Frequently Asked Question

1. Reduced Withholding Tax Rates on cash withdrawals & Banking transactions
   

   Nature of Transaction	Filer Tax	Non-Filer Tax
   Cash Withdrawals > 50,000 Rupees	Exempt	0.6 %
   a) PL Saving Accounts Profits & Saving Certificates up to 5 Lakh b) PL Saving Accounts Profits & Saving Certificates  > 5 Lakh	10% 15%	20% 30%

2. Tax relief in registration and transfer of motor vehicles
   

   Engine Capacity	Filer Tax (Rs.)	Non-Filer Tax (Rs.)
   Upto 850cc	10,000	30,000
   851-1000cc	20,000	60,000
   1001-1300cc	25,000	75,000
   1301-1600cc	50,000	150,000
   1601-1800cc	150,000	450,000
   1801-2000cc	200,000	600,000

3. Lower taxes on Property transactions

   Transaction Type	Filer Tax	Non-Filer Tax
   Sale	Half	Double
   Purchase	Half	Double

4. Taxes on Commission Income & Dividend and Prize Bond

   Income Type	Filer Tax	Non-Filer Tax
   Commission Income	12%	24%
   Dividend & Prize Bond Income	15%	30%

5. Taxes on Services & Contracts

   Transaction Type	Filer Tax	Non-Filer Tax
   Services	10%	20%
   Contracts	7.5%	15%

6. Other Benefits Includes:
   • Access to financial services like loans, credit cards and mortgage from banks
   • Avoidance of Penalties in case of non filing if FBR caught it
   • Eligibility of Government Contracts
   • National Contribution & Civic Responsibility
   • Improved documentations and records keeping
   • Inclusion in name of Active Taxpayer List (ATL List)
   • Reduced Import Duties from 8% (non filer) to 5.5% (filer)
   • Reduced tax on commercial exports from 9% (non filer) to 6% filer

Income tax in Pakistan is a direct tax levied on the income of individuals and businesses. It is imposed under the Income Tax Ordinance, 2001, and administered by the Federal Board of Revenue (FBR). Both salaried individuals and businesses must file their income tax returns annually.

All individuals, associations of persons (AOPs), and companies with taxable income are required to file income tax returns. This includes:

• Salaried individuals earning more than PKR 600,000 annually.
• Business individuals and companies with taxable income.
• Non-residents who have Pakistan-source income.

Income tax in Pakistan is calculated based on different income slabs for salaried and non-salaried individuals. For salaried persons, the tax is calculated progressively, meaning higher income levels are taxed at higher rates. Businesses are taxed based on their annual net income and other applicable tax rates.

The income tax rates for salaried individuals and non-salaried individuals are determined based on income slabs that change annually. For the latest tax year, salaried individuals with income below PKR 600,000 are exempt, while the rates increase progressively from 5% to 35% for higher-income brackets. For non-salaried individuals, the rates may differ.

The usual deadline for filing income tax returns in Pakistan is September 30 each year for individuals and salaried persons, while companies have until December 31. However, these deadlines can sometimes be extended by the Federal Board of Revenue (FBR).

You can file your income tax return online through the FBR’s e-filing portal (IRIS). You’ll need to create an account, log in, and submit the relevant information about your income, deductions, and tax payments. Alternatively, you can hire a tax consultant to help with filing.

A “filer” is an individual or entity that has submitted an income tax return to the FBR and is included in the Active Taxpayers List (ATL). A “non-filer” has not filed their tax return and faces higher tax rates and penalties on certain financial transactions such as banking withdrawals and property transactions.

Failure to file your income tax return on time may result in penalties, such as:

• A minimum penalty of PKR 5,000 for late filing.
• Additional taxes for non-filers on certain transactions.
• Legal action and fines for prolonged non-compliance.

Tax Asaan is a mobile application developed by FBR to
facilitate taxpayers. It is available free of cost for Android as well as
iOS based smart phones. Wizard based Income Tax Return filing
option is also available in Iris. This feature will help taxpayer to
proceed step by step utilizing interactive questions for return filing.

Certain types of income are exempt from tax in Pakistan, including:

• Agricultural income (subject to provincial taxes).
• Foreign remittances sent by overseas Pakistanis.
• Incomes specified by the government, such as for certain charitable organizations or educational institutions.

In Pakistan, income tax registration is required for various individuals under the Income Tax Ordinance, 2001. The Federal Board of Revenue (FBR) mandates certain categories of individuals to obtain a National Tax Number (NTN) and file tax returns. The individuals required to register for income tax include:

1. Individuals with Taxable Income:

   • Anyone earning a taxable income exceeding the minimum exemption threshold (which varies year by year, e.g., PKR 600,000 annually for salaried individuals and PKR 400,000 for business income in recent years).

2. Salaried Individuals:

   • Employees working in the public or private sector whose annual salary exceeds the exemption limit must register and file tax returns.

3. Business Owners and Professionals:

   • Self-employed individuals, sole proprietors, doctors, lawyers, consultants, and other professionals who generate income from their professions.

4. Property Owners (Rental Income):

   • Individuals earning income from renting out immovable properties.

5. Investors:

   • Individuals who invest in securities (such as stocks), mutual funds, or real estate, especially if the income from these investments crosses the threshold for taxable income.

6. Importers, Exporters, and Contractors:

   • Any individual involved in import/export activities, as well as contractors, regardless of income, must register for income tax.

7. Individuals with Foreign Income:

   • Residents of Pakistan who earn income from abroad or have foreign assets are required to declare their global income and register.

8. Sales Tax Registrants:

   • Individuals required to register for sales tax (such as businesspersons involved in manufacturing or trading) are also required to register for income tax.

9. Vehicle and Property Purchasers:

   • Individuals who purchase property (with a value exceeding a certain threshold, e.g., PKR 5 million) or vehicles (exceeding 1300cc in engine capacity) must register for income tax and file returns.

10. Non-Filers in Withholding Tax Transactions:

    • Individuals involved in transactions (such as vehicle registration, property purchase, or banking transactions) where withholding tax is applied at a higher rate for non-filers, are encouraged to register to avoid higher rates.

The FBR actively encourages individuals to become tax filers to avoid penalties and higher withholding tax rates.

A person is resident in Pakistan for income tax purposes: 

In cases where the individual is present in Pakistan for a period or periods aggregating to 183 days or more in a tax year (1 July through 30 June) irrespective of their nationality.

Iris is an integrated, end-to-end, highly configurable and customizable ERP, covering all business processes of Income Tax and Sales Tax.

You can check your income tax status by visiting the Federal Board of Revenue’s website and using the “Taxpayer Verification” service. Enter your CNIC (for individuals) or NTN (for businesses) to verify your filer status or review your Active Taxpayer List (ATL) inclusion.

To e-enroll yourself, follow these steps:
• Access Iris log-in Screen at the following URL:
• https://iris.fbr.gov.pk/infosys/public/txplogin.xhtml
• Click “E-Enrollment” button under the log-in Dialog
• “E-Enrollment” Dialog will open
• Enter data in all Fields
• Enter Captcha in “Enter Captcha” field.
• Click “Submit” Button
• Enter verification code received on email in the relevant Field
• Enter verification code received on Cell No. in the relevant Field
• Click “Submit” Button
• You will receive Password and PIN on your email and Cell No.

To re-set your Password, follow these steps:
• Access Iris log-in Screen at the following URL:
https://iris.fbr.gov.pk/login
• Click “Forgot Password” Link in the log-in Dialog
• “Forgot Password” Dialog will open
• Enter data in all Fields
• Enter Captcha in “Enter Captcha” field.
• Click “Submit” Button, a six-digit code will be sent to your registered Cell Number and email.
• Type the received codes in “SMS-Code” and “Email Code” fields.
• Click “Verify” Button

To change your Password, follow these steps:
• Login to Iris at (https://iris.fbr.gov.pk/login)
• Click “Change Password” Link on top right of the screen
• “Change Password” Dialog will open
• Enter current Password
• Enter new Passwords
• Confirm new Password
• Click “OK” Button

To change your PIN, follow these steps:
• Login to Iris (https://iris.fbr.gov.pk/login)
• Click “Change PIN” Link on top right of the screen
• “Change PIN” Dialog will open
• Enter new PIN
• Confirm new PIN
• Click “OK” Button

Tax deducted at source from salary is to be entered under “Adjustable Tax Regime” against any of the following relevant code:

• 64020001 – Salary of Federal Government Employees u/s 149
• 64020002 – Salary of Provincial Government Employees u/s 149
• 64020003 – Salary of Corporate Sector Employees u/s 149
• 64020004 – Salary of Other Employees u/s 149

Withholding tax is a tax deducted at the source of income, such as salary, rent, or dividends, by the payer on behalf of the recipient. The deducted amount is submitted to the FBR. Withholding taxes can be adjusted against your annual income tax liability when you file your return.

Yes, expatriates and non-residents must file taxes if they have Pakistan-source income or own property in the country. However, foreign income is not taxed for non-residents unless it originates from Pakistan.

Tax deductions and exemptions include allowances for:

• Investments in mutual funds and pension schemes.
• Donations to charitable organizations.
• Certain insurance premiums.
• Mortgage payments on property.

Including these FAQ questions and answers will target a wide array of search queries, improve user engagement, and provide valuable tax-related information for residents and businesses in Pakistan.

To claim a tax refund in Pakistan, you need to submit a tax refund request while filing your annual tax return. If you have paid more tax than required (e.g., through withholding taxes), the excess amount can be refunded after FBR reviews your application.

The general sales tax (GST) rate in Pakistan is currently 18% on most goods and services, but certain items may be taxed at reduced rates or exempt altogether. The Federal Board of Revenue (FBR) sets these rates, which can vary based on the nature of the goods or services. Additionally, provincial sales taxes may apply in some areas.

In Pakistan, under the Federal Board of Revenue (FBR), sales tax registration is generally required for certain individuals and entities engaged in taxable activities. The following categories of businesses and individuals are required to register for sales tax:

1. Manufacturers

• Any person or entity involved in the production, assembling, or manufacturing of taxable goods must register for sales tax.

2. Retailers

• Retailers who are involved in the sale of taxable goods are required to register for sales tax. However, there is an exemption for smaller retailers whose annual turnover is below a certain threshold, determined by FBR (e.g., those below PKR 10 million turnover might not be required to register).

3. Wholesalers, Dealers, and Distributors

• These businesses dealing in taxable goods must register and comply with sales tax regulations.

4. Importers

• Importers of taxable goods are required to register for sales tax, irrespective of the size of their business.

5. Service Providers (in certain provinces)

• In provinces like Sindh, Punjab, and Khyber Pakhtunkhwa, certain service providers must register for provincial sales tax (under the provincial revenue boards, not FBR).

6. Commercial Exporters

• Commercial exporters of goods are generally required to register for sales tax to claim input tax adjustments or refunds.

7. Businesses with an Annual Turnover Above the Threshold

• Businesses with annual sales turnover exceeding the threshold set by FBR (typically PKR 10 million) are required to register for sales tax.

8. Voluntary Registration

• Businesses or individuals not legally required to register can also voluntarily register to avail certain benefits, such as input tax adjustments or access to larger business networks.

Failure to register when required can result in penalties and legal consequences under the Sales Tax Act, 1990.

Any person or business involved in the manufacture, import, export, supply, or retail of taxable goods in Pakistan must pay sales tax. Typically, businesses registered with the Federal Board of Revenue (FBR) as sales tax filers are required to collect and remit this tax. Consumers indirectly pay sales tax as it is included in the price of goods and services.

You can register for sales tax in Pakistan by visiting the Federal Board of Revenue (FBR) website and accessing the IRIS system. This system allows you to create an online profile, submit registration forms, and receive a Sales Tax Registration Number (STRN). You will need to provide details about your business, including your National Tax Number (NTN) and other relevant documents.

Yes, certain goods and services are exempt from sales tax in Pakistan. Common exemptions include basic necessities such as unprocessed food items, educational services, healthcare services, and some agricultural products. Additionally, exports are generally zero-rated under sales tax regulations, meaning no sales tax is charged on goods and services sold abroad.

Non-compliance with sales tax regulations can result in serious penalties. These can include fines, surcharges, interest on unpaid taxes, and even criminal charges for fraudulent activities. Penalties may range from a percentage of the tax due to full audits of business accounts. It’s essential for businesses to file their sales tax returns on time to avoid these penalties.

Sales tax returns in Pakistan must be filed monthly. Registered businesses need to submit their returns by the 15th of each month for the previous month’s taxable transactions. The returns are submitted through the IRIS system on the Federal Board of Revenue (FBR) website.

Output tax is the sales tax collected by a business from customers when it sells taxable goods or services. Input tax is the sales tax that the business pays on its purchases and expenses. Businesses in Pakistan can adjust input tax against output tax, meaning they can deduct the input tax from the output tax they owe to the government. The difference is what the business must remit to the FBR.

In Pakistan, sales tax is applied to imports at the time of customs clearance, generally at the rate of 18%. On the other hand, exports are typically zero-rated, meaning no sales tax is applied to goods or services exported from Pakistan. However, exporters can claim a refund for the input tax paid on purchases related to the exported goods.

Yes, businesses can claim refunds on input tax if it exceeds the output tax or in specific circumstances such as zero-rated supplies (e.g., exports). Refund claims must be submitted through the IRIS system to the Federal Board of Revenue (FBR), along with the required documentation to verify the claim.

Businesses must maintain detailed records for sales tax purposes, including invoices, receipts, purchase orders, and sales records. These documents are essential for preparing accurate monthly sales tax returns and can be requested by the FBR during an audit. Failure to maintain proper records may result in penalties and fines.

In Pakistan, federal sales tax (GST) is levied on goods, while provincial sales taxes generally apply to services. Each province (Punjab, Sindh, Khyber Pakhtunkhwa, and Balochistan) has its own sales tax rates and regulations for services. For example, in Punjab, the Punjab Revenue Authority (PRA) is responsible for collecting sales tax on services.

The Federal Board of Revenue (FBR) is responsible for the administration and collection of federal sales tax in Pakistan. The FBR sets sales tax rates, oversees the registration of taxpayers, collects tax returns, and ensures compliance through audits and enforcement. It also processes tax refunds and provides guidelines to taxpayers regarding sales tax laws and procedures.

Zero-rated goods are taxable but at a 0% rate, meaning no sales tax is charged on their sale, but businesses can still claim input tax credits. Common examples are exports and some specific categories of goods. Exempt goods, on the other hand, are not subject to sales tax at all, and businesses cannot claim input tax credits on them. Exempt items often include essential commodities such as basic foodstuffs.