Registration with Tax Authorities

For Registration / NTN with FBR the First Step is to get E-Enrolled with FBR.

For E- Enrollment and registration with FBR you have to visit the Official Web Site
of FBR www.iris.fbr.gov.pk

Open site
iris.fbr.gov.pk

Click here if
you forget
your Click here
password for E-
Enrollment

Click here for

new
registration
 Click on E- Enrollment
E-Enrollment: of registered person to
open this dialogue box

Fill all particulars

 After filled up all
relevant
particulars click on
submit

New Registration / NTN : To open this

dialogue box click
on registration for
unregistered
person
 Mention CNIC
number in the field of
CNIC

Select prefix

Type name here

as written on Type Last Name
CNIC and First Name

Select Mobile
service provider
 Insert your Cell /
Mobile Number
which should be
registered in your
own name

Type Email
address

Fill captcha, means you

have to write what has
written in the box in order
to check you are literate
and then click to Submit

You will receive two different codes over your Mobile and Email. These
codes will be expire after 10 minutes. You have to use these codes in
appropriate boxes as shown below.

Enter code sent

on SMS or email
 After typing
of sent code
click on
submit

Click on Ok
After completion of this process you will receive Password and PIN
Code on your mobile and email. Now you have successes fully
E-Enrolled with FBR.

Registration with FBR / NTN

NTN is now obsolete terminology, now we use theEnter Login Id

word Registration
with FBR. The step of registration with FBR are as follows;

Enter Password &

then click on Login

Click on draft

Then click
on
registration
 Click here

Click on
Edit
 Click on personal tab. Your
Personal data will already be here.
You can change if you need.

Click here to insert the detail of your property

which will be show on your registration certificate.
This may be your home address in case of Salary
Click here to
and Business premises I n case of Business.
show property
dialog box
Click here to
choose type
of property

Click here to
select form
then put
address 1, 2 & 3
 Type City then
click on finds
button then
select relevant
town of the City

Type here complex/

street/block/sector
Here
type unit

Type
here
area
Type shares
(eg: 100%) in
case of owner
Select capacity and Tenant
either you are
owner or Tenant
Click on ok

Tick mark
in this
small box
Click on business

Click here
to open
dialogue
box

Click here for

acquisition date
mean start date.
Type
Business
Name

Select Capacity
and then
 Click here
to open
Activity tab

Fill all particulars

Click on
Search
Option

Type here to
Search
business
activities
Click on link
tab Click on plus
sign to open
dialogue box

Select capacity out of

provided options
 Click here to attach
required documents

Select document’s description &

then attached the File in PDF
Format and then save, You can
attached others documents to
repeat this step and finally
submit the application.
How to Obtain Registration Certificate

Login in the web site after 1 – 6 hours

On your right side you

Click on
Completed
Tasks

Click on
Registration
 Click here

Click on
View
option
 Click on print option Click on Attribute to see either
to print/save your application is accepted or
application. not.

The Said downloaded application form is your Registration Certificate.

Please do not forget to check the attribute which is also mentioned in
this form along with word Granted / Accepted
 Maintaining of Tax Records

Method of Accounting
A taxpayer can adopt method of accounting which he is regularly adopted.

Precisely for computation of Income from Business one method of accounting can be opt out of
following two methods of accounting.

Method of Accounting Category of Taxpayer

Cash Accounting Other than companies

Mercantile / Accrual Accounting Companies of Method of Accounting.

A taxpayer can apply to the Concerned Commissioner Inland Revenue for the change in Accounting
Method and after due approval can change the method of accounting.

Place to Retain the Accounting Record.

Business At Business Premises

Other than Business Place declared by taxpayer or his residence.

Books of Accounts

One misconception should be very remove from the mind of the reader that there is No provision for
No Books of Accounts in the Income Tax Ordinance 2001. Taxpayers have to maintain books of account
in every case.

Books of Accounts

General Provisions Specific Provisions

 RECORDS, INFORMATION COLLECTION AND AUDIT

174. Records.— (1) Unless otherwise authorised by the Commissioner, every taxpayer shall
maintain in Pakistan such accounts, documents and records as may be prescribed.

(2) The Commissioner may disallow 1[or reduce] a taxpayer’s claim for a deduction if the
taxpayer is unable, without reasonable 2[cause], to provide a receipt, or other record or evidence of the
transaction or circumstances giving rise to the claim for the deduction.

(3) The accounts and documents required to be maintained under this section shall be
maintained for [six] years after the end of the tax year to which they relate4[:]
3

Provided that where any proceeding is pending before any authority or court
the taxpayer shall maintain the record till final decision of the proceedings.]

[Explanation.— Pending proceedings include proceedings for assessment or

amendment of assessment, appeal, revision, reference, petition or prosecution and
any proceedings before an Alternative Dispute Resolution Committee”.]

[(4) For the purpose of this section, the expression “deduction” means any amount debited to
trading account, manufacturing account, receipts and expenses account or profit and loss account.]

[(5) The Commissioner may require any person to install and use an Electronic Tax Register of such type
and description as may be prescribed for the purpose of storing and accessing information regarding any
transaction that has a bearing on the tax liability of such person.

179. Accounts, documents, records and computer-stored information not in Urdu or English language.—
Where any account, document, record or computer-stored information referred to in section 174, 175 or 176 is
not in the Urdu or English language, the Commissioner may, by notice in writing, require the person keeping the
account, document, record or computer-stored information to provide, at the person's expense, a translation into
the Urdu or English language by a translator approved by the Commissioner for this purpose
Penalties
Any person who fails to maintain records required under this Ordinance or the rules
made there under Such person shall pay a penalty of ten thousand rupees or five per
cent of the amount of tax on income whichever is higher.

Any person who fails to maintain records required under this Ordinance or the rules
made there under.

193. Prosecution for failure to maintain records.—A person who fails to maintain
records as required under this Ordinance shall commit an offence punishable on
conviction with –

(a) where the failure was deliberate, a fine5[not exceeding fifty

thousand rupees] or imprisonment for a term not exceeding two
years, or both; or

(b) in any other case, a fine6[not exceeding fifty thousand rupees].

Electronic record

Taxpayer can maintain the record in Urdu or English either Manual or Electronic
Form however The Board may require any person to use its information system and
electronic resource, in order to replace or supplement, its manual business
processes by automated business processes and substitute its paper based records
by electronic record.
 Assessment Procedures

ASSESSMENT PROCEDURE

Assessment means with respect of Tax is to determine the accuracy of taxable income,
calculation of tax liability or refund of a taxpayer.
1. Assessment procedure starts with the submission of Return. Steps of the Procedure
involve;
2. Submission of Return of Income
3. Form an opinion regarding correctness of Income declared, tax calculation, payment of
taxes along with support of documents and evidences.
The First step as narrated above is filing of Return. For your quick review the method of
furnishing of tax return is as follow;
HOW TO SUBMIT THE RETURN
A taxpayer may furnish the ‘return of income’ or a statement U/S 114 and 115 by any of those following
modes:
1) By registered post with acknowledgement due (registered A.D) / through TCS to the authorized
officer at his official address clearly mark ZONE and RTO / LTU.
2) By delivering the return by hand at the specific counter or TFD (Taxpayer facilitation Center)
establish at RTO (Regional Tax Office) or at LTU (Large Tax Unit)
3) By electronic filing of income through e-portal of FBR (Federal Board of Revenue.

SUBMISSION OF RETURN ON DEMAND [114(4)]

The Commissioner may issue a notice to any person requiring him to furnish a return a return of income
for any tax year or assessment year specified in the notice. Such notice may be issued to a person who is,
in the opinion of the cir.
1) Chargeable to tax under any provision of the law; or
2) Required to furnish a return of income under section 114(1) of the ordinance.

The Commissioner shall specify the filing period in the notice. Generally; it is a period of thirty (30) days
from the date of the service of the notice.nut the cir may issue a notice for a longer or shorter period.

It is to be noticed that the above referred notice may be issued in respect of one or more of the last five
(5) completed tax year or assessment years. In other words, the notice may be issued within a maximum
period of 5 years
DEMAND OF RETURN FOR A PERIOD OF LESS THAN TWELVE MONTHS [114(3)]

Under any of the following circumstances the Commissioner may require a person to furnish a return of
income for the period that is less than twelve months:
1) The person has died
2) The person has become bankrupt
3) The person has gone into liquidation
4) The person is about to leave Pakistan permanently
5) Any other appropriate reason

Notes:

1) The Commissioner may issue the notice to a person or his representative

2) The Commissioner shall specify in the notice the due date for filling of return of income

ASSESSMENT
Any return of income filed under the Income Tax Ordinance 2001 may fall under any of the following
categories.
1) The return is complete in all respects: and
2) The return is not complete, rather, has some deficiencies

WHERE RETURN OF INCOME IS COMPLETE [120(1) & (2)]

Where the return furnished by a person is complete in all respects. It shall be treated as is Assessment
Order issued by Commissioner. The amount of taxable income and the tax liability or refund shown the
return shall be taken as assessment income, tax liability or refund.
Under this case Acknowledgement of Submission of Return shall be treated as Deemed Assessment
Order it shall be taken that the assessment order has been issued by the Commissioner.

WHERE RETURN OF INCOME IS NOT COMPLETE [120(3) TO (6)]

The following procedure shall be adopted in a case where a person has filed an incomplete return.

1) The Commissioner shall issue a notice to the taxpayer indicating the deficiency in the rerun and fix
a due date of removing the deficiency.
2) The notice shall not be issued after the expiry of one hundred and eighty (180) days from the
financial year in which return was filed.
3) Where the taxpayer has fully complied with the requirements of the notice issued by
Commissioner, the return furnished by the taxpayer shall be treated as complete on the date of
filling the return. It means the assessment order shall be treated as has been made on the date of
filling the return.
4) A return shall be treated as invalid and not furnished with tax authorities if the taxpayer fails to
comply with the notice within the due date.
SELECTION OF PERSON FOR AUDIT
Section 120(1) specifies that the return filed by a person is complete in all respects, then it shall be
treated as an assessment order made by the Commissioner, but the Commissioner is empowered to
conduct audit of income of affairs of a person under section 177.

Under this case all the provision regarding audit under section 177 shall be applicable.

BEST JUDGMENT ASSESSMENT [121]

Under any of the following case the Commissioner may make an assessment of a taxpayer on the basis of
information or material available to him.

1) Where the taxpayer has failed to furnish the statement required by the Commissioner u/s 115(5).
2) Where the taxpayer being non- resident ship owner or charterer has failed to file a return as
required u/s 143.
3) Where a non –resident aircraft owner has failed to file a return as required u/s 144.
4) Where a person has failed to file the wealth statement, if applicable u/s 116.
5) Where a person has failed to produce before the Commissioner or other authorized person such
documents as are necessary for assessment of income or tax liability.
The authorized person may be employed by a firm of chartered accountants or cost and management
accountants or a special audit panel appointed u/s 177(11).
Under such a case Commissioner is not bound to issue a notice to the concerned taxpayer.
The Commissioner will issue an assessment order in writing. The order shall contain the following
information.
1) The taxable income for the tax year
2) The amount of tax already due
3) The amount of tax already paid, if any
4) The time, place and manner of making an appeal against the assessment order

Where the best judgment assessment is made, the assessment if any, treated to have been made on the
basis of return or revised filed by the taxpayer shall be of no legal effect.
Notes:

1) In case of non filing of return of income the Commissioner may opt any of the following courses of
action:
 He may issue a notice to the concerned person for furnishing or the return u/s 114(4)
 He may assess the taxable income and tax liability of the person u/s 121

2) Where the Commissioner has opted it act u/s 121 (i.e. making an assessment on the basis of
available information),then the assessment order shall only be issued within the period of five (5)
years after the end of the tax year or income year to which it relates [121(3)]
AMENDED ASSESSEMENT [122]
Under the income tax ordinance,2001 a return filed by a person is treated an assessment order now, if
there is any omission or error in the return then it become necessary to make appropriate modification in
this regard are summarized below

1) The Commissioner is empowered to make necessary alterations in the assessment made under
section 120,121 or 122C of the income tax ordinance 2001
2) Where a taxpayer has revised his return of income. It shall be treated as an amended assessment.
3) Where a Commissioner has amended an assessment he may after making or causing to be made,
such enquires as he deems necessary, further amend the same as many times as are considered
necessary
4) The amended assessment may be made within a time period which is later of the following:
 Five years from the end of the financial year in which the original assessment order is
made.
 One year from the end of the financial year in which the Commissioner has issued or
treated have been issued the amended assessment order.

5) An amended assessment shall be made only if the Commissioner is satisfied that

a) Any income has escaped assessment
b) The total income has been under assessed
c) The total income has been assessed at too low rate
d) The total income has been the subject of excessive relief or refund
e) Any income has been the misclassified i.e., the income chargeable under one head has
been charged under the another head of income
f) The assessment order is erroneous and is prejudicial to the interest of revenue
g) The Commissioner shall satisfy himself on the e basis of definite information acquired but
him from an audit or otherwise
6) Where the assessment was erroneous and prejudicial to the interest of revenue then the
Commissioner may amend or amend as assessment order, if the subject matter was not in dispute
in an appeal.
7) After making the amended assessment the Commissioner shall issue the order in writing the
order shall contain the following information(after amendment):
a) The taxable income
b) The amount of the tax due
c) The tax already paid
d) The time ,place and manner in which an appeal may be filed against the amended
assessment

Important Points
1) Before making an amended assessment the taxpayer shall be provided and opportunity of being
heard.

2) Definite information” includes information on sales or purchases of any goods made by the
taxpayer, receipt of the taxpayer from the services rendered or any other receipts that may be
 chargeable to tax under the income tax ordinance and on the acquisition possession or disposal of
out of any money, asset, valuable article or investment or expenditures incurred by the taxpayer.
REVISION BY COMMISIONER [122A]
The Commissioner is empowered to call sue moto of any proceeding under the income tax law and
revise the orders passes by any officer of inland revenue. Other provision in this regard is summarized
below:
1) The Commissioner may revise the order of any officer of inland revenue however, he cannot
revise the order of Commissioner (appeals)
2) Before issuing a revision order, Commissioner shall make necessary inquiry
3) Under the following cases a revision cannot be made:
 Where the time period fixed for appeal has not expired.
 Where the order is pending in an appeal before any of the appellate authorities.

REVISION BY CHIEF COMMISIONER [122B]

The Commissioner is empowered to revise an order regarding issuance of issuance of an exemption or
lower rate certificate with regard to collection or deduction of tax at source passed by an authority
subordinate to him. Other provision in this regards are:

1) The Chief Commissioner may take necessary action either of his own motion or on an application
made by taxpayer for revision.
2) The Chief Commissioner may call for the record of any proceedings relating to issuance of
exemption or lower rate certificate.
3) Before revising the order of any of his subordinate authority the Commissioner shall:
 Make such inquiry as is necessary.
 Provide a reasonable opportunity of being heard to the taxpayer

PROVISIONAL ASSESSEMENT [122C & 123]

The income tax ordinance, 2001 contains two different sections regarding provisional assessement.these
sections deal with two different situations in which Commissioner may make a provisonal assessment
order. Each of these provisions is discussed below.

PROVISIONAL ASSESSMENT FOR NON- FILING OF RETURN [122C].

1) The Commissioner shall make the provisonal assessment on the basis of any available information
or material and to the best of his judgment.
2) The provisional assessment order shall l specify the assessed taxable income and the amount of
tax due.
3) The provisional assessment shall be treated as final assessment after the expiry of forty –dive (45)
days from the date of service of provisonal assessment order.
 4) The provisional assessment shall not be treated as final assessment if the person (being an
individual or an AOP) files the following documents within the above referred period of
forty-five(45) days:
a. A wealth statement
b. A wealth reconciliation statement
c. An explanation of sources of asset or income

5) The Provisional assessment shall l not be treated as final assessment if the company electronically
files the income along with audited accounts or final accounts within the above-referred period of
forty-five (45) days.

PROVISIONAL ASSESSMENT FOR CONCEALED ASSET [123]

Where the taxpayer has a concealed asset and that asset has impounded by any government department
or agency. The Commissioner may make an order assessing therein the taxable income and tax liability of
the taxpayer. The assessment is subject to the following conditions:

1) A Provisional assessment may be made before any assessment or amended assessment is made
under section 121 or 122.
2) It is to be made in writing.
3) The Commissioner shall finalize the provisional assessment as soon as practicable.
4) It is made on the basis of value of the ‘Concealed Asset’.
5) The provisional assessment order is issued for the last completed tax year.

‘Concealed Asset’ means any property or asset which, in the opinion of the Commissioner was acquired
from any income subject to tax under the income tax ordinace, 2001.

ASSESSMENT AFTER APPELLATE DECISION [124]

Where an appellate authority, the high court or the supreme court has announced, set aside wholly or
partly, cancelled or modified any assessement, amended assessment or an order made under the income
tax ordinance, it shall be sent to the concerned CIR.He Shall, in the light of the decision given by the
appellate authority, eke arrangement for the issuance of a fresh assessment order.
During this assessment it shall not be necessary to re-issue any notice, which had already been issued, or
the re-furnishing or re-filling of any return, statement or other particulars, which had already been
furnished or filed. [124(3)]
LIMITITATION FOR ASSESSEMENT [124 (1) to (3)]

The income tax ordinance, 2001 fixes a maximum time period within which the assessing authority must
pass the assessment order. The legal provision in this regard is summarized in the table given below:
ASSESSMENT AFTER APPELLATE DECISIONS

Type of Assessment Limitation for Assessment

Section

Two years from the end of the financial

124(1) Assessment after appellate decision year in which the order is received by CIR

One year from the end of the financial

124(2) Assessment has been set aside by year in which the order is received by
any appellate authority Commissioner or Commissioner
(Appeals)

One year from the end of the financial

Assessment after a decision by any civil year in which the decision is brought to
125 court in Pakistan
the notice of CIR

CASE OF DIRECT RELIEF

Where any direct relief (e.g., order for refund of excess tax deposited) is provided but any order of
appellate authority, the Commissioner shall issue necessary orders within a period of two (2) months from
the date the order was served to him.
NOTES:
1) Limitation u/s 124(2) shall not apply if any appeal or reference has been preferred against the
order setting aside the assessment. [Proviso of 124(2)].
2) It may be possible that as a result of an appellate decision an income is excluded from one tax
year and added to another tax year or is excluded from the income of one person and included in
the income of some other person. Under such a case, an order issued by an appellate authority
shall be sufficient for making an assessment or amended assessment for the both tax year or the
both persons, as the case may be.

POWERS OF TAX AUTHORITIES TO MODIFY ORDERS [124 A).

Where in case of a particular taxpayer a question of law has been decided by a High Court or the
AppellateTribunal, the Commissioner may follow that decision in assessemen5t of the same taxpayer
involving the same question of law. The Commissioner may the decision irrespective of the fact that the
Commissioner has filed as appeal against such order of the Tribunal or the High Court.
However, where later on the decision of the Tribunal or the High Court is reversed or modified, the
Commissioner may, within a period of one year from the date of receipt of decision, modify the
assessment based on the order of the Tribunal or the High Court.
Note: In this case the period of limitation prescribed in the ordinance for making any assessment or
order shall not apply to a modification order of CIR.

ASSESSEMENT IN CASE OF A DISPUTED PROPERTY [125]

Where there is a dispute regarding the ownership of a property and the case in before any civil Court in
Pakistan, then it will not be possible for the Commissioner to make assessment in case of income derived
from such property. The Commissioner shall make the assessment or amended assessment after the court
has decided the case. The assessment order shall be issued within one year after the end of the financial
year in which the court has decided the case.

ASSESSEMENT IN CASE OF DISCONTINUED BUSINESS [117]

Where a person discontinues his business, he is required to:

1) Give a notice to the Commissioner of such discontinuance within fifteen (15) days from the
discontinuance
2) Furnish a return of his income for the period starting from the first day of the tax year and ending
on the date of discontinuance of the business. This period shall be treated as a separate tax year.
The Commissioner may also issue a notice for furnishing a return of total income to a person who, in his
opinion, has discontinued or is likely to discontinue his business. He will also specify the period within
which the return is to be filed. The assessment under this situation shall be made at the rates applicable
to the relevant tax year.

ASSESSMENT IN CASE OF SUCCESSION TO BUSINESS [98C]

Where any other person (successor) has succeeded the business of a person (predecessor) and the other
person continues to carry on that business, the assessment shall be made as per the following rules:

1) The predecessor shall be assessed for a period up to the date on which the succession
took place; and
2) The successor shall be assessed for the income of a period after the date of
succession.

Notes:
 Where the predecessor cannot be found, the whole assessment shall be made on!'
successor and the tax payable by the predecessor shall be recovered from the successor. Under
 such a case, the successor shall be entitled to recover the amount paid by him from the
predecessor.
 The above provisions are not applicable to such succession of business which tool.
Place due to the death of the predecessor.

ASSESSMENT OF PERSONS ABOUT TO LEAVE PAKISTAN [145]

Where a person is leaving Pakistan for good, he is required to intimate it to the Commissioner and file a
return of his total income at least fifteen (15) days before the probable date of his departure.
Where such person has failed in compliance of the above-referred provisions, the Commissioner may
issue a notice to such person and requires him to file his return c income within a period specified in the
notice.
Tax liability in this case shall be computed at those rates, which were applicable to the relevant tax year.

LIABILITY IN THE CASE OF A DECEASED PERSON [87]

In the case of death of a taxpayer, his legal representative shall be deemed to be a taxpayer and all legal
proceedings for the assessment of the total income and tax liability of the deceased taxpayer shall be
taken against his legal representative. In this case, the liability c the legal representative shall be limited to
the extent to which the estate of the decease person is capable of meeting the liability.
Under such a case, the following points should be noted:

1) Any proceeding against the deceased person before his death may be continue
against his legal representatives.
2) Any action which could have been taken against the deceased person if he had no
died, the same may be initiated against his legal representatives after his death.
3) The income tax liability shall be the first charge on the deceased's estate.

"Legal Representative" includes an executor, administrator and any person administering the estate of a
deceased person.

LIABILITY IN THE CASE OF A PRIVATE COMPANY [139]

Where tax liability of a private company (including a company which has gone into liquidation or winding-
up), cannot be recovered from the company then it may be recovered from the following persons:

1. A director of the company (excluding an employed director); and

2. A shareholder, who holds at least ten percent (10%) of the paid-up capital of the company.
The above persons shall be held liable only if they were directors or shareholders at any time
during the relevant tax year. Further, they shall be jointly and severally liable for the tax liability of
the company. [139(1)]

A director who has paid the tax of the company can recover it from the company and from
other directors. Other directors are responsible to pay their respective share of tax.
A shareholder, from whom tax has been collected, has a right to recover the same from the company or
other such shareholders who hold at least 10% of the paid-up capital of the company. These shareholders
are liable to pay the tax liability of the company in proportion to the shares held by them.

RECTIFICATION OF MISTAKES [221]

If there is any mistake in any order passed by an income tax authority (i.e., Commissioner, Commissioner
(Appeals) or the Appellate Tribunal), it may amend the orders passed by it. The authority may make such
rectification on its own motion or on being pointed out by any person or authority. Such amendment may
be made within five (5) years from the date of the order sought to be amended.
Where the suggested amendment results in the increase in the tax liability of a taxpayer, then it shall be
made only after giving the taxpayer a reasonable opportunity of being heard.
Where any mistake is brought into the notice by the taxpayer and desired amendment is not made before
the expiry of the financial year next following the date of intimation to the concerned authority, then it
shall be deemed that mistake has been rectified as sought by the taxpayer.

TAX LIABILITY OF A MEMBER OF AOP [139(4)]

Where a tax liability of a member of an AOP in respect of his share from AOP cannot be -e covered from
him, then it shall be recovered from the AOP.

Note:
This provision is not operative as share received by a member from an AOP is exempt from tax.

SERVICE OF NOTICES, Etc. [218]

The law requires that notice, order or requisition should be served by the tax authorities to a person for
certain purposes. Under the following cases it shall be treated that the document has been properly
served on the person:

IN CASE OF RESIDENT INDIVIDUAL (218 (I)]

It shall be treated that a notice, order or requisition is properly served on a resident individual if it is:

1) Personally served on the individual;

2) Served on the representative of the individual who is under a legal disability;
3) Sent by registered post or courier service to his registered office, address or a place of
business of the person; or
4) Served on the individual in the manner prescribed for service of summons under the Code
of Civil Procedure, 1908.
IN CASE OF NON-RESIDENT INDIVIDUAL [218(1) (A)]

The notice, etc., shall be served on the representative of an individual who is a non-resident person.

IN CASE OF ANY OTHER PERSON [218(2)]

In case of any other person it shall be treated that notice has been properly served if it is:
1) Personally served on the representative of the person;
2) Sent by registered post or courier service to his registered office, address or a place of business in
Pakistan; or
3) Served on the person in the manner prescribed for service of summons under the Code of Civil
Procedure, 1908.

IN CASE OF DISSOLVED AOP [218(3)]

Where an AOP is dissolved and there is a need to serve any notice, order or requisition then it shall be
served on any person who was the principal officer or a member of the AOP immediately before its
dissolution.

IN CASE OF DISCONTINUING BUSINESS [218(4)]

Section 117 requires a person to furnish a notice to the CIR in case of discontinuation of his business.
Where such person fails to intimate the CIR within the specified time, then the CIR may issue notice, order
or requisition to such person. Such notice, etc., shall be served on the person personally or on such
individual who was his representative at the time of discontinuance.

VALIDITY OF NOTICE [218(5)]

A person cannot question the validity of any notice or its service if the person has filed the return or the
notice has been otherwise complied with.

POWER TO OBTAIN INFORMATION OR EVIDENCE, Etc. [176]

The Commissioner is empowered to issue notice to any person (whether that person is liable to tax or not
under the Income Tax Ordinance) and require him to:

1) Furnish any information relevant to any tax leviable under the Income Tax Ordinance;
2) Fulfill any obligation under any agreement with foreign governments or tax jurisdiction;
3) Attend, at the specified time and place, for the purpose of being examined on oath concerning
his or any other person's tax affairs; or
4) Produce any accounts, documents or computer-stored information in his control.
Other legal provisions in this regard are as below:

1) The person may be required by the Commissioner to furnish information, etc. to him or
any other authorized officer. (176(1)]
2) The CIR may impound any accounts or documents or computer (if hard copy or computer disk
is not furnished) produced to him and retain them for so long as may be necessary for
examination or prosecution purposes. [176(2) & (3)]
3) The person from whom information is required may, at his option, furnish the same
electronically in a computer readable media. [176(3)]
4) While exercising his jurisdiction as above, the Commissioner shall have the same powers as are
vested in a Court under the Code of Civil Procedure, 1908, in respect of the following matters:
[176(4)]

a. Enforcing the attendance of any person and examining the person on oath or affirmation;
b. Compelling the production of any accounts, records, computer-stored information, or
computer;
c. Receiving evidence on affidavit; or
d. Issuing commissions for the examination of witnesses.

The above-discussed provisions are effective notwithstanding anything contained in any law or rule
relating to production of accounts, documents, or computer-stored information or the giving of
information. [176(5)]

OBTAINING INFORMATION BY AUDITOR OR SPECIAL AUDIT PANEL [176(1)(C) & (1A)]

The Commissioner may authorize, in writing, a firm of Chartered Accountants or Cost and 4anagement
Accountants or Special Audit Panel (appointed for audit u/s 177) to enter into -) e business premises of a
taxpayer to obtain information, require production of any record and examine it within that premises.
Such firm or panel may, if so authorized, exercise lowers specified u/s 176(4)

AUDIT [177]

Primarily the assessment under the Income Tax Ordinance, 2001 falls under 'Self assessment'. However,
section 120(1A) of the Ordinance empowers a Commissioner to elect a person for audit and conduct the
same u/s 177. Legal provisions relating to audit are s below:

1) After selecting a person for audit of his income tax affairs, the Commissioner may call for any
record or documents including books of accounts maintained by him under any law including the
Income Tax Ordinance.
 2) Where such records, etc., have been kept electronically, the Commissioner or other authorized
officer shall have access to machine and software on which such data is kept. Duly attested hard
copies of such information or data shall also be provided for the purpose of investigation and
proceedings.
3) While calling for record, etc., the Commissioner must record the reasons in writing for
such calling and the reasons shall be communicated to the taxpayer while calling record or
documents.
4) Maximum period within which the Commissioner may call for record or documents of
the taxpayer is the expiry of six years from the end of the tax year to which they relate.
5) While conducting audit, the Commissioner may call for such other information and documents as
he may deem appropriate.
6) After completion of the audit, the Commissioner may amend the assessment u/s
122(1) or (4), as the case may be. Before issuing assessment order the Commissioner, if considers
necessary, may obtain taxpayer's explanation on all the issues raised in the audit.
7) A person once audited in a year shall not be precluded from being audited again in the next and
following years where there are reasonable grounds for such audits.
8) The FBR or the Commissioner may appoint a firm of Chartered Accountants or a firm of Cost and
Management Accountants to conduct an audit of the income tax affairs of any person or classes of
persons. The scope of such audit shall be as determined by the Board or the Commissioner on a
case to case basis.
9) The CIR may authorize any person employed by a firm appointed for audit to exercise the powers
specified in sections 175 and 176 of the Income Tax Ordinance for the purposes of conducting an
audit.

SPECIAL AUDIT PANELS [177 (11) — (17)]

In order to contact the audit, including a forensic audit, of income tax affairs of a person or class of
persons the Federal Board of Revenue may appoint as many special audit panels as may be necessary.
Other provisions in this regard are as below:

1) The special audit panel shall be comprising two or more members selected from the
Following persons:

a. An officer or officers of Inland Revenue;

b. A firm of Chartered Accountants;
c. A firm of Cost and Management Accountants;
d. Any other person as directed by the FBR.

2) The scope of such audit shall be as determined by the FBR or the Commissioner or
Case-to-case basis.
3) Special audit panel shall be headed by a Chairman who shall be an officer of Inland
Revenue.
4) Powers u/s 175 and 176 of the Income Tax Ordinance shall only be exercised by such
 an officer of Inland Revenue, who is member of the special audit panel and is so authorized by
the Commissioner for the purpose of audit.
5) If any one member of the special audit panel, for conducting audit, shall be treated to have
been performed by the special audit panel.
6) The FBR may prescribe the mode and manner of constitution, procedure and working of the
special audit panel.

FAILURE IN PRODUCING THE RECORDS, DOCUMENTS, ETC. [177 (10) & (14)]

Where a person fails to produce the record, documents, evidence, etc., as required under the law, the
Commissioner may proceed to make best judgment assessment u/s 121 of the Income Tax Ordinance.
Under such a case the assessment treated to have been made on the basis of return or revised return
filed by the taxpayer shall be of no legal effect.

Note: The powers of the Commissioner u/s 177 are independent of the powers of the FBR u/s 214C and
nothing contained in that section restricts the powers of the Commissioner to call for the record or
documents including books of accounts of a taxpayer for audit and to conduct audit under section 177.

SELECTION FOR AUDIT BY BOARD [214C]

The Federal Board of Revenue (FBR) may select persons or classes of persons for audit of income tax
affairs. This selection shall be through computer ballot, whether random or parametric, at the discretion
of the FBR. The parameters shall be kept confidential.
The persons selected for audit shall be audited as provided in section 77.

Note: The powers of the Commissioner u/s 177 are independent of the powers of the FBR u/s 214C and
nothing contained in that section restricts the powers of the Commissioner to call for the record or
documents including books of accounts of a taxpayer for audit and to conduct audit under section 177.

AUTOMATIC SELECTION FOR AUDIT [214D]

Under the following cases a person shall be automatically selected for audit of his income tax affairs for a
tax year:
1) The return is not filed within the date it is required to be filed;
2) The return is not filed within the time extended by CIR u/s 119;
3) The return is not filed within the time extended by the FBR u/s 214A; or
4) Tax payable with the return u/s 137(1).

Audit of the person automatically selected as above shall be conducted as provided in

section 177 of the Income Tax Ordinance, 2001. It is to be noted that audit proceedings can
be initiated after the expiry of ninety (90) days from the date on which case could be automatically
selected for audit.

A person shall not be automatically selected for audit, if:

 1) The person has filed the return within ninety (90) days from the date on which case could be
automatically selected for audit; and
2) The person has paid tax with return as per the following principle:
a. Where Preceding Tax Year's Return Had Been Filed:
Tax equal to twenty-five percent (25%) higher than the tax paid during immediately preceding tax
year. Under this case, the turnover declared for the tax year should not be less than the turnover
declared for the immediately preceding tax year; or
b. Where Preceding Tax Year's Return Had Not Been Filed or Declared Income Was Below Taxable
Limit:
Tax equal to the higher of 2% of the turnover or tax payable under NTR.

Note: A person who is registered as retailer under the Sales Tax Special Procedure Rules, 2007 shall not be
subject to selection for audit u/s 177(1) and 214C for a tax year if that person remained on the sales tax
active taxpayers' list throughout the tax year. This provision shall have effect from the date as notified by
the FBR.
 Calculation of Income under different Heads of Income
Salary Income
Basic salary XXX
Dearness allowance XXX
Cost of living allowance (COLA) XXX
Overseas allowance XXX
Bonus XXX
Commission XXX
Leave encashment [N-2] XXX
Overtime XXX
Utilities:
Gas XXX
Water XXX
Electricity XXX
Telephone XXX
Tax on salary - paid by employer (in case of tax-free salary) XXX
Amount received on termination of employment (e.g.
Golden handshake payment) [N-3] XXX
Salary received in arrears [N-4] XXX
Services of domestic servants (e.g., housekeeper, driver, etc.) XXX
Loan from employer [N-5] XXX
Waiver of an amount payable by employee XXX
Obligation of an employee paid by employer XXX
Transfer of property or provision of services to employee:
Fair market value of property or services XXX
Less: Payment made by the employee, if any XXX XXX
House rent allowance XXX
Rent-free accommodation
Higher of FMR or 45% of MTS/basic salary [N-34]
XXX
Conveyance allowance XXX

Value of Conveyance [N-6] XXX

Leave fare assistance (LFA) [N-7] XXX
Entertainment allowance XXX
Less: Amount expended for official purpose XXX XXX

Employer's contribution to provident fund:

Government provident fund - Totally exempt

Unrecognized provident fund - No treatment

Recognized provident fund XXX

Less Exempt lesser of 10% of the salary or Rs. 100,000 [N-8]

:
XXX XXX

Interest on provident fund:

Government provident fund - Totally exempt

Unrecognized provident fund - No treatment

Recognized provident fund XXX

Less: Exempt (Higher of 1/3rd of salary or amount

Calculated @ 16%) XXX XXX

Receipt of accumulated balance of provident fund

Government provident fund - Totally exempt --

Recognized provident fund - Totally exempt --

Unrecognized provident fund [N-9] XXX

Profit in lieu of or in addition to salary XXX

Gratuity or commutation of pension:

Received from Govt., statutory body or corporation - Exempt --

Received from approved gratuity or pension fund – Exempt --

Received from Gratuity scheme approved by Board XXX

Less: Exempt Rs 200,000 XXX

Any other case XXX

Less: Exempt (Lesser of Rs. 75,000 or 50% of amount received) XXX XXX
Pension -- only one pension with higher amount is exempt XXX

Any other benefits, allowances, etc. XXX

Total taxable salary income XXX

INCOME FROM PROPERTY

Rent Chargeable to Tax (RCT)

Rent received/receivable [N-10] XXX

1/10th of advance not adjustable against rent XXX

Forfeited advance against sale of property XXX

Owner's burden (e.g., property tax, etc.) paid by tenant XXX

Irrecoverable rent received [N-11] XXX

non-payment of an expense up to three (3) years

(Previously allowed as deduction) XXX

Total rent chargeable to tax (RCT) XXX

Less: Allowable Deductions:
Repair allowance (1/5th of RCT) [N-12] XXX
Any tax in connection with property [N-13]

Property tax XXX

Corporation/Municipal taxes XXX

Local taxes or rates XXX
Any other tax XXX XXX
Ground rent (if the property is on leased land) XXX
Interest on moneys borrowed for property [N-24A] XXX
Share of rent paid to HBFC XXX
Interest on mortgage [N-14] XXX
Rent collection charges (up to 6% of RCT) [N-15] XXX
Legal charges in connection with property XXX
Irrecoverable rent [N-11] XXX
Payment of an expense already treated as
Income due to its non-payment XXX XXX
Taxable Income from Property XXX
INCOME FROM BUSINESS [N-16]
Net profit/loss as per profit and loss account XXX
Add: Inadmissible expenses XXX
Income not included in P/L A/c XXX
Rectification of accounting errors which result in increase of income XXX
Expenses for such income which is not taxable under this head XXX
Less XXX
Admissible allowance not recorded XXX
Expenditures not included in P & L A/c XXX
Rectification of accounting errors which result in decrease of income XXX
Incomes not taxable under this head XXX
Total Income from Business XXX
Less: Carried forward loss from business (XXX) XXX
INCOME FORM SPECULATION BUSINESS [N-17]
Net taxable income from speculation business XXX
Less: Carried forward speculation losses (XXX) XXX XXX
CAPITAL GAINS [N-18]
Gains on assets disposed of within one year
from the date of acquisition XXX
Gains on assets disposed of after one year
from the date of acquisition: [N-19] XXX XXX
Less: Carried forward capital losses (XXX) XXX XXX
INCOME FROM OTHER SOURCES
Dividend [N-20] XXX
Royalty XXX
Fee for technical services XXX
Profit on debt XXX
Ground rent XXX
Income from hire of machinery, plant or furniture XXX
Income from sub-lease of land or building XXX
Deemed income (on a/c of unexplained income,
asset or expenditure) XXX
Meeting fees XXX
Income of non-professional writer XXX
Gratuity received by legal representatives
of a deceased person XXX
Annuity or pension [N-21] XXX
Consideration received for vacating the possession
of a Property [N-22] XXX
Amount of loan, deposit or gift treated as income XXX
Income of shareholder from issuance of bonus shares XXX
Sale of irrigation water XXX
Others XXX
Total XXX
Less: Admissible deductions, if any [N-23] (XXX)
XXX XXX XXX
Total Income XXX
Less: Deductible Allowance and Other Allowable Deductions:
Zakat paid or deducted under the Zakat and Ushr Ordinance XXX
Contribution to Workers Welfare Fund XXX
Contribution towards Worker's Participation Fund XXX
Donations to persons specified in Clause (61) [N-24] XXX
Profit on debt on loan for houses [N-24A] XXX
Donations to any Relief Fund established by the Government XXX
Others XXX XXX
XXX
ACTUALLY TAXABLE INCOME:
Add: Incomes included for rate purposes only:
Share of profit from AOP [N-25] XXX
Any other exempted income [N-26] XXX XXX
Taxable Income for Rate Purposes XXX
COMPUTATION OF TAX LIABILITY
Tax on taxable income as per rates given in First Schedule XXX
Less: Tax credit in respect of incomes included for rate purposes [N-27] XXX
Tax on actually taxable income XXX
Less: Foreign tax credit [N-28] XXX
XXX
Less: Tax credits for donations, investments, etc: [N-29]
a) Charitable donations [N-24] XXX
b) Investment in shares and life insurance XXX
c) Contribution towards approved pension fund XXX
d) Person registered under Sales Tax Act (2.5% of tax under NTR) XXX
e) Enlistment on Stock Exchange in Pakistan (20% of tax) XXX XXX
Gross Tax XXX
Less: Reduction in case of Teachers & Researchers [N-30] XXX
Total Tax XXX
Senior citizen allowance (50% of tax payable) [N-31] XXX
Tax credit to disabled persons (50% of tax payable) [N-32] XXX XXX
 XXX
Default surcharge u/s 205, if any XXX
Liability under Normal Tax Regime (NTR)
XXX
Tax on any other income taxable as a separate block XXX
Total tax liability XXX
a) Tax deducted or collected at source (Adjustable) XXX
b) Tax collected from other persons on bona), of taxpayer XXX
c) Tax paid in advance u/s 147 XXX
d) Refund determined by Tax Department, if any XXX XXX
Net Tax Payable/ (Refund) XXX
Notes:
N-1 As the provision regarding taxability and tax rates are different in case of different classes of taxpayers,
so the distinction is necessary. Personal status will further be classified as below:
a) In case of individuals: Salaried or non-salaried individual; and
b) In case of companies: Private company, public company or small company.
N-2 In case of government employees leave prepratory to retirement (LPR) will be exempt from tax.
N-3 These amounts may be included in the salary income for the tax year in which these are received or may
be treated as a separate block and charged to tax at the average rate of tax based on three immediately
preceding tax years.
N-4 At the option of the taxpayer 'salary in arrear' may be included in the tax year in which it is received or
in the tax year in which services were rendered.
N-5 An amount equal to benchmark rate shall be treated as income. Where the interest charged by the
employer is lesser than the benchmark rate, the difference shall be treated as income. It shall base on the time
period for which loan is availed by the employee during the tax year.
N-6 The value of the conveyance to be included in salary income of an employee shall be determined
according to the principles laid down in Rule-5. Conveyance allowance shall be totally taxable.
N-7 The whole amount expended by employer on LFA is included in salary income of an employee.
N-8 "Salary" for provident purposes means the actual drawn basic salary plus
dearness allowance.
N-9 Only the employer's contribution and interest thereon shall be taxable in the year of receipt
N-10 Amount of rent received or receivable shall be computed for the period for which, property was
actually rented out. Amount to be charged to tax shall be determined according to the method of
accounting adopted by the taxpayer.
N-11 Where a rent could not be recovered, it is allowed as deduction. If in succeeding
years this amount is recovered (whether full or any part of it) it is treated as
and clubbed with the rent chargeable to tax for the year in which it is received
N-12 Repair allowance equal to 1/5th of the RCT is allowed as deduction
expenditure on repair has no concern with the computation of taxable income from property.
N-13 Any amount paid as tax in connection with the property or its income is alcove& deduction. However,
tax paid under the Income Tax Ordinance is not allowed deduction.
N-14 Generally the interest on loan is allowed as deduction only if the loan was
and utilized for the property. But where the property is mortgaged against a loan, the interest is allowed
as deduction, whether or not the loan was utilized for the property.
N-15 Deduction on account of 'rent collection charges' shall be lesser of actual expenses
Or 6% of RCT. The expenditure should have been incurred wholly and ex the purpose of deriving rent
chargeable to tax. It includes administrable collection charges.
N-16 This pattern of computation of taxable business income is based on the presumption that the profit and
loss account or the amount of profit or loss is provided. Only information of business transactions is
given, we will have to prepare the profit and loss account by taking into account the accounting as well
as tax law principles.
N-17 For computation of income and adjustment of losses, 'speculation Business is treated as a separate head
of income.
N-18 Capital Gain shall be computed as below:
Disposal consideration XXX
Less: Cost of acquisition XXX
Expenses on disposal of the asset XXX (XXX) XXX
Gain on disposal of 'securities' as defined u/s 37A (3) shall be treated at block of income and charged to tax
separately.
Gain on disposal of 'immovable property' shall be treated as a smarms income and charged to tax separately.
N-19 Where a capital asset is disposed off after a period of one year from the date of its acquisition, the
taxable capital gain shall be 75% of the actual gain. Remaining 25% shall be treated as exempt.
N-20 Dividend received by a person falls under Final Tax Regime, so shall not be taxable as income from other
source.
N-21 An annuity or pension is generally chargeable under the head "Salary". However, if
the relationship between the recipient and payer is not that of employee and employer, then it shall be
taxed as "Income from Other Source".
N-22 1/10 of the amount is charged to tax for a period of ten (10) years.
N-23 All such expenses (including depreciation on assets), which are incurred for the
purpose of earning this income is allowed as deduction.
N-24 Two different treatments are provided for donations to approved institutions, namely-
1. Donations to funds or institutions specified in Clause (61) of Part-I of Second Schedule are allowed as
straight deduction from total income of a person for the year; and
2. In respect of all other approved donations, a tax credit at the average rate of tax is allowed (instead of
deduction from total income).
N-24A 'Profit on debt' on loans obtained for acquisition, construction or renovation of a house may be treated
as 'deductible allowance' u/s 64A or allowed as deduction against income from property. In the earlier
case, amount to be treated as deductible allowance should be the lesser of 50% of taxable income for
the year or Rs. 100,000. In the second option, there is no limit for amount to be allowed as deduction.
N-25 Share of income from an AOP in the hands of its members is exempt from tax. However, it is included in
total income for rate purposes only if the taxpayer has some other source of income also. A tax credit is
allowed on such amount. In case of an individual or an AOP, being member of an AOP, tax credit shall be
calculated at the average rate of tax of the taxpayer. Whereas in case of a company, being member of
an AOP, tax credit shall base at the average rate of tax of the AOP from whom share has been received.
N-26 Such incomes shall be included which are exempt from tax, but as per requirements of the Second
Schedule these are included for rate purposes. A tax credit at the average rate is allowed in respect of
such income.
N-27 It is computed in respect of such income which though exempt from tax but as per requirements of the
law is included in total income. The result of such inclusion is that due to the application of higher slab
rate the overall tax liability of the taxpayer is increased.
N28 Foreign tax credit is available to a resident taxpayer in respect of his foreign source income taxable in
Pakistan. This credit shall be equal to an amount which is lesser of the following:
1. Foreign income tax paid on such income; or
2. Pakistan income tax payable on such income.
N-29 Tax credit for donations and investments shall be allowed at the average -ate computed after allowing
the foreign tax credit, if any.
N-30 Where a person is also a whole time teacher or researcher, then his tax liability shall be reduce by 40%
of the tax liability for the tax year in respect of salary income
N-31 Senior citizen allowance (@ 50% of tax) is available to such an individual whose
is sixty (60) years or more on the first day of the tax year and has taxable up to Rs. 1,000,000.
N-32 Tax credit (@ 50% of tax) is available to such an individual who holds a NADRA'S CNIC for disabled
persons and whose taxable income for the year does not exceed Rs. 1,000,000.
N-33 Any income, which is taxable under the "Final Tax Regime" or as a separate block of income shall not be
included in the total income of the taxpayer; rather, shall be shown as a footnote to your answer.
N-34 Where an employee is serving in a small town (i.e., muffasal) the higher of FMR or
30% of MTS / basic shall be included in salary income.
 Computation of Tax

PROCEDURE FOR COMPUTATION OF TAX LIABILITY

Following steps are required to compute the tax liability under the normal tax regime (NTR):
1. Determine the total income for the year. For this purpose following points must be kept in mind:

a. Income under each head of income is computed separately;

b. Income under each head of income is determined on the basis of the rules applicable to the
respective source of income; and
c. Only such incomes shall be included in total income, which are taxable in the relevant tax year.

2. Losses as determined under the provisions of the income tax law shall be set-off only In such manner as is
permitted by the law.

3. Deduct "Deductible Allowances" from the total income in order to arrive at the "taxable income".

4. Tax rates as are applicable to the person under the First Schedule are applied to the taxable income in
order to compute the tax for the year.

5. Certain tax credits are available to a person under the law. These tax credits are allowed by taking into
account the conditions, limitations and procedure laid down in the law. The resultant figure will be the tax
liability for the tax year.

6. Deduct the tax already deposited by the taxpayer himself as advance payment and by others on his behalf
(i.e., tax deducted or collected at source) out of the tax liability for the year. The balance will either be the tax
liability for the year payable by the taxpayer or refund receivable by him from the Tax Department.

7. In a case where tax already paid is more than the tax liability for the year, the excess amount shall be claimed
as refund.

8. Any tax payable by a taxpayer for his taxable income shall be deposited at the time of Filing return of
income.
 RATES OF INCOME TAX FOR TAX YEAR 2016
TAX RATES FOR NON-SALARIED INDIVIDUALS & ASSOCIATION OF PERSON
[Clause -1, Division –I, Part –I of First Schedule]
S.N
Taxable Income Rate of tax
o
1. UP to Rs. 400,000 0%

2. Rs. 400,001 to Rs. 500,000 7% of the amount exceeding Rs. 400,000

3. Rs.500,001 to Rs.750000 Rs. 7,000 + 10% of the amount exceeding Rs. 500,000

4. Rs.750.001 to Rs. 1,500,000 Rs. 32,000 + 15% of the amount exceeding Rs. 750,000

Rs. 144,500 + 20% of the amount exceeding Rs.

5. Rs.1,00,001 to Rs. 2,500,000
1,500,000

Rs. 344,500 + 25% of the amount exceeding Rs.

6. Rs.2,500,001 to Rs. 4,000,000
2,500,000.

Rs. 719,500 + 30% of the amount exceeding Rs.

7. Rs.4,000,001 to Rs. 6,000.000
4,000,000.

Rs.1,319,500 +35% of the

8. Exceeding Rs. 6,000,000
Amount exceeding Rs. 6,000,000.

Note: For the tax year 2016 and onwards, the highest tax rate shall be 32% instead of 35% in case of an
AOP which is a professional firm prohibited from incorporating by the law regulating their profession
Example:
Mr. Asif has a total income of Rs 530,000 during the tax year he paid Rs. 10,000 as Zakat, which was deposited
in the Zakat Fund. Compute his taxable income and tax liability for the year.

Answer:
Total income Rs. 530,000
Less: Zakat 10,000
Taxable income 520000

Tax for the year:

Tax on Rs. 500.000 7,000
Tax on balance of Rs. 20,000 x 10% 2,000 9000
 TAX RATES FOR SALARIED TAXPAYERS
[Clause (1A), Division-I, Part-I of First Schedule]
Income Tax Rates for a 'salaried taxpayer' (i.e., an individual whose taxable salary income is more than fifty
Percent (50%) of his total taxable income for the tax year) shall be as below:
S.No Taxable Income Rate of tax
1. Up to Rs. 400,000 0%
2. Rs. 400,001 to Rs. 500,000 2% of the amount exceeding
Rs. 400,000
3. Rs. 500,001 to Rs. 750,000 Rs.2,000 + 5% of the amount
Exceeding Rs. 500,000
4. Rs. 750,001 to Rs. 1,400,000 Rs.14,500 + 10% of the amount
exceeding Rs. 750,000
5. Rs.1,400,001 to Rs. 1,500,000 Rs.79,500 + 12.5% of the amount
exceeding Rs 1,400,000
6. Rs. 1,500,001 to Rs. 1,800,000 Rs.92, 000 + 15% of the amount
Exceeding Rs. 1,500,000.
7. Rs,1,800,001 to Rs. 2,500,000 Rs.137, 000+ 17.5% of the amount
Exceeding Rs. 1.800,000.
8. Rs.2,500,001 to Rs. 3,000,000 Rs.259,500 + 20% of the amount
exceeding Rs. 2,500,000
9. Rs.3,000,001 to Rs. 3,500,000 Rs.359,500 + 22.5% of the amount
Exceeding Rs. 3,000,000.
10. Rs.3,500,001 to Rs. 4,000,000 Rs.472, 000 + 25% of the amount
Exceeding Rs. 3,500,000.
11. Rs4,000,001 to Rs. 7,000,000 Rs.597, 000 + 27.5% of theamount
Exceeding Rs. 4,000,000.

12. Exceeding Rs. 7,000,000 Rs.1,422,000 + of the mount

exceeding Rs. 7,000,000
Income Tax Rates for Companies
Every company shall pay income tax on its taxable income for a tax year (subject to the provisions of the Income
Tax Ordinance, 2001) at the following applicable tax rates:

.No. Types of Company Tax Rates

1 Small Company 25% of taxable Income

2 Banking Company 35% of taxable income

3 Any Other Company :

For tax year 2015 33% of taxable income
For tax year 2016
32% of taxable income
For tax year 2017
For tax year 2018 onwards 31% of taxable income
30% of taxable income

4 Company setting up industrial undertaking between 20% of taxable income

01-07-2014 to 30-06-2017. For a period of five (5)
years beginning from the later of the month in which
undertaking is set up or commercial production is
commenced. [CI. (18A), Pt.II, Second Schedule]

Turnover
For the purpose of charging minimum tax on the income of a specified person, ‘turnover’ means
1. The gross sales or gross receipts excluding the following:
a. Sales tax and Federal excise duty derived from the sale of goods
b. Any trade discount shown on invoices or billing; and
c. Any amount taken as deemed income and assessed as final discharge of tax liability for
which tax is already paid or payable.

2. The gross fees for the rendering of services for giving benefits including commission
3. The gross receipts from execution of contracts.
4. Where the company is a member of an association of persons (AOP), the company’s share of the
following amounts received by the AOP:
a. The gross receipts;
b. The gross fees for rendering services and the commissions; and
c. The gross receipts from the execution of contracts.
Note: The amount, receipts, fees or commissions covered by final discharge of tax liability for which tax
is separately paid or payable shall be excluded while computing turnover for the purpose of charging
minimum tax.
 Alternative Corporate Tax

Starting from the tax year 2014 tax payable by a company (in respect of income which is subject to
tax under NTR or minimum tax under any of the provisions of Income Tax Ordinance) shall be higher of
the Corporate Tax (CT) or Alternative Corporate Tax (ACT). Before proceeding further it will be advisable to
understand certain terms to be used in this context.

"Corporate Tax" means higher of tax payable by the company under NTR (under Division-II of Part-I
of the First Schedule) and minimum tax payable under any of the provisions of the Income Tax Ordinance,
2001.

"Alternate Corporate Tax" means the tax at the rate of seventeen per cent (17%) of a sum computed
as below:

'Accounting Income' XXX

Less:
Exempt income XXX
Income subject to tax other than under NTR & Minimum Tax XXX
Income subject to tax credit u/s 65D (new industrial undertaking) XXX
Income subject to tax credit u/s 65E (old industrial undertaking) XXX
Income subject to tax credit u/s 100C (NPOs, trusts, etc.) XXX XXX
Taxable income for Alternative Corporate Tax XXX

"Accounting Income" means the accounting profit before tax for the tax year, as disclosed in the
financial statements (after certain adjustment for common expenditure, etc.,) but excluding share from the
associate recognized under equity method of accounting.

Note: W hile determining 'accounting income' and sum for ACT, expenses shall be apportioned between the
amounts to be excluded from accounting income.

Provisions Relating to Alternative Corporate Tax

Provisions relating to ACT are summarized below:

1. ACT shall be higher of the CT or ACT, which is computed @ 17% of the taxable
income determined for ACT (as discussed above).

2. The excess of ACT paid over the CT payable for the year shall be carried forward to
the next tax year and adjusted against CT for that tax year. The unadjusted amount of excess tax
paid may be carried forward for a maximum period of ten (10) years immediately succeeding
the tax year for which the excess was first computed.

3. The mechanism for adjustment of excess of ACT over CT shall not prejudice or affect
the entitlement of the taxpayer regarding carrying forward and adjustment of minimum tax u/s 113
of the Income Tax Ordinance, 2001.

4. W here CT or ACT is changed (i.e., enhanced or reduced) as a result of any amendment or

due to any order under the Income Tax Ordinance, 2001, the excess amount to be carried
forward shall be changed accordingly
5. ACT shall not apply to persons carrying insurance business, business of exploration and production
of petroleum and banking companies.

6. Tax credit under section 64B (to companies for employment generation) and section 65B (to
companies making investment for extension, expansion, BMR) shall De allowed against Alternative
Corporate Tax.

7. The Commissioner may make adjustments and proceed to compute `accounting income' as per
historical accounting pattern. Before making such adjustment, the CIR has to provide the compan y
an opportunity of being hear.

8. It is important to note that taxes paid or payable other than payable under NTR (under Division -II of
Part-I of the First Schedule) shall remain payable in accordance with the mode or manner prescribed
under the respective provisions of the Income Tax Ordinance, 2001.
 Filing of Statutory Returns > Income Tax
Practical illustration

How to file income tax Return in case of Salaried Individual

Open site

Income Tax Return U/S 114- Salaried Iris.fbr.gov.pk

Enter Login Id

Enter
Click here password
to Login

Click on
Declaration

Select section
114(1) for
income tax
return
Click on
period

Enter Tax Year

then select
Period of tax Year
 Click on Employment

Click on
Salary
Enter Taxable Salary
Press Calculate
twice
 Click here to Insert
deductible allowances

Click here to open tax reductions and fill

the blank as per the nature of case then
press the tab of calculate
Click here to open Tax Credits
and fill the blanks according
to the case

Press Calculate
twice

Click here to
open
Adjustable
Insert the
Tax
amount deducted
by employer Press Calculate
twice
 Remaining portion of Adjustable Taxes: A taxpayer can claim the
withholding taxes which he has paid during the year. Examples on Cash
Withdrawls, along with mothorvehicle taxes etc…

Click here to
open FTR or PTR
Now you are going to report your income fall under FTR. Examples of FTR are Dividend Income, Profit on
Debt, Commission Income etc.. These forms have two columns for insert the values of Income and
withhold taxes which have to fill accordingly and parallel to each other.
Remaining portion
of FTR/PTR form
Click here to see
Computations of
Tax
 This form show your taxable income, exemption granted, tax charged, total withholding taxes and
refund or tax liability.

Click here for

Personal Expenses

Please do not forget to click the CALCULATE before move to another step.
Payment of Tax Under Section 137 f the Income Tax Ordinance 2011 :

In case your liability has arrived prepare the challan from e.fbr.gov.pk and pay the admitted liability in
the prescribed branch of National Bank of Pakistan. You have to retrieve your amount your return by
click the Payment Option.

Click to search option wherein you will find your tax payment. Select the tax payment and save the Form

Once again open the computation form and press the claculation twice. Your apparent libility will be
remove and your payment of tax libility will be show.
Verification:

Insert the PIN Code which you have received at the time of enrollment and press “Verify Pin”

Submission of Return:

Now you can submit the return, Just click to the Submit. Your return has submitted. In order to check
either your return is submitted or not you can check the date of submission which will clearly
mentioned.

Print the Return for your record. Just Click on Print and get the copy of Return in Soft Form and can save
it or take a print for your file.
 Filing of Statutory Returns > S a l e s Tax
Steps of Submission Sales Tax Return Enter login Id &
Open site
Password and then
e.fbr.gov.pk click on login to login.
 Click on skip this
to continue

Click on
Declaration

Click on
Sales Tax

Select Tax
Year
 Click here to
select Month /
Tax Period

After selected
month click on
Sales tax return
 Click Annexure A to record the Purchase Invoices and claim the Input Taxes

Type Invoice Date

Insert NTN Select Rate Select Type
of buyer
Select
Province

Select
Description
Select of goods
Purchase purchased
Type

Type
purchase
value
excluding
tax
Click here
to
add/Save
transaction
 Repeat the above steps and feed all the invoices.

Recoding of Sales / Output

Click Annexure C to record the Sales Invoices and claim the Output Taxes

Type
Enter NTN Select Invoice
Rate Number
Select
Description
Select Type of good
sold

Type
Invoice
Date

Type value
sales amount
excluding sales
tax
 Fill
Click here Annexure F
to
Add/save
 Previous month
stock amount
brought forward
Balance Shown by
Current Month Purchase system itself
Value and sales tax
value(in below row)
shown by the system

Insert Current Month Then

Insert Current
Sale Value Save Click on
Month Sale Tax
Value the Back to
form Return
Save the
Return Verify the
Return
When you click the Tab Verify a window appear require your name and CNIC Number you have to
confirm the verification.

Submission Process

Click the Tab Submit

 Insert 4
digit PIN
Code

Confirm

Return will be submit when you click the Confirm Tab after insertion of Pin Code.
 Import duty & taxes when importing into Pakistan

Overview

Import duty and taxes are due when importing goods into Pakistan whether by a private
individual or a commercial entity. The valuation method is CIF (Cost, Insurance and Freight),
which means that the import duty and taxes payable are calculated on the complete shipping
value, which includes the cost of the imported goods, the cost of freight, and the cost of
insurance. However, import duty can also be charged per unit of measure. In addition to duty,
imports are subject to sales tax (VAT), excise on some products, and import regulatory duty.

Duty Rates

Duty rates in Pakistan vary from 0% to 100%, with an average duty rate of 20.67%. Some goods
can be imported free of duty.

Sales Tax

Imports into Pakistan are not subject to sales tax by default. Only certain products, like
cosmetics or food supplements, are subject to GST when imported into Pakistan. When
applicable, the standard GST rate is 17% and the reduced rate is 5%, calculated on the sum of the
CIF value, duty, import regulatory duty, and excise.

Minimum thresholds

There is no minimum threshold for imports in Pakistan, i.e. import duty and taxes are always
applicable on imports regardless of their value.

Other taxes and custom fees

 Excise duty is applicable on some goods such as alcohol, Lubricants and tobacco
products. It can be applied ad valorem calculated on the sum of the CIF value and
applicable duty, or it can be specific, i.e. charged per unit of measure.
 Import regulatory duty is charged on some products at a rate between 5% and 50%
calculated on the CIF value.

Export: Export is not subject to any duty however some items attract Export Development Surcharge is
applicable @0.25% is applicable at the time of receipt of remittances.

Further government can impose time to time Regulatory Duty in order to curtail the exports of essential
items.
 International Trade Documents:

1. Export and Import Documents lies at the heart of all international trade transactions. In
provides exporters and importers with an accounting record; shipping and logistics
companies with instructions of what to do with freight information; and banks with
instructions and accounting tools for collecting payments. Export documents are more
complex than those used for domestic sales due to the special characteristics of
international trade: geographical distance, different customs laws, different means of
transport, greater risks, etc. The documents required for each shipment will depend on the
conditions of sale agreed between seller and buyer.

2. TOP TEN DOCUMENTS USED IN INTERNATIONAL TRADE Purchase Order CMR

Document Commercial Invoice Airway Bill AWB Packing List Bill of Lading B/L Letter
of Credit Multimodal Bill of Lading FBL Certificate of Origen Inspection Certificate

3. Usually, international transactions are based on the buyer´s Purchase Order. Issuance of a
international purchase order is normally preceded by an exchange of information between
exporter and importer with respect to the price, quality and quantity of products, etc. The
International Purchase Order may constitute a binding offer or a binding acceptance,
depending on the circumstances. Usually in international transactions involving a large
commercial buyer, the purchase order is often the main contract form and constitutes the
first legally binding offer. In such cases, the seller´s signature of the purchase order will
constitute the acceptance of the transaction. Model of International Purchase Order ready
to use INTERNATIONAL PURCHASE ORDER

4. The International Commercial Invoice is an administrative document which contains all

the information about the international sale. The item, quantity, price for the
products/services sold, delivery and payment conditions, as well as the taxes and other
expenses that might be included in the sale, are detailed in an International Commercial
Invoice. The importer, with the original of the International Commercial Invoice, declares
to the tax authority of his country the amount that it must pay, to who it is going to pay
and the agreed means of payment. For the exporter, this document means a documentary
evidence of the sales that it has made in foreign markets. Model of International
Commercial Invoice ready to use INTERNATIONAL COMMERCIAL INVOICE

5. The Packing List is a more detailed version of the commercial invoice but without price
information. It must include, inter alia, the following: invoice number, quantity and
description of the goods, weight of the goods, number of packages, and shipping marks
and numbers. A copy of the Packing List is often attached to the shipment itself and
another copy is sent directly to the consignee to assist in checking the shipment when
received. Model of Packing List ready to use PACKING LIST

6. In an Irrevocable Letter of Credit L/C the importer´s bank agrees to the exporter (called
“the beneficiary”) that the exporter will get paid if it can prove it has shipped the proper
goods by providing the corresponding documents required by the Letter of Credit.
Exporters like Letters of Credit because the advance assurance of payment ensures the
 seller that it will not waste time preparing or shipping an order to a buyer who ultimately
refuse to accept or pay for the goods. An Irrevocable Letter of Credit cannot be amended
or cancelled without the consent of all Parties. Model of Irrevocable Letter of Credit with
instructions for completing the document IRREVOCABLE LETTER OF CREDIT L/C

7. The CMR transport document is an international consignment note used by drivers,

operators and forwarders alike that governs the responsibilities and liabilities of the
parties to a contract for the carriage of goods by road internationally. The carrier usually
completes the form, but the sender - in other words the exporter - is responsible for the
accuracy of the information and must sign the form when the goods are collected. The
consignee will also sign the form on delivery, which is essential for the carrier to be able
to confirm the delivery of the goods and to justify the payment for its services. Model of
CMR Document ready to use CMR DOCUMENT

8. A Bill of Lading B/L is a document issued by the agent of a carrier to a shipper, signed
by the captain, agent, or owner of a vessel, furnishing written evidence regarding receipt
of the goods (cargo), the conditions on which transportation is made (contract of
carriage), and the engagement to deliver goods at the prescribed port of destination to the
lawful holder of the bill of lading. A Bill of Lading is, therefore, both a receipt for
merchandise and a contract to deliver it as freight. There are a number of different types
of bills of lading and a number of regulations that relate to them as a group of documents.
Model of Bill of Lading B/L ready to use BILL OF LADING B/L

9. An Air Waybill AWB is a non-negotiable transport document covering transport of

cargo from airport to airport. The Air Waybill must name a consignee (who can be the
buyer), and it should not be required to be issued “to order” and/or “to be endorsed” as it
is not a title of property of the merchandise. Since it is not negotiable, and it does not
evidence title to the goods, in order to maintain some control of goods not paid for by
cash in advance, sellers often consign air shipments to their sales agents, or freight
forwarders’ agents in the buyer’s country. Model of Air Waybill ready to use AIR
WAYBILL AWB

10. A Multimodal Bill of Lading FBL is an international transport document covering two or
more modes of transport, such as shipping by road and by sea. It is also used as a carriage
contract and receipt that the goods have been received. When it is issued “to the order”,
the Multimodal Bill of Lading is title of ownership of the goods and can therefore be
negotiated. Only authorized forwarders integrated into FIATA (International Federation
of Freight Forwarders Associations) can issued this document. It is addressed to the
exporter, Multimodal Transport Operator on destination country, and the importer. Model
of Multimodal Bill of Lading with instructions for completing the document
MULTIMODAL BILL OF LADING FBL

11. The Certificate of Origin certifies the country in which the goods originated or in which
the preponderance of manufacturing or value was added. It also constitutes a declaration
by the exporter. Virtually every country in the world considers the origin of imported
goods when determining what duty will be assessed on the goods. Nevertheless the
 exporter´s own certification on company letterhead will suffice. In most countries,
Chambers of Commerce are the key agent in the delivery of certificates or origin.
However, in some countries, this privilege may also be extended to other entities such as
ministries or customs authorities. Model of Certificate of Origen with instructions for
completing the document CERTIFICATE OF ORIGIN

12. The Inspection Certificate for pre shipment inspection is a document issued by an
authority indicating that goods have been inspected (typically according to a set of
industry, customer, government, or carrier specifications) prior to shipment and the
results of the inspection. Inspection certificates are generally obtained from neutral
testing organizations (e.g., a government entity or independent service company such as
SGS o Bureau Veritas). In some cases the Inspection Certificate can come from the
manufacturer or shipper, but not from the forwarder or logistics firm. Model of
Inspection Certificate with instructions for completing the document INSPECTION
CERTIFICATE.