GOVERNMENT OF PAKISTAN
FEDERAL BOARD OF REVENUE
(REVENUE DIVISION)
….
INCOME TAX MANUAL
PART I
INCOME TAX ORDINANCE, 2001
AMENDED UPTO 30th JUNE, 2024
45
INCOME TAX ORDINANCE, 2001 AMENDED UPTO 30.06.2024
TABLE OF CONTENTS
SECTIONS
1.
2.
3.
CHAPTER 1
PRELIMINARY
Short title, extent and commencement
Definitions
Ordinance to override other laws
PAGE
NO.
1
1
30
CHAPTER II
CHARGE OF TAX
4.
4A.
4AB.
4B.
4C.
5.
5A.
5AA.
6.
7.
7A.
7B.
7C.
7D.
7E.
7F.
8.
Tax on taxable income
Omitted by Finance Act 2014
Subject to this Ordinance
Super tax for rehabilitation of temporary displaced
persons.
Super tax on high earning persons.
Tax on dividends
Tax on undistributed Profits.
Tan on return on investments in Sukuks.
Tax on certain payments to non-residents
Tax on shipping and air transport income of a nonresident person
Tax on shipping of a resident person.
Tax on profit on debt
Tax on builders
Tax on developers
Tax on deemed income.
Tax on builders and developers.
General provisions relating to taxes imposed under
sections 5, 6 and 7
31
32
32
32
33
34
35
35
36
37
37
38
38
39
40
42
43
CHAPTER III
TAX ON TAXABLE INCOME
PART I
COMPUTATION OF TAXABLE INCOME
9.
10.
11.
Taxable income
Total income
Heads of income
45
45
45
PART II
HEAD OF INCOME
SALARY
12.
13.
14.
Salary
Value of perquisites
Employee share schemes
47
49
53
PART III
HEAD OF INCOME
INCOME FROM PROPERTY
15.
15A.
16.
17.
Income from property
Deductions in computing income chargeable under
the head “Income from Property”
Non-adjustable amounts received in relation to
buildings.
Omitted by the Finance Act, 2006.
55
56
59
59
PART IV
HEAD OF INCOME
INCOME FROM BUSINESS
Division I
Income from Business
18.
19.
Income from business
Speculation business
60
62
Division II
Deductions
General Principles
20.
21.
Deductions in computing income chargeable under
the head "Income from Business"
Deductions not allowed
63
63
Division III
Deductions
Special Provisions
22.
23.
23A.
23B.
24.
Depreciation
Initial allowance
Omitted by the Finance Act, 2021
Accelerated depreciation to alternate
projects.
Intangibles
energy
68
72
73
73
73
25.
26.
27.
28.
29.
29A
30.
31.
Pre-commencement expenditure
Scientific research expenditure
Employee training and facilities
Profit on debt, financial costs and lease payments
Bad debts
Provision regarding consumer loans
Profit on non-performing debts of a banking
company or development finance institution
Transfer to participatory reserve
76
76
77
77
79
80
81
81
Division IV
Tax Accounting
32.
33.
34.
35.
36.
Method of accounting
Cash-basis accounting
Accrual-basis accounting
Stock-in-trade
Long-term contracts
83
83
83
84
86
PART V
HEAD OF INCOME
CAPITAL GAINS
37.
37A.
38.
Capital gains
Capital gain on disposal of securities
Deduction of losses in computing the amount
chargeable under the head “Capital Gains”
87
91
93
PART VI
HEAD OF INCOME
INCOME FROM OTHER SOURCES
39.
40.
Income from other sources
Deductions in computing income chargeable under
the head “Income from Other Sources”
94
96
PART VII
EXEMPTIONS AND TAX CONCESSIONS
41.
42.
43.
44.
44A.
45.
46.
47.
Agricultural income
Diplomatic and United Nations exemptions
Foreign government officials
Exemptions under international agreements
Exemption under Foreign Investment (Promotion
and Protection) Act, 2022 (XXXV of 2022).
President’s honours
Profit on debt
Scholarships
98
99
99
99
100
101
101
102
48.
49.
50.
51.
52.
53.
54.
55.
Support payments under an agreement to live apart
Federal Governments, Provincial Government and
Local Government
Foreign-source income of short-term resident
individuals
Foreign-source income of returning expatriates
Omitted by Finance Ordinance, 2002
Exemptions and tax concessions in the Second
Schedule
Exemptions and tax provisions in other laws
Limitation of exemption
102
102
103
103
103
104
105
106
PART VIII
LOSSES
56.
56A.
57.
57A.
58.
59.
59A.
59AA.
59B.
59C.
Set off of losses
Set off of losses of companies operating hotels.
Carry forward of business losses
Set off of business loss consequent to
amalgamation
Carry forward of speculation business losses
Carry forward of capital losses
Limitations on set off and carry forward of losses
Group Taxation.
Group relief
Omitted by Finance Act, 2022
107
107
107
109
110
110
111
112
113
115
PART IX
DEDUCTIBLE ALLOWANCES
60.
60A.
60B.
60C.
60D.
Zakat
Workers’ Welfare Fund
Workers’ Participation Fund
Omitted by the Finance Act, 2022.
Deductible allowance for education expenses
116
116
116
117
117
PART X
TAX CREDITS
61.
62.
62A.
63.
64.
64A
64AB
Charitable donations
Omitted by the Finance Act, 2022.
Omitted by the Finance Act, 2022.
Contribution to an Approved Pension Fund.
Omitted by Finance Act, 2015.
Section re-numbered as 60C
Section re-numbered as 60D
118
119
121
121
123
123
123