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Income Tax Law in Pakistan

Updated on October 3, 2009

History of Income Tax Law in Pakistan:

1)         Promulgation of Income Tax Act, 1922:

            When Pakistan came into being, the Government of Pakistan promulgated            the Income Tax Act, 1922, as amended upto the date for regulating the taxation system in Pakistan.

2)         An Applicability of the Income Tax Act, 1922:

            The provisions of the Act were extended to the whole of Pakistan except the          specified areas.

3)         Formation of the Taxation Inquiry Committee:

            "A Taxation Inquiry Committee", was introduced in 1958 which was consist of        officials and the representatives of trade and commerce.

4)         Recommendations of Taxation Inquiry Committee:

            "Taxation Inquiry Committee" submitted a report after keen analysis of        prevailing tax system and suggested some recommendations. Some of the     recommendations were accommodated which resulted in the amendment     of Income Tax Act, 1922.

5)         Abolishment of Super Tax:

            Before 1959, super tax was imposed on the incomes of all the persons but            in registered firm and companies.

6)         Expression of Rate Slab as a Percentage of Income:

            In 1959, the rates of each slab were expressed as a percentage of income            considering the recommendations of "Taxation Inquiry committee".

7)         Change in Financial Year:

            Before 1960, the financial year was considered from 1st April to 31st March             but in 1960, it was changed from 1st July to 30th June.

8)         Introduction of Income Tax Committee:

            In 1961, FBR introduced an "Income Tax Committee". Main purpose of       introduction of such committee was to make recommendations for    simplification   of the Income Tax Act, 1922 and procedure of taxation.

9)         Introduction of Self Assessment Scheme:

            Before 1965, an assessment officer was assessed the income and           determined the tax liability of the person but in 1965, "Self Assessment           Scheme" was introduced.

10)       Promulgation and Enforcement of the Income Tax Ordinance, 1979:

Till 1979, lot of amendments were made in the context of the Income Tax Act, 1922. As a result of these amendments, the Act became a complicated law and difficulties arose in its working. Keeping these difficulties in view, the Government promulgated a new income tax law       namely "The Income Tax Ordinance, 1979" through the Finance Ordinance on June 28, 1979 and included all the basic concept of the repealed Act, so that the benefit of the whole case law built up over the last 57 years is not rendered useless.

11)       Formation of National Tax Reform Commission:

            In 1985, the Federal Government formed a National Tax Reform     Commission. It was consist of members of Senate and National Assembly, high government officials and renowned industrialist. Major purpose of such commission was to    suggest way and means to improve the existing structure of tax laws in    Pakistan.

12)       Income Tax Survey 1999-2000:

            In 1999-2000, under the Income Tax Ordinance, 1979, an income tax survey was conducted to analyze the prevailing taxation structure and to procure the         suggestions and recommendations from surveyors.

13)       Introduction of Tax Amnesty Schemes:

            Many tax amnesty schemes were introduced under the Income Tax           Ordinance, 1979. These schemes were introduced to provide a chance to     black money holders, so that they can change their black money into white         money. Latest scheme was introduced in the year 2002.

14)       Promulgation of the Income Tax Ordinance, 2001:

            After 22 years of the promulgation of the Income Tax Ordinance, 2001, to   modernize the taxation system, a government of Pakistan introduced a new     income tax law namely, "The Income Tax Ordinance, 2001" which was             promulgated on September 13, 2001. It was published in the Extraordinary             Gazette of Pakistan at pages bearing Nos. 969 to 1217.

15)       Short Title of the Income Tax Ordinance, 2001:

            Under section 1, the Ordinance specifies that "The Income Tax Ordinance,            2001" shall be the short title of the law.

16)       Applicability of the Income Tax Ordinance, 2001:

            Under section 1, the Ordinance specifies that the Income Tax Ordinance, 2001    shall extend to the whole of Pakistan.

17)       Date of the Enforcement of the Income Tax Ordinance 2001:

            Section 1 of the Ordinance, empowers the Federal Government to notify the          date from which the Income Tax Ordinance, 2001 shall came into force. The      Federal Government, vide its notification No. S.R.O. 381 (1)/ 2002, dated 15th   June, 2002, announced that the Income Tax Ordinance,      2001 shall came into   force on the first day of July, 2002.

18)       Status of the Income Tax Ordinance, 2001:

            According to section 3 "The Income Tax Ordinance, 2001" overrides other             laws enforceable in Pakistan. It means, in case of any contradiction        between the provisions of the Income Tax Ordinance, 2001 and any other         law of the country, the provisions of the Income Tax Ordinance, 2001 shall             prevail.

19)       Purpose of the Income Tax Ordinance, 2001:

            The preamble of the Ordinance specifies the object of law. It specifies that the       Income Tax Ordinance, 2001, is promulgated to consolidate and to amend law         relating income tax and provide for matters ancillary to and connected with the           income tax.

20)       Income Tax Rules, 2002:

The FBR under the authority of section 237 of the Income Tax Ordinance, 2001 made the Income Tax rules, 2002. These rules were published on July1, 2002 in Extraordinary Gazette of Pakistan at pages 1819 to 1966.

21)       Finance Act, 2009:

            To update the income tax law in Pakistan according to the requirements of            time, different methods of changes have been adopted by competent income tax         authorities like S.R.O's and Circular’s etc. Finance Act is the regular source of           change, it is presented in the month of June in each year. Finance Act, 2009 is      one step to continuance process of change.


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      Kazim 5 years ago

      Can someone recomend if there is a book or blogs on understanding the current income tax laws in Pakistan, I assume that for salaried employees Tax is a % of income , depending upon our income slab. However ' I dont know what types of deductions may be applicable for a person, If I am a business owner , will the same structure apply on me , ?

      Besides income tax, I assume that a person pays other type of taxes , for example on everything we buy there is a sales tax. How can I understand these concepts under Pakistan Laws? Would be grateful for your help in pointing me to right resources.

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      Ali Gulab Siyal 5 years ago

      plzz share me latest knowledge till 2012 of origin of Income Tax its principles, applicabality, computing incomes, purpose, objectives, assessment, tax slabes, laws, all sections, acts, all ordinances, schedules, and provissions applicable by Income Tax Department, Govt Of Pakistan.

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      Mr. Ali shan 5 years ago

      every one talking about the individual income tax

      please share with all of us how corporate sectors handle Income tax which are impose on them through Govt. i know very much about that... thankyou

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      Samar 5 years ago

      does the government of pakistan impose taxes on schools? i need the answer for my project

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      m.iqbal.baltistani 5 years ago

      i agree the idea of taxation

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      Asif Majeed 5 years ago

      These information about income tax law of Pakistan is very authentic and correct.Please give the information of the currently year 2012..


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      Mazhar 6 years ago

      Goverment suppose to receieve tax from citizens for providing facilities, Pakistan tax dept. provide facility of corruption to wealthy people and Tax dept. officials.

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      farrukh 6 years ago

      please pay income tax becouse thats our assets,,,,,,, there is many reasons, goverment make new roads... hospitals schools.... keep enviroment

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      KIle 6 years ago

      Are the cell phone prepaid card provided by not for profit organisation to a staff of the organisation are taxable? assuming the cell phone is in organisation's name and alternatively the cell phone is in personal name of the staff?

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      Financial outsourcing 6 years ago

      I really like the idea of taxation.

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      meena 6 years ago

      how much penalties imposed on tax information about that

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      Meera Ghani 6 years ago

      You dont mention any penalties or fines people may incur by not filing or paying their taxes. Are there any?

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      umair 6 years ago


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      hina baig 6 years ago

      nice information kindly update 2002incme tax law;)

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      atif 7 years ago

      nice hubb you are axillent & nilum all mony going in swec account

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      malik faisal 7 years ago

      its a gud source to create revenue,but in pakistan only middle class pays it fairly.

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      shohab khan 7 years ago

      very much informative thanks

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      ASAD ULLAH 7 years ago

      helpfull information...... Kindly keep it up to date..... thanks.....

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      zanie 7 years ago

      its a gud source to create revenue,but in pakistan only middle class pays it fairly.

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      Zoreen Ubaid 7 years ago

      Its so nice information about tax history of Pakistan. plz u updated the amendments in tax. Thanx

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      Zafar 7 years ago

      Thanks a lot, when the income tax rules 2002 were updated?

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      Zafar Iqbal 7 years ago

      Plz intimate me whent he income tax rules 20020 were updated last time?

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      Faisal 7 years ago

      You made project easy, Thank You.

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      rabia 7 years ago

      i want to know that where all of the amount of the income tax goes in pakistan?

    • nettech profile image

      nettech 7 years ago from London (UK)

      Its great to have Income tax, however its a shame nobody pays it in



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      ferguson 8 years ago

      i need information on section 18A of income tax act 1922

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      i imi 8 years ago

      Thank you nilum

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      nilum 8 years ago

      nice hub :-)

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      i imi 8 years ago

      You are well come

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      prasetio30 8 years ago from malang-indonesia

      nice information. I know more about taxes from this hub. thanks