Registration and Filing of Income Tax Returns is mandatory for all people deriving taxable income. In Pakistan, tax is levied on its residents on their worldwide income. A non-resident individual is taxed only on Pakistan-source income, including income received or deemed to be received in Pakistan or deemed to accrue or arise in Pakistan. Salary is Pakistan’s source of income to the extent it relates to employment exercised in Pakistan, wherever paid.
Taxable Income means Total Income reduced by donations qualifying straight for deductions and specific deductible allowances.
Total Income is the aggregate of Income chargeable to Tax under each head of Income.
Under the Income Tax Ordinance, 2001, all Income is broadly divided into the following five heads of Income:
Salary
Income from the property
Income from business
Capital gains
Income from Other Sources.
The Government of Pakistan has finalized tax slabs for salaried individuals for the fiscal year 2022-23. It has set a minimum income tax rate of 2.5% for those earning up to Rs. 100,000 per month and a maximum of 35% for individuals earning a monthly salary over Rs.1 million.
Following are the changes in tax laws recently enacted through the Finance Act 2022 that will impact salaried individuals:
Sr. No. |
Sr. No. Taxable income Existing Rate of Tax |
Rate of Tax |
---|---|---|
1 |
1 Where the taxable income does not exceed Rs. 600,000 |
0% |
2 |
Where the taxable income exceeds Rs. 600,000 but does not exceed Rs. 1,200,000 |
2.5% of the amount exceeding Rs. 600,000 |
3 |
Where the taxable income exceeds Rs. 1,200,000 but does not exceed Rs. 2,400,000 |
Rs. 15,000 + 12.5% of the amount exceeding Rs. 1200,000 |
4 |
Where the taxable income exceeds Rs. 2,400,000 but does not exceed Rs. 3,600,000 |
Rs 165,000 + 20% of the amount exceeding Rs. 2,400,000 |
5 |
Where the taxable income exceeds Rs. 3,600,000 but does not exceed Rs. 6,000,000 |
Rs. 405,000 + 25% of the amount exceeding Rs. 3,600,000 |
6 |
Where the taxable income exceeds Rs. 6,000,000 but does not exceed Rs. 12,000,000 |
Rs. 1,005,000 + 32.5% of the amount exceeding Rs. 6,000,000 |
7 |
Where the taxable income exceeds Rs. 12,000,000 |
Rs. 2,955,000 + 35% of the amount exceeding Rs. 12,000,000 |
An individual is a 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
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 are situated wholly or partly in Pakistan at any time in that year
A Company is Resident for a Tax Year
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
It is a Provincial Government or a local Government in Pakistan
An Association of Persons, a Company, and an Individual are Non-Resident for a Tax Year if they are not Residents for that year.
In section 101 of the Income Tax Ordinance, 2001, caters to 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
Any Income, which is not a Pakistan source Income is called foreign source income.
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 a public international organization
It is twelve months ending on the 30th day of June, i.e., the financial year, and is denoted by the calendar year in which the said date falls. For example, the tax year for the period of twelve months from July 01, 2017, to June 30, 2018, shall be denoted by the calendar year 2018, and the period of twelve months from July 01, 2018, to June 30, 2019, shall be denoted by the calendar year 2019. It is called the 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 the closing date of the Special Tax Year falls. For example, the Tax Year for the period of twelve months from January 01, 2017, to December 31, 2017, shall be denoted by the calendar year 2018, and the period of twelve months from October 01, 2017, to September 30, 2018, shall be denoted by the calendar year 2019.
Income Tax can be paid online by following these simple steps:
A person can file an online Income Tax Return by logging into Iris. Iris is an online portal where Income Tax Return is filed.
If you are a first-time Income Tax filer, registration will be required before filing your Income Tax Return.
After registration, you can log into Iris and file your Income Tax Return. Those having obtained a National Tax Number (NTN) or Registration Number but do not have credentials to log into Iris can get access by clicking on ‘E-enrollment for Registered Person’
E-enrollment with the Federal Board of Revenue (FBR) provides you with an NTN or Registration Number and password. You can log in to Iris by entering your NTN or Registration Number and password.
To pay your Income Tax dues, the person must log into the efile online portal.
You can log into efile using the same credentials you used to log into Iris. After logging into the efile, the person has to access the e-Payments tab.
In the e-Payments tab, the person will access Create Payment and select the Income Tax Annual Return option.
The resulting selection will lead you to the Income Tax e-Payment page. On this page, a payment slip (PSID) will be created by:
Selecting the relevant Tax Year
Typing the Tax amount due
Selecting the mode of payment
Clicking the create button at the bottom of the page
Confirm the e-Payment created. This will successfully create your e-Payment slip. The e-Payment slip can be deposited in any National Bank (NBP)/State Bank (SBP) branch. Select the nearest city where you want to deposit the payment slip from the drop-down list.
Click the print button to download the PSID on your computer. Deposit the PSID in any of the available branches of the city of your choice.
A Computerized Payment Receipt (CPR) is generated after paying the tax due. This is reflected in Iris within 24 hours of depositing the payment.
Tax payable is to be made on or before each person’s designated Income Tax due date.
Failure to pay the tax payable on the due date will attract a penalty, default surcharge, or both. Failure to pay your tax dues is an offense punishable on conviction with a fine or imprisonment for a term not exceeding one year or both.