Pakistan Tax Hub

Defines key terms including: Person (individual, company, AOP, trust), Company, Resident, Non-Resident, Tax Year (July 1 to June 30), Taxable Income, and the territorial scope. Pakistan taxes residents on worldwide income and non-residents on Pakistan-source income only.

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Tax is imposed for each tax year on every person with taxable income at the rates in the First Schedule. The First Schedule contains salary slabs, dividend rates, CGT rates, and all other income tax rates.

Salary includes wages, pay, leave pay, overtime, bonus, commission, fees, gratuity, perquisites, and profits in lieu of salary. All employer-to-employee payments are salary unless explicitly excluded. Medical allowance up to 10% of basic salary and conveyance allowance up to PKR 10,000/month are standard exempt items.

Rent received from immovable property in Pakistan. Annual rent above PKR 300,000 is taxable after a 20% standard deduction. Taxed at specific rental income slabs (not salary slabs).

Profits and gains from business, profession, or vocation. Business income is taxed at corporate rates for companies and individual slab rates for sole proprietors and AOPs after deducting allowable business expenses.

Capital gains on disposal of capital assets in Pakistan. Separate CGT rates apply for securities (listed shares) based on holding period. Property gains are taxed at rates based on holding period (0% after 4 years for immovable property).

Key exemptions include: agricultural income (provincial), foreign remittances received through banking channels, income of approved charitable and religious organizations, certain allowances within limits, and pension from government service.

Zakat paid under the Zakat and Ushr Ordinance 1980 to eligible recipients is deductible from taxable income in the year it was paid. This reduces your taxable income before applying the slab rates.

Tax credit for donations to approved charitable organizations under Section 2(36). Credit is the lesser of: 30% of taxable income or actual donation amount. This is a direct credit against tax liability, not a deduction from income.

Every person with taxable income above the threshold, every company, and every registered person must file an annual return by September 30 each year. The return covers the tax year ending June 30. Late filing results in penalties and loss of ATL status.

Individuals and companies with latest assessed income above PKR 1 million must pay advance tax in quarterly installments (September 25, December 25, March 25, June 25). The advance tax is based on 25% of the previous year's tax each quarter. Adjusted against final liability in the return.

Every employer paying salary must deduct tax at source based on the estimated annual salary. The employer calculates annual tax on estimated annual salary, divides by 12, and deducts monthly. The employer deposits this with FBR by the 15th of the following month.

Every company paying a dividend must deduct WHT before payment. Listed company dividends: 15% for filers (final tax). Unlisted company dividends: 25% for filers. Non-filer rate: 30% for all categories. The deducting company deposits with FBR within 7 days.

Prescribed persons making payments for goods supply (4-4.5%), services (8-10%), and contracts (7-7.5%) must deduct WHT for filers. Non-filer rates are 8%, 20%, and 15% respectively. Adjustable tax — credited against annual liability.

Penalty for failure to file return: 0.1% of tax payable per week or part of week, minimum PKR 20,000 for individuals and PKR 40,000 for companies. Additionally, late filers lose their ATL status for the year, resulting in higher WHT rates on all transactions — often more costly than the direct penalty.