • A Company is Resident for a Tax Year if :
    • It is incorporated or formed by or under any law in force in Pakistan;
    • The control and management of its affairs is situated wholly in Pakistan at any time in the year; or
    • It is a Provincial Government or a local Government in Pakistan.

NON-RESIDENT

An Association of Persons, a Company and an Individual are Non-Resident for a Tax Year if they are not Resident for that year.

PAKISTAN SOURCE INCOME

Is defined in section 101 of the Income Tax Ordinance, 2001, which caters for Incomes under different heads and situations. Some of the common Pakistan source Incomes are as under: –

  • Salary received or receivable from any employment exercised in Pakistan wherever paid;
  • Salary paid by, or on behalf of, the Federal Government, a Provincial Government, or a local Government in Pakistan, wherever the employment is exercised;
  • Dividend paid by Resident Company;
  • Profit on debt paid by a Resident Person;
  • Property or rental Income from the lease of immovable property in Pakistan;
  • Pension or annuity paid or payable by a Resident or permanent establishment of a Non-Resident;.

FOREIGN SOURCE INCOME

Is any Income, which is not a Pakistan source Income.

PERSON

  • An Individual;
  • A Company or Association of Persons incorporated, formed, organized or established in Pakistan or elsewhere;
  • The Federal Government, a foreign government, a political subdivision of a foreign government, or public international organization

COMPANY

  • A Company as defined in the Companies Ordinance, 1984 (XLVII of 1984);
  • A body corporate formed by or under any law in force in Pakistan;
  • A modaraba;
  • A body incorporated by or under the law of a country outside Pakistan relating to incorporation of Companies;
  • An amendment has been made through Finance Act, 2013 to enlarge the scope of definition of a Company. Now as per Income Tax Ordinance, 2001 a company includes:
    1. A co-operative society, a finance society or any other society;
    2. A non-profit organization;
    3. A trust, an entity or a body of persons established or constituted by or under any law for the time being in force.
  • A foreign association, whether incorporated or not, which the Board has, by general or special order, declared to be a company for the purposes of this Ordinance;
  • A Provincial Government;
  • A Local Government in Pakistan;
  • A Small Company

ASSOCIATION OF PERSONS

Includes a firm (the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all), a Hindu undivided family, any artificial juridical person and any body of persons formed under a foreign law, but does not include a Company.

TAX YEAR

Is a period of twelve months ending on 30th day of June i.e. the financial year and is denoted by the calendar year in which the said date falls. For example, tax year for the period of twelve months from July 01, 2017 to June 30, 2018 shall be denoted by calendar year 2018 and the period of twelve months from July 01, 2018 to June 30, 2019 shall be denoted by calendar year 2019. It is called Normal Tax Year.

SPECIAL TAX YEAR

Means any period of twelve months and is denoted by the calendar year relevant to the Normal Tax Year in which closing date of the Special Tax Year falls. For example, Tax Year for the period of twelve months from January 01, 2017 to December 31, 2017 shall be denoted by calendar year 2018 and the period of twelve months from October 01, 2017 to September 30, 2018 shall be denoted by calendar year 2019.

The first step of filing your Income Tax Return is to register yourself with Inland Revenue Department Revenue Department (IRD).

  • For Income Tax Registration Individual and AOP can register online through Iris 
  • Whereas, the principal officer  Company needs to visit Inland Revenue Office. 

A person can change their registration information recorded for filing Income Tax Return in three (3) possible ways.

  1. Changing information through Iris, a person can change/update information by logging into Iris.
    Following information can be updated by the person through Registration Form 181 (filed for modification) Income Tax:
    • Mobile number
    • Email
    • Personal/Residential Address
    • Business Address
    • Addition of Business Branches
    • Legal Representative u/s 87 of Income Tax Ordinance 2001
    • Bank Account
  2. Changing information through Central Board of Revenue (CBR) helpline, a person can also change or update information through CBR helpline via phone or email.
    Following information can be updated through the helpline:
    • Name
    • Date of Birth
    • Gender
    • Disability Status
    • Senior Citizen Status
  3. Changing Information by visiting  Tax Office 
    For changes in registration regarding the following issues, the person will have to visit their relevant Tax Office:
    • Discontinuance of business
    • Jurisdiction for Income Tax Return assessment
    • Deregistration
    • Updating CNIC number
    • Updating Pakistan Origin Card (POC)

    A person will have to take relevant documents to Tax Office in order to successfully change details regarding Income Tax Registration.

The Active Taxpayer List (ATL) is a central record of online Income Tax Return filers for the previous Tax Year.

ATL UPDATE

ATL is published every financial year on the 1st March and is valid up to the last day of February of the next financial year. For example, Active Taxpayer List for Tax year 2021 was published on 1st March 2022 and will be valid till 28th February 2023. Similarly, Active Taxpayer List for Tax year 2022 will be published on 1st March 2023 and will be valid till 28th February 2024.

The ATL is updated on every Monday on the Federal Board of Revenue (FBR) website.

Applicable Withholding Tax RatesUpdated up to June 30, 2023

To pay your income tax dues, the person can pay through E-payment.

INCOME TAX DUE DATES

PersonDue Dates
Individual & Association of Person (AOP)On or before 30th September
CompanyOn or before 31st December
Company having a special tax yearOn or before 30th September

INCOME TAX REFUND

Refund can be only claimed if the person has filed their Income Tax Return electronically. A manual Return does not entitle you to a refund.

The refund amount should be clearly reflected in your Income Tax Return in Iris.

Refund resulting from the Income Tax Return can be claimed by filing a separate application in Iris. To check the status of your application, please visit your relevant Regional Tax Office (RTO).

The refund can also be claimed later on after submitting your Income Tax Return, but within two years from the date of filling of return (date of assessment) or from the date on which the tax was paid, whichever is later.

ENTITLEMENT OF REFUND

However, persons filing Tax Return for Tax year after the specified due date will not be entitled to refund during the period the person is not included in ATL and Income Tax authorities will not incur any liability of compensation for delayed refund for the period the person is not appearing in ATL and such period shall not be counted for the purpose of computing additional payment for delayed refund.

PERSONS ELIGIBLE TO APPEAL

Any person dissatisfied with any order passed by a Commissioner/Officer Inland Revenue has the right of appeal.

In case of an Individual, the Individual himself; in case of an Association of Person (AOP), any partner or member of the association; and in case of a Company the principal officer.

In case of a deceased individual, the legal representatives of the deceased; and in case of an individual under legal disability or a nonresident person, his/her/it’s “representative”

REQUIREMENTS FOR MAKING AN APPEAL

In order to make an appeal person has to submit the tax due along with the return of income, on the basis of income declared.

TIME LIMIT FOR MAKING AN APPEAL

Time limit for filing an appeal before the Commissioner (appeals) is thirty (30) days from the date of receipt of notice of demand relating to an assessment, penalty or any other order.