Income Tax Ordinance, 2001

CHAPTER I

PRELIMINARY

1.

Short title, extent and commencement

2.

Definitions

3.

Ordinance to override other laws

CHAPTER II

CHARGE OF TAX

4.

Tax on taxable income

4A.

Omitted

4B.

Super tax for rehabilitation of temporarily displaced persons

5.

Tax on dividends

5A.

Tax on undistributed profits.

5AA.

Tax on return on investments in sukuks.

6.

Tax on certain payments to non-residents

7.

Tax on shipping and air transport income of a non-resident person

7A.

Tax on shipping of a resident person

7B.

Tax on profit on debt

7C.

Tax on builders.

7D.

Tax on developers.

8.

General provisions relating to taxes imposed under sections 5, 5AA, 6, 7, 7A, 7B.

CHAPTER III

TAX ON TAXABLE INCOME

PART I--COMPUTATION OF TAXABLE INCOME

9.

Taxable income

10.

Total income

11.

Heads of income

PART II--HEAD OF INCOME: SALARY

12.

Salary

13.

Value of perquisites

14.

Employee share schemes

PART III--HEAD OF INCOME: INCOME FROM PROPERTY

15.

Income from property

15A.

Deductions in computing income chargeable under the head “Income from Property”.

16.

Non-adjustable amounts received in relation to buildings

17.

Omitted

PART IV--HEAD OF INCOME: INCOME FROM BUSINESS

Division I

Income from Business

18.

Income from business

19.

Speculation business

Division II

Deductions: General Principles

20.

Deductions in computing income chargeable under the head "Income from Business"

21.

Deductions not allowed

Division III

Deductions: Special Provisions

22.

Depreciation

23.

Initial allowance

23A.

Omitted

23B.

Accelerated depreciation to alternate energy projects.

24.

Intangibles

25.

Pre-commencement expenditure

26.

Scientific research expenditure

27.

Employee training and facilities

28.

Profit on debt, financial costs and lease payments

29.

Bad debts

29A.

Provision regarding consumer loans

30.

Profit on non-performing debts of a banking company or development finance institution

31.

Transfer to participatory reserve

Division IV

Tax Accounting

32.

Method of accounting

33.

Cash-basis accounting

34.

Accrual-basis accounting

35.

Stock-in-trade

36.

Long-term contracts

PART V--HEAD OF INCOME: CAPITAL GAINS

37.

Capital gains

37A.

Capital gain on disposal of securities.

38.

Deduction of losses in computing the amount chargeable under the head "Capital Gains"

PART VI--HEAD OF INCOME: INCOME FROM
OTHER SOURCES

39.

Income from other sources

40.

Deductions in computing income chargeable under the head "Income from Other Sources"

PART VII--EXEMPTIONS AND TAX CONCESSIONS

41.

Agricultural income

42.

Diplomatic and United Nations exemptions

43.

Foreign government officials

44.

Exemptions under international agreements

45.

President's honours

46.

Profit on debt

47.

Scholarships

48.

Support payments under an agreement to live apart

49.

Federal Government, Provincial Government, and Local Government income

50.

Foreign-source income of short-term resident individuals

51.

Foreign-source income of returning expatriates

52.

Omitted

53.

Exemptions and tax concessions in the Second Schedule

54.

Exemptions and tax provisions in other laws

55.

Limitation of exemption

PART VIII--LOSSES

56.

Set off of losses

56A.

Set off of losses of companies operating hotels.

57.

Carry forward of business losses

57A.

Set off of business loss consequent to amalgamation

58.

Carry forward of speculation business losses

59.

Carry forward of capital losses

59A.

Limitations on set off and carry forward of losses

59AA.

Group taxation.

59B.

Group Relief.

PART IX--DEDUCTIBLE ALLOWANCES

60.

Zakat

60A.

Workers’ Welfare Fund

60B.

Workers’ Participation Fund

60C.

Deductible allowance for profit on debt.

60D.

Deductible allowance for education expenses.

PART X--TAX CREDITS

61.

Charitable donations

62.

Tax credit for investment in shares and insurance

62A.

Tax credit for investment in health insurance.

63.

Contribution to an approved Pension Fund

64.

Omitted

64A

Re-numbered as 60C

64AB.

Re-numbered as 60D

64B.

Tax credit for employment generation by manufacturers.

64C.

Omitted

64D

Tax credit for point of sale machine.

65.

Miscellaneous provisions relating to tax credits

65A.

Omitted.

65B.

Tax credit for investment.

65C.

Omitted

65D.

Omitted

65E.

Tax credit for industrial undertakings established before the first day of July, 2011.

65F

Tax credit for certain persons.

65G

Tax credit for specified industrial undertakings.

CHAPTER IV

COMMON RULES

PART I--GENERAL

66.

Income of joint owners

67.

Apportionment of deductions

68.

Fair market value

69.

Receipt of income

70.

Recouped expenditure

71.

Currency conversion

72.

Cessation of source of income

73.

Rules to prevent double derivation and double deductions

PART II--TAX YEAR

74.

Tax year

PART III--ASSETS

75.

Disposal and acquisition of assets

75A.

Purchase of assets through banking channel.

76.

Cost

77.

Consideration received

78.

Non-arm's length transactions

79.

Non-recognition rules

CHAPTER V

PROVISIONS GOVERNING PERSONS

PART I--CENTRAL CONCEPTS

Division I

Persons

80.

Person

Division II

Resident and Non-Resident Persons

81.

Resident and non-resident persons

82.

Resident individual

83.

Resident company

84.

Resident association of persons

Division III

Associates

85.

Associates

PART II--INDIVIDUALS

Division I

Taxation of Individuals

86.

Principle of taxation of individuals

87.

Deceased individuals

Division II

Provisions relating to Averaging

88.

An individual as a member of an association of persons

88A.

Omitted

89.

Authors

Division III

Income Splitting

90.

Transfers of assets

91.

Income of a minor child

PART III--ASSOCIATIONS OF PERSONS

92.

Principles of taxation of associations of persons

93.

Omitted

PART IV--Companies

94.

Principles of taxation of companies

95.

Disposal of business by individual to wholly-owned company

96.

Disposal of business by association of persons to wholly-owned company

97.

Disposal of asset between wholly-owned companies

97A.

Disposal of asset under a scheme of arrangement and reconstruction

PART V--COMMON PROVISIONS APPLICABLE TO
ASSOCIATIONS OF PERSONS AND COMPANIES

98.

Change in control of an entity

PART VA--TAX LIABILITY IN CERTAIN CASES

98A.

Change in the constitution of an association of persons

98B.

Discontinuance of business or dissolution of an association of persons

98C.

Succession to business, otherwise than on death

CHAPTER VI

SPECIAL INDUSTRIES

PART I--INSURANCE BUSINESS

99.

Special provisions relating to insurance business

99A.

Special provisions relating to traders.

99B.

Special procedure for small traders and shopkeepers.

99C.

Special procedure for certain persons.

PART II--OIL, NATURAL GAS AND OTHER MINERAL
DEPOSITS

100.

Special provisions relating to the production of oil and natural gas, and exploration and extraction of other mineral deposits

100A.

Special provisions relating to banking business

100B.

Special provision relating to capital gain tax

100BA.

Special provisions relating to persons not appearing in active taxpayers' list.

100C.

Tax credit for charitable organizations

100D.

Special provisions relating to builders and developers.

100E

Special provisions relating to small and medium enterprises.

CHAPTER VII

INTERNATIONAL

PART I--GEOGRAPHICAL SOURCE OF INCOME

101.

Geographical source of income

101A.

Gain on disposal of assets outside Pakistan

PART II--TAXATION OF FOREIGN-SOURCE INCOME
OF RESIDENTS

102.

Foreign source salary of resident individuals

103.

Foreign tax credit

104.

Foreign losses

PART III--TAXATION OF NON-RESIDENTS

105.

Taxation of a permanent establishment in Pakistan of a non-resident person

106.

Thin capitalization

106A.

Restriction on deduction of profit on debt payable to associated enterprise.

PART IV--AGREEMENTS FOR THE AVOIDANCE OF DOUBLE TAXATION AND PREVENTION OF FISCAL EVASION

107.

Agreements for the avoidance of double taxation and prevention of fiscal evasion

CHAPTER VIII

ANTI-AVOIDANCE

108.

Transactions between associates

108A.

Report from independent chartered accountant or cost and management accountant.

108B.

Transactions under dealership arrangements.

109.

Recharacterisation of income and deductions

109A.

Controlled foreign company

110.

Salary paid by private companies

111.

Unexplained income or assets

112.

Liability in respect of certain security transactions

CHAPTER IX

MINIMUM TAX

113.

Minimum tax on the income of certain persons

113A.

Omitted.

113B.

Omitted.

113C.

Alternative Corporate Tax

PROCEDURE

PART I--RETURNS

114.

Return of income

114A.

Business bank account.

115.

Persons not required to furnish a return of income

116.

Wealth statement

116A.

Foreign income and assets statement

117.

Notice of discontinued business

118.

Method of furnishing returns and other documents

119.

Extension of time for furnishing returns and other documents

PART II--ASSESSMENTS

120.

Assessments

120A.

Omitted.

120B.

Restriction of proceedings.

121.

Best judgement assessment.

122.

Amendment of assessments

122A.

Revision by the Commissioner

122B.

Revision by the Chief Commissioner

122C.

Omitted.

122D.

Agreed assessment in certain cases.

123.

Provisional assessment in certain cases

124.

Assessment giving effect to an order

124A.

Powers of tax authorities to modify orders, etc.

125.

Assessment in relation to disputed property

126.

Evidence of assessment

PART III--APPEALS

127.

Appeal to the Commissioner (Appeals)

128.

Procedure in appeal

129.

Decision in appeal

130.

Appellate Tribunal

131.

Appeal to the Appellate Tribunal

132.

Disposal of appeals by the Appellate Tribunal

133.

Reference to High Court

134.

Omitted

134A.

Alternative Dispute Resolution

135.

Omitted

136.

Burden of proof

PART IV--COLLECTION AND RECOVERY OF TAX

137.

Due date for payment of tax

138.

Recovery of tax out of property and through arrest of taxpayer

138A.

Recovery of tax by District Officer (Revenue)

138B.

Estate in bankruptcy.

139.

Collection of tax in the case of private companies and associations of persons

140.

Recovery of tax from persons holding money on behalf of a taxpayer

141.

Liquidators

142.

Recovery of tax due by non-resident member of an association of persons

143.

Non-resident ship owner or charterer

144.

Non-resident aircraft owner or charterer

145.

Assessment of persons about to leave Pakistan

146.

Recovery of tax from persons assessed in Azad Jammu and Kashmir and Gilgit-Baltistan

146A.

Initiation, validity, etc., of recovery proceedings

146B.

Tax arrears settlement incentives scheme

146C

Assistance in the recovery and collection of taxes

PART V--ADVANCE TAX AND DEDUCTION OF TAX AT SOURCE

Division I

Advance tax paid by the Taxpayer

147.

Advance tax paid by the taxpayer

147A.

Advance tax from provincial sales tax registered person.

Division II

Advance tax paid to a Collection Agent

148.

Imports

148A.

Omitted.

Division III

Deduction of Tax at Source

149.

Salary

150.

Dividends

150A.

Omitted

151.

Profit on debt

152.

Payments to non-residents

152A.

Omitted

153.

Payments for goods, services and contracts

153A.

Omitted.

153B.

Omitted

154.

Exports

154A

Export of Services.

155.

Rent of immoveable property

156.

Prizes and winnings

156A.

Petroleum Products

156B.

Omitted

157.

Omitted

158.

Time of deduction of tax

Division IV

General Provisions Relating to the Advance Payment of Tax
or the Deduction of Tax at Source

159.

Exemption or lower rate certificate

160.

Payment of tax collected or deducted

161.

Failure to pay tax collected or deducted

162.

Recovery of tax from the person from whom tax was not collected or deducted

163.

Recovery of amounts payable under this Division

164.

Certificate of collection or deduction of tax

165.

Statements

165A.

Furnishing of information by banks.

165B.

Furnishing of information by financial institutions including banks.

166.

Priority of tax collected or deducted

167.

Indemnity

168.

Credit for tax collected or deducted

169.

Tax collected or deducted as a final tax

PART VI--REFUNDS

170.

Refunds

170A

Electronic processing and electronic issuance of Refunds by the Board.

171.

Additional payment for delayed refunds

171A.

Payment of refund through income tax refund bonds.

PART VII--REPRESENTATIVES

172.

Representatives

173.

Liability and obligations of representatives

PART VIII--RECORDS, INFORMATION COLLECTION
AND AUDIT

174.

Records

175.

Power to enter and search premises

175A.

Real-time access to information and databases.

176.

Notice to obtain information or evidence

177.

Audit

178.

Assistance to Commissioner

179.

Accounts, documents, records and computer-stored information not in Urdu or English language

180.

Power to collect information regarding exempt income

PART IX--TAXPAYER’S REGISTRATION

181.

Taxpayer’s registration

181A.

Active taxpayers’ list.

181AA.

Compulsory registration in certain cases

181B.

Tax Payer Card.

181C.

Displaying of National Tax Number.

181D.

Business licence scheme.

PART X--PENALTY

182.

Offences and penalties.

182A.

Return not filed within due date.

183.

Exemption from penalty and default surcharge.

184.

Omitted

185.

Omitted

186.

Omitted

187.

Omitted

188.

Omitted

189.

Omitted

190.

Omitted

PART XI--OFFENCES AND PROSECUTIONS

191.

Prosecution for non-compliance with certain statutory obligations

192.

Prosecution for false statement in verification

192A.

Prosecution for concealment of income.

192B.

Prosecution for concealment of an offshore asset.

193.

Prosecution for failure to maintain records

194.

Prosecution for improper use of National Tax Number Certificate

195.

Prosecution for making false or misleading statements

195A.

Prosecution for non-compliance with notice under section 116A.

195B.

Prosecution for enabling offshore tax evasion.

196.

Prosecution for obstructing an income tax authority

197.

Prosecution for disposal of property to prevent attachment

198.

Prosecution for unauthorised disclosure of information by a public servant

199.

Prosecution for abetment

200.

Offences by companies and associations of persons

201.

Institution of prosecution proceedings without prejudice to other action

202.

Power to compound offences

203.

Trial by Special Judge

203A.

Appeal against the order of a Special Judge.

203B

Power to arrest and prosecute.

203C

Procedure to be followed on arrest of a person.

203D

Special Judges.

203E

Cognizance of offences by Special Judges.

203F

Special Judge, etc. to have exclusive jurisdiction.

203G

Provisions of Code of Criminal Procedure, 1898, to apply.

203H

Transfer of cases.

203I

Place of sittings.

204.

Power to tender immunity from prosecution

PART XII--DEFAULT SURCHARGE

205.

Default surcharge

205A.

Reduction in default surcharge, consequential to reduction in tax or penalty

PART XIII--CIRCULARS

206.

Circulars

206A.

Advance ruling

CHAPTER XI

ADMINISTRATION

PART I--GENERAL

207.

Income tax authorities.

208.

Appointment of income tax authorities.

209.

Jurisdiction of income tax authorities.

210.

Delegation.

211.

Power or function exercised.

212.

Authority of approval.

213.

Guidance to income tax authorities.

214.

Income tax authorities to follow orders of the Board.

214A.

Condonation of time limit.

214B.

Power of the Board to call for records.

214C.

Selection for audit by the Board.

214D.

Omitted.

214E.

Closure of audit.

215.

Furnishing of returns, documents etc.

216.

Disclosure of information by a public servant.

216A.

Proceedings against authority and persons.

217.

Forms and notices; authentication of documents.

218.

Service of notices and other documents.

219.

Tax or refund to be computed to the nearest Rupee.

220.

Receipts for amounts paid.

221.

Rectification of mistakes.

222.

Appointment of expert.

222A.

Fee and service charges.