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Collection
And
Deduction
Of Tax at Source
(Taxpayer’s Facilitation Guide)
Prepared by :
FATE Wing
August 2008
Revenue Division helpline@fbr.gov.pk
Federal Board of Revenue
Government of Pakistan 0800-00-227, 051-111-
227-227
www.fbr.gov.pk
1
Collection and Deduction of Tax at Source
Summary of withholding tax regime under the Income Tax Ordinance, 2001
st
Amended upto 31 July, 2007.
Section Person(s) From Rate On When Payable to the Statement(s) of tax Taxability
liable to whom credit of collected or Final/Adjustable
collect or Federal deducted
deduct tax Government
148 Collector of Importers of 2% Value of At the same On the day Monthly Within 15 Final
(Imports) Customs goods Reduced rates:
goods as time and collected. days (Rule:44(2) And For details see
@ 1%: determined manner as Rule: 43(a) Annual Within 2 Sec. 148 and Sec.
Fibres, yarns and fabrics under the months: Rule 44(1) 169 of Income
(excluding pure cotton or its section 25 customs Tax Ordinance
yarn or its fabrics). (Clause: of the duty is 2001.
9 Part: II 2nd Schedule)
Goods covered by the Zero Customs payable
Rating Regime of the Sales Act, 1969,
Tax notified by Federal Board as if the
of Revenue.] (Clause: 9 goods were
Part: II 2nd Schedule)
Capital goods and raw
subject to
material imported exclusively ad-valorem
for its own use by a duty
manufacturer registered with increased
Sales Tax Department.]
(Clause: 13 Part: II 2nd
by the
Schedule). customs-
duty and
Phosphatic fertilizers sales tax, if
imported and specified in
Notification No. S.R.O.
any,
609(I)/2004, dated 16th July, payable in
2004. (Clause: 13-A Part: II respect of
2nd Schedule). the import
of the
In respect of Urea
goods.
fertilizer imported, the tax
under section 148 shall be
collected at the rate
of 1% of its import
value as increased by
[customs-duty,
sales tax and federal
excise duty], if any
levied thereon.
(Clause: 23 Part:
II 2nd Schedule)
2
Collection and Deduction of Tax at Source
Section Person(s) From Rate On When Payable to the Statement(s) of Taxability
liable to whom credit of Federal tax collected or Final/Adjustable
collect or Government deducted
deduct tax
Potassic fertilizers imported in
pursuance of Economic
Coordination Committee of the
cabinet’s decision No ECC -
155/12/2004 dated 9th December
2004. (Clause: 13-E Part : II 2nd
Schedule
The following items as per (Clause:
13-G Part: II 2nd Schedule).
i. Capital goods;
ii. Cement;
iii. Coal;
iv. Gold;
v. Mobile telephone sets;
vi. Silver;
3
Collection and Deduction of Tax at Source
Section Person(s) From whom Rate On When Payable to the Statement(s) Taxability
liable to credit of Federal of tax Final/
collect or Government collected or Adjustable
deduct tax deducted
14 9 Employer Employee Annual average rate (to be calculated as per Salary chargeable to At the time the On the day Monthly Within
(Salary) rate card subject to applicable reductions in tax salary is deducted 15 days Adjustable
tax) actually paid (Where deducted (Rule:44 For details see
( For details see FBR’s brochure “ Taxation by and on behalf of (2) And Sec. 149 and 169
of Income from Salary”) the Government) Annual Within 2 of Income Tax
.Rule:43(a) months: Rule Ordinance 2001.
Within 15 days of 44(1)
deduction
(In other cases)
150 Company Shareholders 10% Gross amount of At the time the Within 7 days Monthly Within Final
(Dividen Reduced rates dividend dividend is from the end 15 days (Dividend paid by
d) 7.5% - Paid by a purchaser of a power actually paid of each (Rule:44 the Company)
project privatized by WAPDA [Clause fortnight. (2) And Adjustable
(17) of Part II of 2nd Schedule]. Annual Within 2 (Dividend received
Rule : 43(b)
7.5% - Paid by a company set up for months: Rule by a company).
power generation [Clause (20) of Part II 44(1) For details see Sec.
of 2nd Schedule]. 5,8,150.
151(1)(a) Persons paying Recipient of 10% Yield or profit At the time the On the day Monthly Within Final
(Profit on yield or profit yield or profit (profit on debt) yield or deducted 15 days For details see
debt) (profit on debt) (profit on on an account, profit (profit Rule:43(a) (Rule:44 Sec. 151(1) (a)
on an account, debt) deposit or a on debt) is (2) And and 169 of Income
deposit or a Annual Within 2 Tax Ordinance
certificate under credited to 2001.
certificate under months: Rule
the National the National the account 44(1)
Savings Scheme Savings Scheme of the
or Post Office or Post Office recipient or
Savings Account Savings Account is actually
as reduced by paid,
amount of Zakat, whichever is
if any, paid by the earlier.
recipient under
the Zakat and
Ushr Ordinance,
4
Collection and Deduction of Tax at Source
1980
Section Person(s) From whom Rate On When Payable to the Statement(s) Taxability
liable to credit of of tax Final/Adjustable
collect or Federal collected or
deduct tax Government deducted
151(1)(b) Banking Recipient of 10% Profit on debt on an At the time the profit on debt is Within 7 days Monthly Within Final
Company profit on debt account or deposit credited to the account of the from the end of 15 days For details see Sec.
on an account maintained as reduced recipient or is actually paid, each fortnight. (Rule:44(2) 151(1) (b) and 169 of
Financial or deposit by amount of Zakat, if whichever is earlier Rule : 43(b) And Income Tax Ordinance
Institution any, paid by the Annual Within 2 2001.
recipient under the months: Rule
Zakat and Ushr 44(1)
Ordinance, 1980
151(1)(c) Federal Recipient of 10% Profit on debt on any At the time the profit on debt is On the day Monthly Within Adjustable
Government profit on any security (other than credited to the account of the deducted 15 days For details see Sec.
Provincial security those covered under recipient or is actually paid, (Where deducted (Rule:44 151(1) (c) and 169 of
Government (profit on section 151(1)(a)) whichever is earlier by and on (2) And Income Tax Ordinance
Local debt) issued by the Federal behalf of the Annual Within 2 2001.
Authority Government or a Government) months: Rule
Provincial Rule:43(b) 44(1)
Government or a local
authority as reduced
by amount of Zakat, if
any, paid by the
recipient under the
Zakat and Ushr
Ordinance, 1980
5
Collection and Deduction of Tax at Source
Section Person(s) liable From whom Rate On When Payable to Statement(s) Taxability
to collect or the credit of of tax Final/Adjustable
deduct tax Federal collected or
Government deducted
151(1)(d) Banking Company Recipient of 10% Profit on debt on At the time the profit on Within 7 days Monthly Final
Financial Institution Profit on debt any bond, debt is credited to the from the end Within 15 For details see Sec.
Company as certificate, account of the of each days (Rule:44 151(1) (d) and 169 of
defined in the debenture, recipient or is actually fortnight. (2) And Income Tax
Companies security or paid, whichever is Rule:43(b) Annual Within Ordinance 2001.
Ordinance, 1984 instrument of earlier 2 months:
Body Corporate any kind as Rule 44(1)
formed by or reduced by
under any law in amount of Zakat,
force in Pakistan if any, paid by
Finance Society the recipient
under the Zakat
and Ushr
Ordinance, 1980
152(1) Every Person Non-Resident 15% or lower Gross amount of At the time the royalty On the day Monthly Final
Payment paying royalty or Person rate as per royalty or fee for or fee for technical deducted Within 15 For details see Sec.
to Non fee for technical agreement technical services is actually (Where days (Rule:44 6, 8,152(1) and 169
Residents services to a non- for services paid deducted by (2) And of Income Tax
resident avoidance of and on behalf Annual Within Ordinance 2001.
double of the 2 months:
taxation Government) Rule 44(1)
Rule:43(a)
Within 7 days
from the end
of each
fortnight
(In other cases)
Rule:43(b)
6
Collection and Deduction of Tax at Source
Section Person(s) From Rate On When Payable to the Statement(s) Taxability
liable to whom credit of Federal of tax Final/Adjustable
collect or Government collected or
deduct tax deducted
152(1A) Every Person Non- 6% or lower rate Gross amount of payment At the time the On the day Monthly Within Final
making Resident as per agreement on account of execution of amount is deducted 15 days For details see Sec.
payment for Person for avoidance of a contract or sub-contract actually paid (Where deducted by (Rule:44 6, 8,152(1A) and
execution of double taxation under a construction, and on behalf of the (2) And 169 of Income Tax
contract etc., assembly or installation Government) Annual Within 2 Ordinance 2001.
to a non- project in Pakistan, Rule:43(a) months: Rule
resident including a contract for 44(1)
the supply of supervisory Within 7 days from
activities in relation to the end of each
such project; or fortnight
(In other cases)
A contract for Rule:43(b)
advertisement services
rendered by Television
Satellite Channels
Any other contract for the
construction or services
rendered, relating thereto.
7
Collection and Deduction of Tax at Source
Section Person(s) From whom Rate On When Payable to the Statement(s) Taxability
liable to credit of Federal of tax Final/Adjustable
collect or Government collected or
deduct tax deducted
152(2) Every Person Non-resident 30% or lower rate as per Gross amount of At the time the On the day Monthly Adjustable
making a Person agreement for avoidance of any payment amount is deducted Within 15 For details see
payment to a double taxation chargeable to actually paid (Where deducted days (Rule:44 Sec. 6, 8,152(2)
non-resident tax including by and on behalf of
(2) And and 169 of
(other than profit on debts the Government)
royalty or fee for but excluding Rule:43(a)
Annual Within Income Tax
technical services royalty and fee 2 months: Ordinance 2001.
for technical Within 7 days from Rule 44(1)
services the end of each
fortnight
(In other cases)
Rule:43(b)
153(1) Federal Resident Person Sale of: Gross amount of At the time the On the day Monthly Final
Contract Government Permanent Rice, cottonseed or edible oils payment on amount is deducted Within 15 For details see Sec.
Supply of Company Establishment 1.5% account of: 1.5% actually paid (Where deducted days (Rule:44 153 and 169 of
Goods Association of in Pakistan of a Any other goods 3.5% Sale of goods 3.5% by and on behalf of
(2) And Income Tax
Persons Services rendered or provided (inclusive of the Government) Ordinance 2001.
constituted by,
Non-Resident 6% sales tax); -6.0% Rule:43(a)
Annual Within
or under, law Execution of contract 6% -6.0% 2 months:
Foreign Reduced rate Rendering or Within 7 days from Rule 44(1)
Contractor or Transport 2% providing of the end of each
Consultant -2.0%
services; and fortnight
Consortium or 05, 2006]
[SRO 794(I) /2006 dated August(In other cases)
Joint Venture Execution of a Rule:43(b)
contract, other
than a contract
for the sale of
goods or
rendering of
services.
8
Collection and Deduction of Tax at Source
Section Person(s) From whom Rate On When Payable to the Statement(s) Taxability
liable to credit of Federal of tax Final/Adjustable
collect or Government collected or
deduct tax deducted
153(1A) Every Exporter Resident Person and Gross amount of At the time the On the day deducted Monthly Final
or an Export Permanent Establish- 0.5% payment on account amount is actually (Where deducted by Within 15 For details see Sec. 153
House ment in Pakistan of a of rendering or paid and on behalf of the days (Rule:44 and 169 of Income Tax
non-Resident providing of Government) (2) And Ordinance 2001.
services of stitching, Rule:43(a) Annual Within
dying, printing, 2 months:
embroidery, Within 7 days from Rule 44(1)
washing, sizing and the end of each
weaving fortnight
(In other cases)
Rule:43(b)
154(1) Authorized Exporter of goods 1% Foreign Exchange At the time of Within 7 days from Monthly Final
Exports dealer in proceeds realization of the end of each Within 15 For details see Sec. 154
foreign export proceeds fortnight.Rule43(b) days (Rule:44 and 169 of Income Tax
exchange or indenting (2) And Ordinance 2001
commission Annual Within
2 months:
Rule 44(1)
9
Collection and Deduction of Tax at Source
Section Person(s) From whom Rate On When Payable to Statement( Taxability
liable to the credit of s) of tax Final/Adjustable
collect or Federal collected
deduct tax Government or
deducted
154 (2) Authorized Foreign indenting Foreign indenting commission Foreign At the time of Within 7 days Monthly Final
dealer in commission 5.00% indenting realization of from the end Within 15
foreign agents Reduced rates commission export of each days For details see Sec. 154
exchange proceeds or fortnight. (Rule:44 and 169 of Income Tax
Ordinance 2001.
Export indenting commission on indenting Rule43(b) (2) And
export of goods. 5% commission Annual
Within 2
[Clause (5) of Part II of 2nd Schedule] months:
Rule 44(1)
Section Person(s) From Rate On When Payable to the credit of Statement(s) of tax Taxability
liable to whom Federal Government collected or Final/Adjustable
collect or deducted
deduct tax
154(3) Banking Every 1% Realization of At the time of Within 7 days from the end of Monthly Within 15 Final
Company Person proceeds on account realization each fortnight days (Rule:44 For details see Sec. 154
of sale of goods to an of the sale Rule:43(b) (2) And and 169 of Income Tax
exporter under an proceeds Annual Within 2 Ordinance 2001.
inland back-to-back months: Rule 44(1)
letter of credit
Realization of
payments made
through crossed
cheques to indirect
10
Collection and Deduction of Tax at Source
exporters against
Standard Purchase
Order in the format
prescribed by the
State Bank of
Pakistan
154(3A) The Export Industrial 1% Proceeds of the export At the time of Within 7 days from the end of Monthly Within 15 Final
Processing undertaking of goods export of each fortnight days (Rule:44 For details see Sec. 154
Zone s located in goods Rule:43(b) (2)And and 169 of Income Tax
Ordinance 2001.
Authority Export Annual Within 2
Processing months: Rule 44(1)
Zones
154(3B) Direct Indirect 1% Payment against a firm At the time the Within 7 days from the end of Monthly Within 15 Final
Exporter exporter contract amount is each fortnight days (Rule:44 For details see Sec. 154
Export House (defined actually paid Rule:43(b) (2) And and 169 of Income Tax
Ordinance 2001.
registered under sub- Annual Within 2
under DTRE chapter 7 of months: Rule 44(1)
Rules, 2001 Chapter XII
of the
Customs
Rules, 2001
`
11
Collection and Deduction of Tax at Source
Section Person(s) liable From whom Rate O When Payable to the Statement Taxability
to collect or n credit of Federal (s) of tax Final/Adjustable
deduct tax Government collected
or
deducted
155 Federal Recipient of rent of The rate of tax to be deducted under R At the time the On the day deducted Monthly Final ( in case of
Income Government immovable section 155, in the case e rent is actually (Where deducted by Within 15 property income
from Provincial property of an individual and association of n paid and on behalf of the days only)
Propert For details see
Government persons, shall be- t Government) (Rule:44
S Gross Rate of tax
Sec. 15, 155 and
y Local Authority Rule:43(a) (2) And 169 of Income Tax
Company . amount of o Annual
N rent Ordinance 2001.
Non-Profit o f Within 7 days from Within 2
Organization the end of each months:
Diplomatic Mission 1 Where the Nil i fortnight Rule 44(1)
of a foreign state gross amount m (In other cases)
of rent does
not exceed m Rule:43(b)
Rs.150,000. o
v
2 Where the 5 per cent of the gross a
gross amount amount exceeding
of rent Rs.150,000.
b
exceeds l
Rs.150,000 e
but does not
exceed
Rs.400,000.
p
r
3 Where the Rs.12,500 plus 5[7.5] per o
gross amount cent of the gross amount p
of rent exceeding Rs.400,000.
exceeds
e
Rs.400,000 r
but does not t
exceed y
Rs.1,000,000
.
(
4 Where the Rs.57,500] plus 10 per i
gross amount cent of the gross amount n
of rent exceeding Rs.1,000,000. c
exceeds
Rs.1,000,000 l
. u
d
i
n
g
r
e
n
12 t
Collection and Deduction of Tax at Source
o
f
f
(b) The rate of tax to be deducted under
section 155, in the case of
a company, shall be-
S.No. Gross amount of Rate of tax
rent
1 Where the gross 5 per cent of
amount the gross
of rent does not amount of
exceed rent.
Rs.400,000.
2 Where the gross Rs.20,000
amount plus 3[7.5]
of rent exceeds per
Rs.400,000 but does cent of the
not gross amount
exceed of rent
Rs.1,000,000. exceeding
Rs.400,000.
3 Where the gross Rs.65,000
amount plus 10
of rent exceeds per cent of
Rs.1,000,000. the gross
amount of
rent
exceeding
Rs.1,000,000.
Section Person(s) From whom Rate On When Payable to the credit Statement(s) Taxability
liable to of Federal of tax Final/Adjustable
collect or Government collected or
deduct tax deducted
156 Every person Recipient of 10% - On Prize on a prize bond; At the time the On the day deducted Monthly Final
Prizes and paying a prizes or prize of a Prize or winnings from a prize or (Where deducted by Within 15 For details see
Winnings prize or winnings prize bond raffle, lottery, quiz or winnings are and on behalf of the days Sec.
winnings 20% - On crossword puzzle; actually paid Government) (Rule:44 156 and 169 of
Income Tax
Prize or Prize offered by Rule:43(a) (2) And Ordinance 2001.
winnings companies for Within 7 days from Annual
from a promotion of sale the end of each Within 2
raffle, fortnight months:
lottery, quiz (In other cases) Rule 44(1)
13
Collection and Deduction of Tax at Source
or Rule:43(b)
crossword
puzzle; or
prize
offered by
companies
for
promotion
of sale.
156 A Every person Petrol pump 10% The amount of At the time of On the day deducted Monthly Final
Petroleum selling operators commission/discount receiving the amount (Where deducted by and Within 15 For details see
products petroleum allowed to the petrol of sold petroleum on behalf of the days Sec. 156(A) and
products to pump operator. products Government) (Rule:44 169 of Income Tax
Ordinance 2001.
petrol pump Rule:43(a) (2) And
operator. Within 7 days from the Annual
end of each fortnight (In Within 2
other cases) months: Rule
Rule:43(b) 44(1)
156B Pension Fund Recipient of Average Any amount withdrawn At the time of Within 7 days from the Monthly Adjustable.
Withdrawal Manager amount from rate of tax before the retirement age; making the end of each fortnight Within 15
from individual on the or payment Rule:43(b) days (For details see
pension pension taxable (Withdrawal) (Rule:44 Sec. 156B & 169
funds account income of 3 In excess of 25% of the (2) And of Income Tax
maintained preceding accumulated balance Annual Ordinance,
under any years withdrawn on or after the Within 2 2001).
Approved retirement age months: Rule
Pension Fund 44(1)
At the time of making the
payment (withdrawal)
Section Person(s) From whom Rate On When Payable to the Statement(s) of tax Taxability
14
Collection and Deduction of Tax at Source
liable to credit of Federal collected or Final/Adjust
collect or Government deducted able
deduct tax
231A Banking Every Person 0.3% Amount At the time of making Within 7 days from the Monthly Within 15 Adjustable
Cash Company making a cash withdrawn in the payment end of each fortnight days (Rule:44 for details
Withdra withdrawal excess of Rs. (Withdrawal) Rule:43(b) (2) And see Sec.
wals exceeding Rs. 25,000 per Annual Within 2 231 A & 169
from 25,000 per day day months: Rule 44(1) of Income
banks Tax
Ordinance,
2001.
231 B Every Purchaser of New The Value of At the time of sale On the day deducted Monthly Within 15 Adjustable
Purchase Manufacturer Motor Cars Engine the Motor (Where deducted by days (Rule:44 For details
Amount
of Motor and Authorized Capacit Vehicle. and on behalf of the (2) And see Sec.
of Tax
y 231(B) and
Cars and Dealer Government) Annual Within 2
upto 169 of
Jeeps 850cc
Rs.7,500 Rule:43(a) months: Rule
Income Tax
851cc to Rs.10,50 Within 7 days from the 44(1) Ordinance
1000cc 0 end of each fortnight 2001.
1001cc (In other cases)
Rs.16,87
to Rule:43(b)
5
1300cc
1301cc
to Rs.16,87
1600cc 5
1601cc
to Rs.22,50
1800cc 0
1801cc
to Rs.16,87
2000cc 5
Above
2000cc Rs.50,00
0
233 Federal Recipient of 10% Brokerage and At the time the On the day deducted Monthly Within 15 Final
Brokera Government brokerage or Reduced Commission brokerage or (Where deducted by days (Rule:44 For details
ge and Provincial commission rate commission is and on behalf of the (2) And see Sec.
Commis Government Advertising actually paid Government) Annual Within 2 233 and
169 of
sion Local Authority Agents 5.0% Or Rule:43(a) months: Rule 44(1) Income Tax
Company [Clause (26) of Part At the time of Ordinance
Association of II of 2nd Schedule] receiving payment Within 7 days from the 2001.
Persons where the agent end of each fortnight
constituted by, retains the (In other cases)
15
Collection and Deduction of Tax at Source
or under, law brokerage or Rule:43(b)
commission out of
proceeds remitted
Section Person(s) liable From whom Rate On- When Payable to the Statement(s) of Taxability
to collect or credit of tax collected or Final/Adjustable
deduct tax Federal deducted
Government
233A(1)(a) Stock Exchange Members of 0.01% Purchase and/or sale At the time of Within 7 days Monthly Within 15 Final
and registered in the stock value of the shares making the from the end of days (Rule:44 For details see Sec.
233A(1)(b) Pakistan exchange payment or each fortnight (2) And 233 A (1) (a), 233
Commission receiving the Rule:43(b) Annual Within 2 A(1)(b) and 169 of
Income Tax
of Members payment months: Rule Ordinance 2001.
of Stock 44(1)
Exchange
233A)1)(c) Stock Exchange Sellers of 0.01% Value of the shares At the time of Within 7 days Monthly Within 15 Adjustable
Trading of registered in shares traded (Sale) making the from the end of days (Rule:44 For details see Sec.
Shares Pakistan through payment each fortnight (2) And 233 A (1) (c) and 169
members of Rule:43(b) Annual Within 2 of Income Tax
Ordinance 2001.
the stock months: Rule
exchange 44(1)
233(A)(1)(d) Stock Exchange Financiers 10% Amount of carry over At the time of Within 7 days Monthly Within 15 Adjustable
Financing of registered in through charge making the from the end of days (Rule:44 For details see Sec.
carryover Pakistan members of payment each fortnight (2) And 233 A (1) (d) and 169
trade in the stock Rule:43(b) Annual Within 2 of Income Tax
Ordinance 2001.
shares exchange months: Rule
44(1)
Section Person(s) From Rate On When Payable to Statement(s) of Taxability
liable to whom the credit of tax collected or Final/Adjustable
16
Collection and Deduction of Tax at Source
collect or Federal deducted
deduct tax Government
234 Person Owner of In the case of goods Registered laden At the time of On the day Monthly Within 15 Final
Tax on collecting motor transport vehicles weight of collecting collected days (Rule:44 (In case of owner of
Motor motor vehicle ranging from Rs. 1,200 transport motor vehicle (2) And goods transport
Vehicles vehicle tax to Rs. 36,000 per vehicles tax (if motor Annual Within 2 vehicle).
In every other case
annum Registered vehicle tax is months: Rule Adjustable
In case of passenger seating capacity collected in 44(1) For details see Sec.
transport vehicles of passenger installments, 234 and 169 of
plying for hire ranging transport the tax is also Income Tax Ordinance
from Rs. 25 to Rs. 100 vehicles plying collected in 2001.
per seat per annum for hire installments)
Other private motor cars Engine capacity of
ranging from Rs. 500 to other private
Rs. 3,000 per annum motorcars
Reduced rate – Rs. 1,200
Goods transport
vehicles with laden
weight of 8120
kilograms or more after
a period of ten years
from the date of first
registration of the
vehicle in Pakistan
[Paragraph (1A) of
Division III of Part IV of
st
1 Schedule].
234A Gas CNG 4% On the amount of At the time of On the day Monthly Within 15 Final
CNG Marketing Station gas bill. preparing the collected. days (Rule:44 For details see Sec.
Station Companies Operator gas bill. (2) And 234 A and 169 of
Annual Within 2 Income Tax Ordinance
months: Rule 2001.
44(1)
17
Collection and Deduction of Tax at Source
Section Person(s) From whom Rate On When Payable to Statement(s) Taxability
liable to the credit of of tax Final/Adjustable
collect or Federal collected or
deduct tax Government deducted
235 Person Commercial Ranging from Rs. 60 Amount of Alongwith payment Within 7 days Monthly Minimum Tax.
Electricity preparing and to Rs. 2,000 of the electricity of electricity from the Within 15 For details see Sec.
Consumption electricity Industrial monthly bill (monthly consumption consumption end of each days 235 and 169 of
consumptio consumers bill Not exceeding charges charges fortnight (Rule:44 Income Tax
n bill of electricity 20000) (2) And Ordinance 2001, read
with circular no 1 of
Bill exceeding Rs Annual 2007 dated 2.7.2007.
20000 @ 10 % Within 2
months: Rule
44(1)
236 Person Telephone In case of telephone Amount of bill or Alongwith payment Within 7 days Monthly Adjustable
Telephones preparing subscriber subscriber (Other sale price of a of telephone bill from the Within 15 For details see Sec.
telephone Purchaser of then mobile phone pre-paid card or at the time of end of each days 236 and 169 of
bill prepaid where the amount issuance or sale fortnight (Rule:44 Income Tax
Ordinance 2001.
telephone exceeds Rs 1000 of pre-paid cards (2) And
Person cards @ 10 % of the Annual
issuing or exceeding Within 2
selling amount). months: Rule
prepaid In the case of 44(1)
cards for subscriber of
telephone mobile telephone
and prepaid
telephone card -
10% of the amount
of bill or sales price
of pre-paid
telephone card
18
Collection and Deduction of Tax at Source
EXEMPTIONS :
Section 148 - IMPORTS
Exemptions kjkjhjlkjlkj
hospital or institution, solely for the purpose
1. Goods imported by Federal Government of advancing the declared objectives of such
[Section 49]. hospital or institution, subject to the following
conditions, namely:
2. Goods imported by Provincial Government
[Section 49 and SRO 593(I)/91 dated June 30, a. No condition is attached to the gift or
1991]. donation by the donor and the receiving
institution or hospital is at liberty to use
3. Goods imported by a local authority [Section the same in accordance with its declared
49 and SRO 593(I)/91 dated June 30, 1991]. objectives; and
4. Where, in the case of a person, whose income b. The receiving institution or hospital
in not subject to final taxation & is not likely furnishes an undertaking in writing to the
to pay any tax (other than minimum tax respective Collector of Customs to the
under section 113 of the Income Tax effect that such gifts or donations will not
Ordinance, 2001) the Commissioner shall, be sold, utilized or disposed of otherwise
upon application in writing made by such than for the purpose for which the same
person, issue certificate allowing payment of have been received and binds itself to
tax at a reduced rate of 0.5% [section 148(4A)] pay the chargeable duties in the event of
a breach of the undertaking.
nd
5. Goods imported by persons whose income is [Clause (56)(iii) of Part IV of 2 Schedule]
exempt from tax and produces a certificate
from the Commissioner of an exemption from 10. Equipment, apparatus, reagents,
collection of tax [Section 159]. disposable and spares, imported by: -
6. Goods imported by Institutions of the Agha a. charitable non profit making institutions
Khan Development Network (Pakistan) listed in operating hospitals of fifty beds or more;
Schedule 1 of the Accord and Protocol dated and
November 13, 1994, executed between the
Government of the Islamic Republic of b. hospitals run by the Federal Government
Pakistan and Agha Khan Development or a Provincial Government, - Subject to
nd
Network [Clause (16) of Part IV of 2 the following conditions: -
Schedule].
i. the importing institution or hospital
7. Goods or classes of goods imported by furnishes an undertaking in writing to the
contractors and sub-contractors engaged in respective Collector of Customs to the
the execution of power project under the effect that such equipment, apparatus,
agreement between the Islamic Republic of reagents, disposal and spares will not be
Pakistan and Hub Power Company Limited sold, utilized or disposed of otherwise
nd
[Clause (56)(i) of Part IV of 2 Schedule]. than for the purpose for which the same
have been imported and binds itself to
8. Specially equipped motor vehicle or support pay the chargeable duty and sales tax in
equipment imported by disabled persons, as the event of breach of the undertaking.
allowed by the Federal Government [Clause
(56)(ii) of Part IV of 2nd Schedule]. ii. The importing institution operating a
hospital of fifty beds or more shall furnish
9. Goods imported by way of gift or donation a proof thereof to the satisfaction of the
received by a charitable non-profit making respective Collector of Customs.
19
Collection and Deduction of Tax at Source
nd
[Clause (56)(iii) of Part IV of 2 Schedule] b. Gold
11. Goods imported by or donated to non profit c. Un-cut precious and semi precious
making educational and research institutions stones
subject to the following conditions:
d. Polished semi precious stones
a. The imported goods have an educational
and scientific character; e. Jewelry casting powder
b. The importing or receiving institutions are f. Molding rubber
recognized, aided or run by the Federal
Government or a Provincial Government; g. Injection wax
c. The importing or receiving institution shall h. Jewelry casting machines and
produce a certificate from the competent accessories
authority that –
i. Rhodium-plating solution concentrate
i. Goods of equivalent educational and
scientific value are not produced in j. Bright and chrome lacquering solution
Pakistan; and
k. Steel balls and pins (different sizes) used
ii. The imported goods will be used for polishing.
exclusively under the control and
responsibility of the importing or receiving l. Diamond cutting tools (different sizes)
institution.
m. Alloys of silver copper and zinc for mixing
nd
[Clause (56)(iii) of Part IV of 2 Schedule] in 24 ct. gold
12. Goods imported by direct and indirect n. Mounts and findings of gold, silver and
exporters (in-bond manufacturing) covered platinum jewelry.
under sub-chapter 4 of Chapter XII of SRO
nd
450(I)/2001, dated June 18, 2001 [Clause [Clause (56)(v) of Part IV of 2 Schedule]
nd
(56)(iv) of Part IV of 2 Schedule]
16. Liquefied Petroleum Gas (LPG) [Clause
nd
13. Goods imported by direct and indirect (56)(vi) of Part IV of 2 Schedule].
exporters (common bonded warehouse
(conventional)) covered under sub-chapter 6 of 17. Liquefied Natural Gas (LNG) [Clause
nd
Chapter XII of SRO 450(I)/2001, dated June (56)(vii) of Part IV of 2 Schedule
nd
18, 2001 [Clause (56)(iv) of Part IV of 2
Schedule] 18. Agricultural tractors imported in completely
built up (CBU) condition [Clause (56)(viii)
nd
14. Goods imported by direct and indirect of Part IV of 2 Schedule]
exporters (Duty and Tax Remission for
Exports) covered under sub-chapter 7 of 19. Goods imported by indirect exporters as
Chapter XII of SRO 450(I)/2001, dated June defined in Duty and Tax Remission for
nd
18, 2001 [Clause (56)(iv) of Part IV of 2 Export Rules, 2001 issued under SRO
Schedule] 185(I)/2001 dated March 21, 2001 [Clause
nd
(56)(ix) of Part IV of 2 Schedule].
15. Goods mentioned below if imported in
accordance with the conditions and 20. Radio Navigational Aid Apparatus
procedures laid down in Import and Export of imported for an airport or on after First
Gold, Gold Jewellery and Gemstones Order, January, 2006 [Clause (56)(x) of Part IV of
nd
2001 as amended from time to time, notified 2 Schedule].
vide Ministry of Commerce’s SRO 21. Import of the following items:, namely:-
th
266(I)/2001 dated 7 May, 2001.
a. Pearls a. Onions;
20
Collection and Deduction of Tax at Source
b. Potatoes;
c. Tomatoes;
d. Garlic; 29. Goods imported by persons excluding
e. Halal meat of goat and sheep; commercial importers and manufacturers of
f. Halal meat of beef; and vanaspati ghee or oil, who produces a
g. Live animals (bovine animals i.e. certificate from the Commissioner to the effect
buffalos, cows, sheep, goats and camels that:
only).
nd
[Clause (56)(xii) of Part IV of 2 Schedule]. a. Their income during the tax year is exempt
from tax;
22. Goods donated for the relief of earthquake b. Their income during the tax year is not
victims as are exempt from customs duties likely to be chargeable to tax; or
nd
and sales tax [Clause (56)(xiv) of Part IV of 2 c. No tax is likely to be payable by them on
Schedule]. their income during the tax year on
account of any brought forward loss,
23. Tents, tarpaulin and blankets [Clause (56)(xv) depreciation allowance or tax credit.
nd
of Part IV of 2 Schedule]. [SRO 593(I)/91 dated June 30, 1991]
24. Import of ships and floating crafts including 30. High-speed diesel oil, light diesel oil, high-
tugs, dredgers, survey vessels and other octane blending component or kerosene oil
specialized crafts, registered in Pakistan. imported by companies [SRO 593(I)/91 dated
nd
(Clause 56 xvii of part IV of 2 Schedule). June 30, 1991].
25. Goods imported by a company operating 31. Crude oil for refining and chemicals used in
trading houses which- refining thereof imported by companies [SRO
593(I)/91 dated June 30, 1991].
a. Has a paid up capital of more than Rs.
250 million; 32. Raw materials imported by manufacturer
b. Owns fixed assets exceeding Rs. 300 whose sales are hundred percent exports and
million at the close of the Tax Year; who furnishes an undertaking to the
c. Maintains computerized records of Commissioner, to the effect that the imported
imports and sales of goods; raw materials shall be exclusively used and
d. Maintains a system for issuance of 100% wholly consumed in production of goods, which
cash receipts on sales; shall be exported, and produces a certificate
e. Presents its accounts for tax audit every from the Commissioner that these
year; and requirements have been fulfilled [SRO
f. Is registered with the Sales Tax 593(I)/91 dated June 30, 1991].
Department:
nd
[Clause (57) of Part IV of 2 Schedule]. 33. Goods imported by Businessmen Hospital
Trust, Lahore [ RO 840(1)79 dated September
26. Fully as well partly designed/assembled 12,1979]
cypher devices, for use within the country as
are verified by Cabinet Division (NTISB) with 34. Goods temporarily imported into Pakistan for
reference to design, quality and quantity subsequent exportation which are exempt from
nd
[Clause (60) of Part IV of 2 Schedule]. Customs duty and Sales Tax under Notification
th
No. S.R.O 1065(I)/2005 dated 20 October
nd
27. Goods imported by foreign companies and 2005. [SRO 863(I)/2006 dated 22 August
other associations whose share capital is 2006]
substantially held by a foreign Government Reduction in rate
[SRO 593(I)/91 dated June 30, 1991].
35. Goods imported by persons whose income is
28. Plant or machinery imported by a person for subject to a tax at a lower rate and produces a
execution of a contract with the Federal certificate from the Commissioner of lower rate
Government or Provincial Government and of collection of tax [Section 159].
produces a certificate from the Government
[SRO 593(I)/91 dated June 30, 1991].
21
Collection and Deduction of Tax at Source
Section (149) SALARY:
Exemptions
1. Salary paid to employees whose income is
exempt from tax and produces a certificate
from the Commissioner of exemption from
deduction of tax [Section 159].
Reduction in rate
2. Salary paid to employees whose income is
subject to a tax at a lower rate and produces a
certificate from the Commissioner of lower rate
of deduction of tax [Section 159].
(For details see our brochure taxation of income
From salary. The same brochure is also available
at our website www.fbr.gov.pk).
Section 150 - DIVIDENDS
Exemptions (Establishment and Regulation) Rules, 2003
nd
1. Dividend paid to the Federal Government [Clause (47B) of Part IV of 2 Schedule].
[Section 49].
10. Dividend paid to a modaraba [Clause (47B) of
nd
2. Dividend paid to a Provincial Government Part IV of 2 Schedule].
[Section 49].
11. Dividend paid to an approved pension fund or
3. Dividend paid to a Local Authority [Section 49]. an approved income payment plan constituted
by a pension fund manager registered under
4. Dividend paid to a shareholder whose income Voluntary Pension System Rules, 2005
nd
is exempt from tax and produces a certificate [Clause (47B) of Part IV of 2 Schedule].
from the Commissioner of an exemption from
deduction of tax. [Section 159]. 12. Dividend paid to a Real Estate Investment
Trust approved and authorized under the
5. Dividend paid to a Venture Capital Company. Real Estate Investment Trust Rules, 2006,
nd
[Clause (38A) of Part IV of 2 Schedule]. established and managed by a REIT
Management Company licensed under the
6. Dividend paid to the Islamic Development Real Estate Investment Trust Rules, 2006
nd nd
Bank. [Clause (38B) of Part IV of 2 [Clause (47B) of Part IV of 2 Schedule].
Schedule].
13. Dividend paid to a shareholder who produces a
7. Dividend paid to National Investment (Unit) certificate from the Commissioner to the effect
nd
Trust. [Clause (47B) of Part IV of 2 that his income during the tax year is exempt
Schedule]. from tax under the Ordinance. [SRO 1236(I)/91
dated December 05, 1991].
8. Dividend paid to Mutual fund established by
Investment Corporation of Pakistan. [Clause Reduction in rate
nd
(47B) of Part IV of 2 Schedule].
14. Dividend paid to a shareholder whose income
9. Dividend paid to a collective investment is subject to tax at a lower rate and produces a
scheme authorized or registered under the certificate from the Commissioner of lower rate
Non-Banking Finance Company of deduction of tax. [Section 159].
22
Collection and Deduction of Tax at Source
Section 151(1)(a) PROFIT ON DEBT
exclusively made from foreign exchange
Exemptions remitted into Pakistan through a Special
Convertible Rupees Account maintained with a
nd
1. Yield or profit paid to the Federal Government. bank in Pakistan. [Clause (19) of Part IV of 2
[Section 49 and SRO 594(I)/91 dated June 30, Schedule]
1991].
10. Yield or profit paid to National Investment
2. Yield or profit paid to a Provincial Government. (Unit) Trust. [Clause (33) and (47B) of Part IV
nd
[Section 49 and SRO 594(I)/91 dated June 30, of 2 Schedule].
1991].
11. Yield or profit paid to a mutual fund established
3. Yield or profit paid to a local authority. [Section by Investment Corporation of Pakistan. [Clause
nd
49 and SRO 594(I)/91 dated June 30, 1991]. (33) and (47B) of Part IV of 2 Schedule].
4. Yield or profit paid to non-resident and such 12. Yield or profit paid to a mutual fund established
yield or profit is subject to withholding tax by an Investment Company registered under
under section 152(2). [Section 151(2)]. the Investment Companies and Investment
Advisors Rules, 1971. [Clause (33) of Part IV
nd
5. Yield or profit paid to persons whose income is of 2 Schedule].
exempt from tax and produces a certificate
from the Commissioner of an exemption from 13. Yield or profit paid to unit trust scheme
deduction of tax. [Section 159]. constituted by an Asset Management
Company registered under the Assets
6. Yield or profit paid on investments in National Management Companies Rule, 1995. [Clause
nd
Savings Schemes of the Directorate of (33) of Part IV of 2 Schedule].
National Savings that were exempt from tax
under the repealed Income Tax Ordinance, 14. Yield or profit paid to a Real Estate
1979 and where investment was made on or Investment Trust approved and authorized
before June 30, 2001 [Section 239(14)]. under the Real Estate Investment Trust
Rules, 2006, established and managed by a
7. Yield or profit paid on Mahana Amadni Account REIT Management Company licensed under
of the Directorate of National Savings where the Real Estate Investment Trust Rules, 2006
nd
the monthly installment does not exceed Rs. [Clause (33) and (47B) of Part IV of 2
1000 [Section 239(14)]. Schedule].
15. Yield or profit paid on investment in Bahbood
8. Yield or profit paid to institutions of the Agha Savings Certificates or Pensioner’s Benefit
nd
Khan Development Network (Pakistan) listed in Account. [Clause (36A) of Part IV of 2
Schedule 1 of the Accord and Protocol dated Schedule].
November 13, 1994, executed between the
Government of the Islamic Republic of 16. Yield or profit paid to a Special Purpose
Pakistan and Agha Khan Development Vehicle for the purpose of securitization.
nd nd
Network. [Clause (16) of Part IV of 2 [Clause (38) of Part IV of 2 Schedule].
Schedule].
17. Yield or profit paid to a Venture Capital
nd
9. Yield or profit paid to a non-resident, (excluding Company. [Clause (38A) of Part IV of 2
a local branch or subsidiary or office of foreign Schedule].
bank, company association of persons or any
other person operating in Pakistan), in respect 18. Yield or profit paid to a person who produces a
of their Pak rupees denominated Government certificate from the Commissioner to the effect
securities, where the investments are that his income during the tax year is exempt
23
Collection and Deduction of Tax at Source
nd
from tax. [Clause (47) of Part IV of 2
Schedule and SRO 594(I)/91 dated June 30,
1991].
19. Yield or profit paid to a collective investment
scheme authorized or registered under the
Non-Banking Finance Companies
(Establishment and Regulation) Rules, 2003
nd
[Clause (47B) of Part IV of 2 Schedule].
20. Yield or profit paid to a Modaraba [Clause
nd
(47B) of Part IV of 2 Schedule].
21. Yield or profit paid to an approved pension
fund or an approved income payment plan
constituted by a pension fund manager
registered under Voluntary Pension System
nd
Rules, 2005 [Clause (47B) of Part IV of 2
Schedule].
22. Yield or profit paid on investments made out of
foreign currency account or deposit held on
May 28, 1998, with a bank authorized under
the Foreign Currency Accounts Scheme of
State Bank of Pakistan. [Clause (59)(iii) of Part
nd
IV of 2 Schedule].
23. Yield or profit paid to a resident individual on
investments or deposit in Defense Savings
Certificates, Special Savings Certificates,
Savings Accounts or Post Office Savings
Account, where such investment or deposit
does not exceed Rs. 150,000 [Clause
nd
(59)(iv)(a) of Part IV of 2 Schedule]
24. Yield or profit paid to a resident individual on
investment made in Monthly Income Savings
Account Scheme of Directorate of National
Savings, where monthly installment in an
account does not exceed Rs. 1000 [Clause
(59)(iv)(b) of Part IV of 2nd Schedule]
Reduction in rate
25. Yield or profit paid to a person whose income
is subject to a tax at a lower rate and produces
a certificate from the Commissioner of lower
rate of deduction of tax [ Section 159].
24
Collection and Deduction of Tax at Source
Section 151(1)(b) - PROFIT ON DEBT
Exemptions Management Company registered under the
Assets Management Companies Rule, 1995.
1. Profit on an account or deposit paid to the [Clause (33) of Part IV of 2nd Schedule].
Federal Government. [Section 49 and SRO
594(I)/91 dated June 30, 1991]. 11. Profit on an account or deposit paid to a Real
Estate Investment Trust approved and
2. Profit on an account or deposit paid to a authorized under the Real Estate Investment
provincial Government. [Section 49 and SRO Trust Rules, 2006, established and managed
594(I)/91 dated June 30, 1991]. by a REIT Management Company licensed
under the Real Estate Investment Trust
3. Profit on an account or deposit paid to a local Rules, 2006 [Clause (33) and (47B) of Part IV
nd
authority. [Section 49 and SRO 594(I)/91 dated of 2 Schedule].
June 30, 1991].
12. Profit on an account or deposit paid to a
4. Profit on an account or deposit paid to non- Special purpose Vehicle for the purpose of
residents and such profit is subject to securitization. [Clause (38) of Part IV of 2nd
withholding tax under section 152(2). [Section Schedule].
151(2)].
13. Profit on an account or deposit paid to a
5. Profit on an account or deposit paid to a Venture Capital Company. [Clause (38A) of
nd
person whose income is exempt from tax and Part IV of 2 Schedule].
produces a certificate from the Commissioner
of an exemption from deduction of tax. [Section 14. Profit on an account or deposit paid to a
159]. person who produces a certificate from the
Commissioner to the effect that his income
6. Profit on an account or deposit paid to during the tax year is exempt from tax. [Clause
institutions of the Agha Khan Development (47) of Part IV of 2nd Schedule and SRO
Network (Pakistan) listed in Schedule 1 of the 594(I)/91 dated June 30, 1991].
Accord and Protocol dated November 13,
1994, executed between the Government of 15. Profit on an account or deposit paid to a
the Islamic Republic of Pakistan and Agha collective investment scheme authorized or
Khan Development Network. [Clause (16) of registered under the Non-Banking Finance
Part IV of 2nd Schedule]. Companies (Establishment and Regulation)
nd
Rules, 2003 [Clause (47B) of Part IV of 2
7. Profit on an account or deposit paid to National Schedule].
Investment (Unit) Trust. [Clause (33) and (47B)
of Part IV of 2nd Schedule]. 16. Profit on an account or deposit paid to a
nd
Modaraba [Clause (47B) of Part IV of 2
8. Profit on an account or deposit paid to mutual Schedule].
fund established by Investment Corporation of
Pakistan. [Clause (33) and (47B) of Part IV of 17. Profit on an account or deposit paid to an
2nd Schedule]. approved pension fund or an approved income
payment plan constituted by a pension fund
9. Profit on an account or deposit paid to mutual manager registered under Voluntary Pension
fund established by an Investment Company System Rules, 2005 [Clause (47B) of Part IV of
nd
registered under the Investment Companies 2 Schedule].
and Investment Advisors Rules, 1971. [Clause
(33) of Part IV of 2nd Schedule]. 18. Profit on an account or deposit paid on an
amount in a account or deposit created out of
10. Profit on an account or deposit paid to a unit foreign currency account or deposit held on
trust scheme constituted by an Asset May 28, 1998, with a bank authorized under
25
Collection and Deduction of Tax at Source
the Foreign Currency Accounts Scheme of
State Bank of Pakistan. [Clause (59)(iii) of Part 21. Profit on inter bank deposit paid to a banking
nd
IV of 2 Schedule]. company by another banking company. [SRO
594(I)/91 dated June 30, 1991].
19. Profit paid on an a foreign currency account or
deposit maintained in accordance with Foreign Reduction in rate
Currency Accounts Scheme introduced by the
State Bank of Pakistan, by a citizen of Pakistan 22. Profit on an account or deposit paid to a
and a foreign national residing abroad, foreign person whose income is subject to tax at a
association of persons, a company registered lower rate and produces a certificate from the
and operating abroad and a foreign national Commissioner of lower rate of deduction of tax.
residing in Pakistan. [SRO 594(I)/91 dated [Section 159].
June 30, 1991].
20. Profit paid on a rupee account or deposit held
by a citizen of Pakistan residing abroad, where
the deposit(s) in the said account is/are made
exclusively from foreign exchange remitted into
the said account. [SRO 594(I)/91 dated June
30, 1991].
26
Collection and Deduction of Tax at Source
Section 151(1)(c) - PROFIT ON DEBT
Exemptions Special Convertible Rupees Account
maintained with a bank in Pakistan. [Clause
nd
1. Profit on a Government or a local authority (19) of Part IV of 2 Schedule].
Security paid to the Federal Government.
[Section 49 and SRO 594(I)/91 dated June 30, 9. Profit on a Government or a local authority
1991]. security paid to National Investment (Unit)
Trust. [Clause (33) and (47B) of Part IV of 2nd
2. Profit on a Government or a local authority Schedule].
Security paid to a provincial Government.
[Section 49 and SRO 594(I)/91 dated June 30, 10. Profit on a Government or a local authority
1991]. security paid to a mutual fund established by
Investment Corporation of Pakistan. [Clause
3. Profit on a Government or a local authority (33) and (47B) of Part IV of 2nd Schedule].
Security paid to a local authority. [Section 49
and SRO 594(I)/91 dated June 30, 1991]. 11. Profit on a Government or a local authority
security paid to mutual fund established by an
4. Profit on a Government or a local authority Investment Company registered under the
Security paid to non-residents and such profit Investment Companies and Investment
is subject to withholding tax under section Advisors Rules, 1971. [Clause (33) of Part IV
nd
152(2). [Section 151(2)]. of 2 Schedule].
5. Profit on a Government or a local authority 12. Profit on a Government or a local authority
Security paid to a person whose income is security paid to unit trust scheme constituted
exempt from tax and produces a certificate by an Asset Management Company registered
from the Commissioner of an exemption from under the Assets Management Companies
nd
deduction of tax. [Section 159]. Rule, 1995. [Clause (33) of Part IV of 2
Schedule].
6. Profit on a Government or a local authority
Security paid to a person whose income is not 13. Profit on Government or a local authority
likely to be chargeable to tax and produces a security paid to a Real Estate Investment
certificate from the Commissioner of an Trust approved and authorized under the
exemption from deduction of tax [Section 159]. Real Estate Investment Trust Rules, 2006,
established and managed by a REIT
Management Company licensed under the
7. Profit on a Government or a local authority Real Estate Investment Trust Rules, 2006
nd
Security paid to institutions of the Agha Khan [Clause (33) and (47B) of Part IV of 2
Development Network (Pakistan) listed in Schedule].
Schedule 1 of the Accord and Protocol dated
November 13, 1994, executed between the 14. Profit paid on Special US Dollar Bonds issued
Government of the Islamic Republic of under the Special US Dollar Bonds Rules,
nd
Pakistan and Agha Khan Development 1998 [Clause (36) of Part IV of 2 Schedule].
Network [Clause (16) of Part IV of 2nd
Schedule]. 15. Profit on a Government or a local authority
Security paid to Special Purpose Vehicle for
8. Profit on Pak rupee denominated Government the purpose of securitization. [Clause (38) of
nd
Security paid to a non-resident, (excluding a Part IV of 2 Schedule].
local branch or subsidiary or office of foreign
bank, company, association of persons or any 16. Profit on a Government or a local authority
other person operating in Pakistan), where the Security paid to a Venture Capital Company.
nd
investment is exclusively made from foreign [Clause (38A) of Part IV of 2 Schedule].
exchange remitted into Pakistan through a
27
Collection and Deduction of Tax at Source
17. Profit on a Government or a local authority
Security paid to a person who produces a Reduction in rate
certificate from the Commissioner to the effect
that his income during the tax year is exempt 22. Profit on a Government or a local authority
nd
from tax. [Clause (47) of Part IV of 2 Security paid to a person whose income is
Schedule and SRO 594(I)/91 dated June 30, subject to tax at a lower rate and produces a
1991]. certificate from the Commissioner of lower rate
of deduction of tax. [Section 159].
18. Profit on a Government or a local authority
Security paid to a collective investment
scheme authorized or registered under the
Non-Banking Finance Companies.
nd
[Clause (47B) of Part IV of 2 Schedule].
19. Profit on a Government or a local authority
Security paid to a Modaraba [Clause (47B) of
nd
Part IV of 2 Schedule].
20. Profit on a Government or a local authority
Security paid to an approved pension fund or
an approved income payment plan constituted
by a pension fund manager registered under
Voluntary Pension System Rules, 2005
nd
[Clause (47B) of Part IV of 2 Schedule].
21. Profit paid on a Government or a local
authority security created out of foreign
currency account or deposit held on May 28,
1998, with a bank authorized under the
Foreign Currency Accounts Scheme of State
Bank of Pakistan. [Clause (59)(iii) of Part IV of
nd
2 Schedule].
28
Collection and Deduction of Tax at Source
Section 151(1)(d) - PROFIT ON DEBT
Exemptions of persons or any other person operating in
Pakistan), where the investment is exclusively
1. Profit on bond, certificate, etc. paid to the made from foreign exchange remitted into
Federal Government. [Section 49 and SRO Pakistan through a Special Convertible
594(I)/91 dated June 30, 1991]. Rupees Account maintained with a bank in
nd
Pakistan. [Clause (19) of Part IV of 2
2. Profit on bond, certificate, etc. paid to Schedule].
Provincial Government. [Section 49 and SRO
594(I)/91 dated June 30, 1991]. 10. Profit on bond, certificate, etc. paid to National
Investment (Unit) Trust. [Clause (33) and (47B)
nd
3. Profit on bond, certificate, etc. paid to a local of Part IV of 2 Schedule].
authority. [Section 49 and SRO 594(I)/91 dated
June 30, 1991]. 11. Profit on bond, certificate, etc. paid to a mutual
fund established by Investment Corporation of
4. Profit on bond, certificate, etc. paid to a Pakistan. [Clause (33) and (47B) of Part IV of
nd
Financial Institution. [Section 151(1)(d)]. 2 Schedule].
5. Profit on bond, certificate, etc. paid to a 12. Profit on bond, certificate, etc. paid to a mutual
banking company or a development financial fund established by an Investment Company
institution under a loan agreement by a registered under the Investment Companies
borrower. [Section 151(1)(d)]. and Investment Advisors Rules, 1971. [Clause
nd
(33) of Part IV of 2 Schedule].
6. Profit on bond, certificate, etc. paid to non-
residents and such profit is subject to 13. Profit on bond, certificate, etc. paid to a unit
withholding tax under section 152(2). [Section trust scheme constituted by an Asset
151(2)]. Management Company registered under the
Assets Management Companies Rule, 1995.
nd
7. Profit on bond, certificate, etc. paid to a person [Clause (33) of Part IV of 2 Schedule].
whose income is exempt from tax and
produces a certificate from the Commissioner 14. Profit on bond, certificate, etc. paid to a Real
of an exemption from deduction of tax. [Section Estate Investment Trust approved and
159]. authorized under the Real Estate Investment
Trust Rules, 2006, established and managed
by a REIT Management Company licensed
8. Profit on bond, certificate, etc. paid to under the Real Estate Investment Trust
institutions of the Agha Khan Development Rules, 2006 [Clause (33) and (47B) of Part IV
nd
Network (Pakistan) listed in Schedule 1 of the of 2 Schedule].
Accord and Protocol dated November 13,
1994, executed between the Government of 15. Profit on bond, certificate, etc. paid to Special
the Islamic Republic of Pakistan and Agha Purpose Vehicle for the purpose of
nd
Khan Development Network. [Clause (16) of securitization. [Clause (38) of Part IV of 2
nd
Part IV of 2 Schedule] Schedule].
9. Profit on Pak rupees denominated corporate 16. Profit on bond, certificate, etc. paid to a
securities and redeemable capital, as defined Venture Capital Company. [Clause (38A) of
nd
in the Companies Ordinance, 1984, listed on a Part IV of 2 Schedule].
registered stock exchange paid to a non-
resident, (excluding local branch or subsidiary 17. Profit on bond, certificate, etc. paid to a person
or office of foreign bank, company, association who produces a certificate from the
29
Collection and Deduction of Tax at Source
Commissioner to the effect that his income
during the tax year is exempt from tax. [Clause 24. Profit on Term Finance Certificates paid to a
nd
(47) of Part IV of 2 Schedule and SRO resident individual where such investment
594(I)/91 dated June 30, 1991]. does not exceed Rs. 150,000 [Clause
nd
(59)(iv)(a) of Part IV of 2 Schedule]
18. Profit on bond, certificate, etc. paid to a
collective investment scheme authorized or 25. Profit on inter-bank deposits paid to a banking
registered under the Non-Banking Finance company by another banking company. [SRO
Companies (Establishment and Regulation) 594(I)/91 dated June 30, 1991].
nd
Rules, 2003 [Clause (47B) of Part IV of 2
Schedule]. Reduction in rate
19. Profit on bond, certificate, etc. paid to a 26. Profit on bond, certificate, etc. paid to a person
nd
Modaraba [Clause (47B) of Part IV of 2 whose income is subject to a tax at a lower
Schedule]. rate and produces a certificate from the
Commissioner of lower rate of deduction of tax.
20. Profit on bond, certificate, etc. paid to an [Section 159].
approved pension fund or an approved income
payment plan constituted by a pension fund
manager registered under Voluntary Pension
System Rules, 2005 [Clause (47B) of Part IV of
nd
2 Schedule].
21. Profit on Term Finance Certificate issued on,
st
or after 1 July, 1999 to a company [Clause
nd
(59)(i) of Part IV of 2 Schedule].
22. Profit paid on Term Finance Certificate being
the instrument of redeemable capital under the
Companies Ordinance, 1984 issued by Prime
Minister’s Housing Development Company
(Private) Limited [Clause (59)(ii) of Part IV of
nd
2 Schedule].
23. Profit paid on bond, certificate, etc. created out
of foreign currency account or deposit held on
May 28, 1998, with a bank authorized under
the Foreign Currency Accounts Scheme of
State Bank of Pakistan. [Clause (59)(iii) of Part
nd
IV of 2 Schedule].
30
Collection and Deduction of Tax at Source
Section 152(1) - PAYMENT TO NON-RESIDENTS
Exemptions
1. Royalty in respect of any property or right
effectively connected with a Permanent
Establishment in Pakistan. [Section 152(1)
read with section 6(3)(a)].
2. Fee for technical services rendered through a
Permanent Establishment in Pakistan. [Section
152(1) read with section 6(3)(b)].
3. Royalty or fee for technical services paid to a
non-resident, whose incomes is exempt from
tax and produces a certificate from the
Commissioner of an exemption from deduction
of tax. [Section 159].
Reduction in rate
4. Royalty or fee for technical services paid to a
non-resident whose income is subject to a tax
at a lower rate and produces a certificate from
the Commissioner of lower rate of deduction of
tax. [Section 159], e.g., -.
a. Royalty or fee for technical services
subject to reduced rate under an
agreement for avoidance of double
taxation.
31
Collection and Deduction of Tax at Source
Section 152(1A) - PAYMENT TO NON-RESIDENTS
Exemptions
1. Amount paid to a non-resident, whose incomes
is exempt from tax and produces a certificate
from the Commissioner of an exemption from
deduction of tax. [Section 159].
Reduction in rate
2. Amount paid to a non-resident whose income
is subject to a tax at a lower rate and produces
a certificate from the Commissioner of lower
rate of deduction of tax. [Section 159].
the payee and the nature and amount of
Section 152(2) payment. The Commissioner on receipt of the
notice shall pass an order accepting the
PAYMENT TO NON-RESIDENTS contention or directing to deduct the tax. This
exemption shall not apply if the Commissioner
directs otherwise [Sections 152(3)(d), 152(5),
Exemptions 152(5A) and 152(6)].
1. Salary paid that is covered under section 149. No notice to the Commissioner is required for
[Section 152(3)(a)]. payment on account of:
2. Dividend paid that is covered under section - Import of goods where the title to the
150. [Section 152(3)(a)]. goods passes outside Pakistan (certain
restrictions apply) [Sections 152(7)].
3. Rent of immovable property that is covered
under section 155. [Section 152(3)(a)]. - Educational and medical expenses
remitted in accordance with the regulations
4. Prize on prize bond, or winnings from a raffle, of the State Bank of Pakistan [Sections
lottery, or crossword puzzle that is covered by 152(7)]
section 156. [Section 152(3)(a)].
5. Commission and brokerage that is covered by 9. Payment to a non-resident whose income is
section 233. [Section 152(3)(a)]. exempt from tax and who produces a
certificate from the Commissioner of an
6. Payment that is taxable in the hands of a exemption from deduction of tax. [Section 159].
permanent establishment in Pakistan, with the
written approval of the Commissioner. [Section Reduction in rate
152(3)(b)]. 10. Payment to a non-resident whose income is
subject to a tax at a lower rate and who
7. Payment made by the person who is liable to produces a certificate from the Commissioner
pay tax thereon as a representative of the non- of lower rate of deduction of tax. [Section 159],
resident provided a declaration to this effect is e.g., -
filed with the Commissioner prior to making the
payment [Sections 152(3)(c) and 152(4)]. Payment subject to reduced rate under an
agreement for avoidance of double
8. Payment that is not chargeable to tax subject taxation.
to a notice in writing to the Commissioner to
this effect indicating the name and address of
32
Collection and Deduction of Tax at Source
Section 153(1) - PAYMENT FOR GOODS AND SERVICES
Exemptions Government of the Islamic Republic of
Pakistan and Agha Khan Development
nd
1. Payment made to the Federal Government Network. [Clause (16) of Part IV of 2
[Section 49]. Schedule].
2. Payment made to a local authority [Section 49 13. Payment made to a Special Purpose Vehicle
and SRO 586(I)/91 dated June 30, 1991] for the purpose of securitization [Clause (38)
nd
of Part IV of 2 Schedule].
3. Payment made to a local authority [Section 49
and SRO 586(I)/91 dated June 30, 1991]. 14. Payments received by a person [including
permanent establishment of non-resident
4. Persons to whom the Commissioner may by an petroleum exploration and production (E&P)
order in writing direct to make the payment companies] on account of supply of petroleum
without deduction of tax [Section 153(4)]. product imported by the same person under
the Government of Pakistan’s deregulation
5. Payment for sale of goods to an importer who policy of POL products (Clause (43A) of part
nd
has paid tax at the time of import of such goods IV of 2 Schedule).
provided the goods are sold in the same
condition as they were when imported [Section 15. Payment made by a manufacturer-cum-
nd
153(5)(a) and Clause (47A) of Part IV of 2 exporter excluding payments relating to goods
Schedule]. sold in Pakistan or payments in respect of
which special rates of tax deduction are
nd
6. Payment of refund of security deposit. [Section specified [Clause (45) of Part IV of 2
153(5)(b)]. Schedule].
7. Payment representing the cost of construction 16. Payment made to an oil distribution company
material supplied to the contractor by the or an oil refinery for supply of its petroleum
nd
Federal Government, Provincial Government or products [Clause (46) of Part IV of 2
a local authority [Section 153(5)(ba)]. Schedule].
8. Payment for purchase of an asset under a lease 17. Goods imported by companies operating
and buy back agreement by a modaraba, trading houses which-
leasing company, banking company or financial
institution [Section 153(5)(c)]. a. Have paid up capital of exceeding
Rs.250 million;
9. Payment for securitization of receivables by a
Special Purpose Vehicle to the Originator. b. Own fixed assets exceeding Rs. 300
[Section 153(5)(d)]. million at the close of the Tax Year;
10. Payments made by a Small Company [Section c. Maintain computerized records of
153(5)(e)]. imports and sales of goods;
11. Payment made to a person whose income is d. Maintain a system for issuance of 100%
exempt from tax and produces a certificate from cash receipts on sales;
the Commissioner of an exemption from
deduction of tax [Section 159]. e. Present accounts for tax audit every
year; and
12. Payment made to institutions of the Agha Khan
Development Network (Pakistan) listed in f. Is registered with the Sales Tax
Schedule 1 of the Accord and Protocol dated Department:
nd
November 13, 1994, executed between the [Clause (57) of Part IV of 2 Schedule]
33
Collection and Deduction of Tax at Source
charges of goods transported [SRO 586(I)/91
18. Fully as well partly designed/assembled dated June 30, 1991].
cypher devices, for use within the country as
are verified by Cabinet Division (NTISB) with 28. Payment made for sale of goods not
reference to design, quality and quantity. exceeding Rs. 25,000 in a financial year.
nd
[Clause (60) of Part IV of 2 Schedule]. Provided that where the total payments in a
financial year, exceed Rs. 25,000 the payer
19. Payment made to residents of Tribal Areas or shall deduct tax from the payments including
Azad Kashmir who execute contracts in Tribal the tax on payments made earlier without
Areas or as the case may be, Azad Kashmir deduction of tax during the same financial
only and produces a certificate to this effect year [SRO 586(I)/91 dated June 30, 1991].
from the Political Agent concerned or the district
authority, as the case may be, or in case of 29. Payment made for services rendered,
Azad Kashmir, from the Taxation Officer services provided and execution of a contract
concerned [SRO 586(I)/91 dated June 30, not exceeding Rs. 10,000 in a financial year.
1991]. Provided that where the total payments in a
financial year, exceed Rs. 10,000, the payer
20. Payment made to a person who produces a shall deduct tax from the payments including
certificate from the Commissioner to the effect the tax on payments made earlier without
that his income during the tax year is exempt deduction of tax during the same financial
from tax [SRO 586(I)/91 dated June 30, 1991]. year [SRO 586(I)/91 dated June 30, 1991].
21. Payment made by a company exclusively for 30. Payment made for sale of cottonseed [SRO
the sale of agricultural produce, including fresh 586(I)/91 dated June 30, 1991].
milk, live chicken birds and eggs by any person
engaged in poultry farming and by an industrial 31. Payment made to a manufacturer of goods,
undertaking engaged in poultry processing who produces a certificate from the
which has not been subjected to any process Commissioner to the effect that his income
other than that which is ordinarily performed to during the tax year is not likely to be
render such produce fit to be taken to the chargeable to tax due to assessed losses
market [SRO 586(I)/91 dated June 30, 1991]. carried forward [SRO 586(I)/91 dated June
30, 1991].
22. Payment made to a company for the sale of
electricity and gas [SRO 586(I)/91 dated June 32. Payment made to an owner of one goods
30, 1991]. transport vehicle, once in a financial year from
a payer on account of carriage of goods on
23. Payment made to a company for the sale of behalf of such payer on a single journey
crude oil [SRO 586(I)/91 dated June 30, 1991]. undertaken during the said financial year
[SRO 586(I)/91 dated June 30, 1991].
24. Payment made to Attock Refinery Limited,
National Refinery Limited or Pakistan Refinery 33. Payment made to a person whose income is
Limited for the sale of their products [SRO not liable to final taxation and who produces a
586(I)/91 dated June 30, 1991]. certificate from the Commissioner to the effect
that his income during the tax year is not likely
25. Payment made to Pakistan State Oil Company to be chargeable to tax due to assessed
Limited, Shell Pakistan Limited or Caltex Oil losses carried forward. [SRO 586(I)/91 dated
(Pakistan) Limited for the sale of petroleum June 30, 1991].
products [SRO 586(I)/91 dated June 30, 1991].
34. Payment made to a person whose income is
26. Payments made in cash to a hotel or restaurant not liable to final taxation; and
for providing accommodation or food or both as
the case may be [SRO 586(I)/91 dated June 30, (a) from whom tax has been deducted under
1991]. sub-section (1) of section 153;
27. Payment made to a shipping company or air (b) the aggregate of the tax deducted under
carrier for sale of passenger ticket or cargo the said sub-section is equal to or
34
Collection and Deduction of Tax at Source
exceeds the tax payable under section 147 Clarifications
in respect of that tax year; and 37. Payment to agents, who work on fixed
commission basis but receive payment on
(c) produces a certificate to that effect from the behalf of their principals as well, can be
Commissioner [SRO 586(I)/91 dated June bifurcated between the agent and the
30, 1991]. principal for the purposes of deduction at
source. Accordingly the tax deducted will be
35. Payments made by exporters of goods on separately deposited on behalf of the agent
account of supply of such goods as are and principal.
purchased in respect of goods exported outside
Pakistan. Provided that – Where the principal is exempt, the tax shall be
deducted from the payment relating to the
(a) the exporter shall deduct tax on account of agent only.
goods purchased in respect of goods sold
in Pakistan; This situation normally arises in case of
(b) if tax has not been deducted from payments advertising agents, insurance agents, travel
on account of supply of goods in respect of agents and agents of petroleum companies
goods sold in Pakistan, the said tax shall be etc.
paid by the exporter, if the sales in Pakistan
are in excess of five percent of export sales; 38. In case the recipient of payment claims
and exemption under S.No.5 above (i.e. import-
(c) nothing contained in this clause shall apply cum-sale), it is the responsibility of the person
to payments made on account of purchases making the payment to ensure that the
of such goods in respect of which special conditions for exemption are fulfilled and for
rates of tax deduction have been specified. this purpose may obtain the relevant import
documents etc.
[SRO 368(I)/94 dated March 07, 1994].
Reduction in rate 39. Lease payments under “lease financing
arrangements” are not liable to deduction of
36. Payment made to a person whose incomes is tax at source.
subject to a tax at a lower rate and produces a
certificate from the Commissioner of lower rate 40. Renting of vehicles amounts to provision of
of deduction of tax [Section 159], e.g., - services and therefore car rentals attract
deduction of tax at source.
a. Resident persons engaged in the business
of shipping in respect of their ships and all 41. Insurance premiums paid to and claims
floating crafts including tugs, dredgers, discharged by insurance companies are not
survey vessels and other specialized craft liable to deduction of tax at source.
purchased or bare-boat chartered and flying
Pakistan Flag at the rate of one US$ per
gross registered tonnage per annum; 42. The Commissioner of Income Tax is
nd
[Clause (21) of Part II of 2 Schedule] empowered, under section 153(4) of the
Income Tax Ordinance, 2001, to issue
b. Resident persons engaged in the business exemption certificate to the petrol pump
of shipping in respect of their ships and all operators who may have to suffer further tax
floating crafts including tugs, dredgers, deduction from the sales of petroleum
survey vessels and other specialized craft products under section 153(1) of the Income
not registered in Pakistan and hired under Tax Ordinance, 2001 from whom tax has
any charter other than bare-boat charter at already been collected under section 156A of
the rate of fifteen US cents per ton of gross the Income Tax Ordinance, 2001.
registered tonnage per chartered voyage
subject to a maximum of one US$ per ton
of gross registered tonnage per annum.
nd
[Clause (21) of Part II of 2 Schedule].
35
Collection and Deduction of Tax at Source
Section 153(1A) - PAYMENT FOR RENDERING OR PROVIDING OF
SERVICES OF STITCHING, DYING, PRINTING,
EMBROIDERY, WASHING, SIZING AND WEAVING.
Exemptions
1. Payment made to the Federal Government
[Section 49].
2. Payment made to a Provincial Government
[Section 49].
3. Payment made to a Local Authority [Section
49].
4. Payment made to a person whose income is
exempt from tax and produces a certificate from
the Commissioner of an exemption from
deduction of tax [Section 159].
Section 154(1) & (2) - EXPORTS
Exemptions
1. Realization on behalf of the Federal 6. Realization on behalf of Cotton Export
Government [Section 49]. Corporation of Pakistan. [SRO 987(I)/92 dated
October 07, 1992].
2. Realization on behalf of a Provincial Reduction in rate
Government [Section 49].
7. Realization on behalf of person whose income
3. Realization on behalf of a Local Authority is subject to a tax at a lower rate and produces
[Section 49]. a certificate from the Commissioner of lower
rate of deduction of tax [Section 159], e.g., -
4. Realization on behalf of a person whose
income is exempt from tax and who produces Realization of commission by an export
indenting agent or an export buying house at
a certificate from the Commissioner of an the rate equal to the rate of tax applicable to
exemption from deduction of tax [Section 159]. the exporter on export of goods to which such
commission relates.
nd
5. Realization against export of cooking oil or [Clause (5) of Part II of 2 Schedule]
vegetable ghee to Afghanistan by a person
from whom tax has been collected on the Clarifications
import of edible oil [Clause (47C) of Part IV of
nd
2 Schedule]. 8. Advance payment received against export to
be made are also realization of export
proceeds and liable to deduction of tax at
source.
36
Collection and Deduction of Tax at Source
Section 154(3) - INDIRECT EXPORTS
Exemptions
1. Realization on behalf of the Federal
Government [Section 49].
2. Realization on behalf of a Provincial
Government [Section 49].
3. Realization on behalf of a Local Authority
[Section 49].
4. Realization on behalf of a person whose
income is exempt from tax and produces a
certificate from the Commissioner of an
exemption from deduction of tax [Section 159].
5. Realization on behalf of Cotton Export
Corporation of Pakistan [SRO 987(I)/92 dated
October 07, 1992].
Reduction in rate
6. Realization on behalf of a person whose
income is subject to a tax at a lower rate and
produces a certificate from the Commissioner
of lower rate of deduction of tax. [Section 159].
Section 154(3A) EXPORTS
Exemptions
1. Goods exported by the Federal Government Reduction in rate
[Section 49]. Goods exported by a person whose income is
2. Goods exported by a Provincial Government exempt from tax and produces a certificate from
[Section 49]. the Commissioner of an exemption from deduction
3. Goods exported by a Local Authority [Section of tax [Section 159].
49].
4. Goods exported by a person whose income is
subject to a tax a lower rate and produces a
certificate from the Commissioner of lower rate
of deduction of tax [Section 159].
37
Collection and Deduction of Tax at Source
Section 154(3B) - INDIRECT EXPORTS
Exemptions Reduction in rate
1. Payment made to the Federal Government 5. Payment made to a person whose income is
[Section 49]. subject to a tax at a lower rate and produces a
certificate from the Commissioner of lower rate
2. Payment made to a Provincial Government of deduction of tax [Section 159].
[Section 49].
3. Payment made to a Local Authority [Section
49].
4. Payment made to a person whose income is
exempt from tax and produces a certificate
from the Commissioner of an exemption from
deduction of tax [Section 159].
Section 155 - INCOME FROM PROPERTY
Exemptions 6. Rent paid to a person who produces a
certificate from the Commissioner to the effect
1. Rent paid to the Federal Government [Section that his income during the tax year is exempt
nd
49]. from tax [Clause (47) of Part IV of 2
Schedule].
2. Rent paid to a Provincial Government [Section
49].
3. Rent paid to a Local Authority [Section 49].
4. Rent paid to a person whose income is exempt
from tax and produces a certificate from the
Commissioner of an exemption from deduction
of tax [Section 159].
5. Rent paid to institutions of the Agha Khan
Development Network (Pakistan) listed in
Schedule 1 of the Accord and Protocol dated
November 13, 1994, executed between the
Government of the Islamic Republic of
Pakistan and Agha Khan Development
nd
Network [Clause (16) of Part IV of 2
Schedule].
38
Collection and Deduction of Tax at Source
Section 156 - PRIZES AND WINNINGS
Exemptions
1. Prize or winnings paid to a person whose
income is exempt from tax and produces a
certificate from the Commissioner of an
exemption from deduction of tax [Section 159].
2. Prize or winnings paid to institutions of the
Agha Khan Development Network (Pakistan)
listed in Schedule 1 of the Accord and Protocol
dated November 13, 1994, executed between
the Government of the Islamic Republic of
Pakistan and Agha Khan Development
nd
Network [Clause (16) of Part IV of 2
Schedule].
Clarification
3. If the prize or winning is not paid in cash, the
person giving the prize or winning is required to
collect the tax on the fair market value of the
prize or winning [Section 156(2)].
Section 156A - PAYMENTS FOR PETROLEUM PRODUCTS
Exemptions
1. Commission or discount allowed to a person
whose income is exempt from tax and
produces a certificate from the Commissioner
of an exemption from deduction of tax [Section
159].
Clarifications
2. The Commissioner of Income Tax is
empowered, under section 153(4) of the
Income Tax Ordinance, 2001, to issue
exemption certificate to the petrol pump
operators who may have to suffer further tax
deduction from the sales of petroleum products
under section 153(1) of the Income Tax
Ordinance, 2001 from whom tax has already
been collected under section 156A of the
Income Tax Ordinance, 2001.
39
Collection and Deduction of Tax at Source
Section 156B - WITHDRAWAL FROM PENSION FUND
Exemptions
c. Transferred to another individual pension
1. Withdrawal before the retirement age: account of the eligible person; or
a. Where the person suffers from any d. Transferred to the survivors pension
disability as mentioned in sub-rule (2) of account (in case of death of the eligible
rule 17 of the Voluntary Pension System
Rules, 2005 which renders him unable to
continue with any employment at the age person) maintained with any other pension
which he may so elect to be treated as fund manager as specified in Voluntary
the retirement age or the age as on the Pension System Rules, 2005
date of such disability if not so elected by
him. [Section 156B].
b. Payment to the nominated survivor(s) of 3. Withdrawal by a person whose income is
the deceased person which would be exempt from tax and produces a certificate
treated as if the person had reached the from the Commissioner of an exemption from
age of retirement. deduction of tax [Section 159].
[Section 156B]. Reduction in rate
2. Withdrawn, in excess of 25% of accumulated 4. Withdrawal by a person whose income is
balance at or after the retirement age which is: subject to a tax at a lower rate and produces a
certificate from the Commissioner of lower rate
a. Invested in an approved income of deduction of tax [Section 159].
payment plan of a pension fund manager
[Section 156B];
b. Paid to a life insurance company for the
purchase of an approved annuity plan ;
Section 231A - CASH WITHDRAWAL FROM A BANK
4. Withdrawal by a foreign diplomat or a
Exemptions diplomatic mission in Pakistan [Section
231A(2)(b)].
1. Withdrawal by the Federal Government
[Section 49 and 231A(2)(a)]. 5. Withdrawal by a person whose income is
exempt from tax and produces a certificate
2. Withdrawal by a Provincial Government from the Commissioner of an exemption from
[Section 49 and 231A(2)(a)]. deduction of tax. [Section 159 and 231A(2)(c)].
3. Withdrawal by a Local Authority [Section 49].
40
Collection and Deduction of Tax at Source
Clarifications 13. Transactions through “clearing house” are
not cash withdrawals and therefore
6. The incidence of withholding tax is on the withholding tax is not attracted.
person in whose name the account, deposit
or any other arrangement exists and from 14. Whenever there is a cash withdrawal of full
which a cash withdrawal in excess of Rs. amount or amount of withdrawal and tax
25,000 per day is made. involved exceed the balance, then either the
bank should refuse payment on account of
7. Withholding tax is attracted on issuance of “withdrawal amount exceeds the balance” or
bearer Pay Order or other similar banking make payment to the person presenting the
instrument either by debiting an account, instrument after setting aside the amount of
deposit or any other arrangement, or against tax involved.
cash received.
15. Withholding tax is not attracted on cash
8. Withholding tax is not attracted on withdrawals by banks from accounts
encashment of Pay Order or other similar maintained with sub-treasury for their day-to-
banking instruments. day cash requirements.
9. Withholding tax is not attracted on direct cash 16. Generally, the withdrawal limit from an ATM
payment against home remittances from is below Rs. 25,000 per day and therefore,
abroad. withdrawals for day-to-day requirements by
10. Withholding tax is attracted on cash default do not attract withholding tax.
withdrawn from ATM outside Pakistan However, in case cash withdrawal from an
against credit card issued in Pakistan. ATM per day exceeds Rs. 25,000,
withholding tax would be attracted.
11. Withholding tax is not attracted on cash
withdrawal from ATM in Pakistan against
credit card issued outside Pakistan.
12. Withholding tax is not attracted on credit card
issued by Non-banking companies.
41
Collection and Deduction of Tax at Source
Section 231B - Purchase of motor cars
Exemptions Reduction in rate
1. Motor cars purchased by the Federal 5. The withholding tax under this section
Government [Section 231B]. shall be charged at the rate of 2.5% [ Clause 9A
nd
Part II 2 Schedule, of Income Tax Ordinance
2. Motor cars Purchased by a Provincial 2001].
Government [Section 231B].
Amendment:
3. Motor cars Purchased by a Foreign Diplomat
th
[Section 231B]. 6. Through SRO 153(1)/2008 dated 20
February, 2008, the following further amendments
4. Motor cars Purchased by a Diplomatic have been made for the purpose of said section,
Mission [ Section 231B]. “No tax shall be collected under section 231B
st
during the period commencing from the 21
th
February, 2008 and ending on the 20 April, 2008
and shall apply to booking of a motor car and
delivered during the said period”.
Section 233 - BROKERAGE AND COMMISSION
Exemptions Pakistan [Clause (33) and (47B) of Part IV of
nd
2 Schedule].
1. Brokerage or commission paid to the Federal
Government [Section 49]. 7. Brokerage or commission paid to mutual fund
l established by an Investment Company
2. Brokerage or commission paid to a Provincial registered under the Investment Companies
Government [Section 49]. and Investment Advisors Rules, 1971 [Clause
nd
(33) of Part IV of 2 Schedule].
3. Brokerage or commission paid to a Local
Authority [Section 49]. 8. Brokerage or commission paid to Unit Trust
Scheme constituted by an Asset Management
4. Brokerage or commission paid to a person Company registered under the Assets
whose income is exempt from tax and Management Companies Rule, 1995 [Clause
nd
produces a certificate from the Commissioner (33) of Part IV of 2 Schedule].
of an exemption from deduction of tax [Section
159]. 9. Brokerage or commission paid to a Real
Estate Investment Trust approved and
5. Brokerage or commission paid to National authorized under the Real Estate Investment
Investment (Unit) Trust [Clause (33) and (47B) Trust Rules, 2006, established and managed
nd
of Part IV of 2 Schedule]. by a REIT Management Company licensed
under the Real Estate Investment Trust
6. Brokerage or commission paid to mutual fund Rules, 2006 [Clause (33) and (47B) of Part IV
nd
established by Investment Corporation of of 2 Schedule].
42
Collection and Deduction of Tax at Source
10. Brokerage or commission paid to a special Clarification
purpose vehicle for the purpose of
nd
securitization [Clause (38) of Part IV of 2 16. Payment to agents, who work on fixed
Schedule]. commission basis but receive payment on
behalf of their principals as well, can be
11. Brokerage or commission paid to a Venture bifurcated between the agent and the principal
Capital Company [Clause (38A) of Part IV of for the purposes of deduction at source.
nd
2 Schedule]. Accordingly, the tax deducted will be
separately deposited on behalf of the agent
12. Brokerage or commission paid to a collective and principal.
investment scheme authorized or registered
under the Non-Banking Finance Companies Where the principal is exempt, the tax shall be
(Establishment and Regulation) Rules, 2003 deducted from the payment relating to the
nd
[Clause (47B) of Part IV of 2 Schedule]. agent only.
13. Brokerage or commission paid to a Modaraba This situation normally arises in case of
nd
[Clause (47B) of Part IV of 2 Schedule]. advertising agents, insurance agents, travel
agents and agents of petroleum companies
14. Brokerage or Commission paid to a Pvt equity etc.
and venture capital fund. (clause 47B part iv of
nd
2 Schedule) .
Reduction in rate
15. Brokerage or commission paid to a person
whose income is subject to a tax at a lower
rate and produces a certificate from the
Commissioner of lower rate of deduction of tax.
[Section 159].
Section 233A(1)(a) & (b)- COMMISSION OF MEMBERS OF STOCK EXCHANGES
Exemptions
1. Member of a stock exchange whose income is
exempt from tax and produces a certificate
from the Commissioner of an exemption from
deduction of tax [Section 159]
43
Collection and Deduction of Tax at Source
Section233A(1)(c)
TRADING OF SHARES BY THE MEMBERS OF STOCK EXCHANGES
Exemptions
1. Sellers of shares whose income is exempt
from tax and produces a certificate from the
Commissioner of an exemption from deduction
of tax [Section 159].
Section 233A(1)(d) - FINANCING OF CARRY OVER TRADE(BADLA) IN SHARES
BY THE MEMBERS OF STOCK EXCHANGES
Exemptions
1. Financiers of carry over trade whose income is
exempt from tax and produces a certificate
from the Commissioner of an exemption from
deduction of tax [Section 159]
Section 234 - TRANSPORT (Motor Vehicles)
Exemptions
1.
Motor vehicles owned by the Federal persons after a period of ten years from the
Government [Section 49]. first day of July of the year of make of the
vehicle [Section 234(3)].
2. Motor vehicles owned by a Provincial
Government [Section 49]. 7. Goods transport vehicle with registered
laden weight of less than 8120 kilograms after
3. Motor vehicles owned by a Local Authority a period of ten years from the date of first
[Section 49]. registration of the vehicle in Pakistan [Section
234(4)].
4. Owner of motor vehicle whose income is
exempt from tax and who produces a
certificate from the Commissioner of an Reduction in rate
exemption from deduction of tax [Section 159].
8. Owner of motor vehicle whose income is
5. Motorcar used for more than ten years in subject to a tax at a lower rate and produces a
Pakistan [Section 234(2A)]. certificate from the Commissioner of lower rate
of deduction of tax [Section 159].
6. Passenger transport vehicle with
registered seating capacity of ten or more
44
Collection and Deduction of Tax at Source
Section 234A CNG STATIONS
(Final tax liability see details on page 20)
Section 235 - ELECTRICITY CONSUMPTION
Exemptions
1. Consumer being the Federal Government Reduction in rate
[Section 49].
6. Commercial or industrial consumer of
2. Consumer being a Provincial Government electricity whose income is subject to a tax at a
[Section 49]. lower rate and produces a certificate from the
Commissioner of lower rate of deduction of tax.
3. Consumer being a Local Authority [Section 49]. [Section 159].
4. Commercial or industrial consumer of
electricity whose income is exempt from tax
and produces a certificate from the
Commissioner of an exemption from deduction
of tax [Section 159].
5. Commercial or industrial consumer of
electricity whose income is exempt from tax
and produces a certificate from the
Commissioner to this effect [Section 235(3)].
Section 236 - TELEPHONE USERS
Exemptions 5. Subscriber, which is a foreign diplomatic
mission in Pakistan [Section 236(4)].
1. Subscriber being the Federal Government
[Section 49]. 6. Subscriber, who is a foreign diplomat [Section
2. Subscriber being a Provincial Government 236(4)].
[Section 49].
3. Subscriber being a local authority [Section 49]. 7. Subscriber whose income is exempt from tax
4. Subscriber whose income is exempt from tax and produces a certificate from the
and produces a certificate from the Commissioner to this effect. [Section 236(4)].
Commissioner of an exemption from deduction Reduction in rate
of tax [Section 159]. 8. Subscriber whose income is subject to a tax at
a lower rate and produces a certificate from the
45
Collection and Deduction of Tax at Source
Commissioner of lower rate of deduction of tax. All taxes collected or deducted are payable to the
[Section 159]. Commissioner of Income Tax by way of credit to
the Federal Government by remittance to the
Withholding agent’s liability to issue Government Treasury or deposit in an authorized
certificate of deduction and collection of tax branch of the State Bank of Pakistan or the
National Bank of Pakistan.
Every withholding agent (person obliged to
collect or deduct tax at source) collecting or Withholding agent’s liability to submit
deducting tax under the provisions of the Income Monthly and annual statements of tax
Tax Ordinance, 2001 is obliged to issue collected or deducted
certificate of tax collected or deducted, in
duplicate and serially numbered, in the Every withholding agent (person obliged to
prescribed form to the person from whom such collect or deduct tax at source) under the
tax has been collected or deducted. provisions of the Income Tax Ordinance, 2001 is
required to submit necessary details and
Where the tax is deducted from salary under information after each month and annually.
section 149 of the Income Tax Ordinance, 2001:
A single consolidated statement for each month is
(a) The certificate of tax deducted is to be to be submitted within 15 days from the end of the
issued within 45 days from the end of each each month in the prescribed form accompanied
financial year. Rule:41(1) with evidence of deposit of tax collected or
deducted to the credit of the Federal Government.
(b) Where the employment ceases before the
end of the financial year, the certificate is to Two separate annual statements are prescribed:
be issued for the period of employment in
that year within 7 days of the ceasing of the (a) One for the withholding agents obliged to
employment or at the time of making deduct tax from salary under section 149 of
payment of final settlement whichever is the Income Tax Ordinance, 2001; and
later.Rule:41(2)
(b) The other for withholding agents obliged to
Where the tax is collected or deducted under any collect or deduct tax under any other
other provisions of the Income Tax ordinance, provision of the Income Tax Ordinance,
2001: 2001.
(a) The certificate of collection or deduction is
to be issued within 15 days from the end of Withholding agent’s liability to reconcile the
each financial year or discontinuation of Monthly and annual statements
business, etc.Rule:42(1)
(b) If the person from whom tax has been Every withholding agent (person obliged to
collected or deducted requests for the collect or deduct tax at source) wherever required
issuance of the certificate before the end of by the Commissioner, is obliged to furnish a
the financial year, the certificate is to be reconciliation of the amounts mentioned in the
issued for the period in that year within 7 annual and monthly statements with the amounts
days of the request made.Rule:42(2)
mentioned in the return of income, statements,
Where a certificate issued has been lost, stolen related annexes and other documents submitted
or destroyed, the recipient of the certificate may from time to time.
request, in writing, that the issuer of the certificate
issue a duplicate certificate.Rule41(3) Consequences of non-compliance
Where a request has been made, the issuer of The Income Tax Ordinance, 2001 takes ample
the certificate shall comply with the request and care for non-compliance of the provisions of law
the certificate so issued shall be clearly marked relating to withholding taxes and filing of monthly
“duplicate”.Rule:41(4) and annual statements of tax collected and
deducted. These are explained below:
46
Collection and Deduction of Tax at Source
Deductions not allowed [Section 21] Charge of additional tax
In case of not withholding tax at source the In addition to the principal amount of the tax to be
following expenditures are not allowed as collected or deducted at source by the
deduction for the purpose of computing income: withholding agent, a further tax “additional tax” is
also payable/recoverable at the rate of 12% per
o Salary annum on the amount of tax not collected or
o Rent deducted or having collected or deducted not
o Brokerage or commission paid computed for the period commencing on the
o Profit on debt date the amount was required to be collected or
deducted and ending on the date on which it is
o Payment to non-resident
paid.
o Payment for services or fee
Prosecution
Recovery of tax not collected or deducted
Any person who, without reasonable excuse, fails
The person responsible for collecting or to comply with the obligation to collect or deduct
deducting the tax at source as a withholding
tax or having collected or deducted fails to pay
agent, is personally liable for the amount of tax
the tax shall tantamount to committing an offence
not collected or deducted and
punishable on conviction with a fine or
payable/recoverable as if it is due under an
imprisonment for a term not exceeding one year,
assessment order under the Income Tax or both.
ordinance, 2001.
Penalty for failure to furnish statement(s) of
Recovery of tax collected or deducted but not
tax collected or deducted
deposited/paid
Any person responsible for collection or
Similarly, the tax collected or deducted, if not paid deduction of tax at source as a withholding agent,
is also payable/recoverable as if it is due under without reasonable excuse, fails to furnish, within
an assessment order under the Income Tax
the time allowed for this purpose, any
ordinance, 2001 personally from the person
statement(s) of tax collected or deducted is liable
responsible to collect or deduct the tax as source
for a penalty of Rs. 2,000.Sec:182(2)
as a withholding agent.
If the default of not furnishing the statement(s)
continues even after the imposition of penalty of
Rs. 2,000, mentioned above, an additional
penalty of Rs. 200 for each day of is also
attracted.Sec:182(3)
47
Collection and Deduction of Tax at Source
Cross Index withholding agent wise
Persons liable to collect or deduct tax (Withholding Applicable sections of the Income Tax
agents) Ordinance, 2001
Authorized dealer in foreign exchange 149, 154(1), 154(2)
Association of persons 149, 152(1), 152(1A), 152(2), 153(1A),156,
233
Association of persons constituted by, or under, law 149, 152(1), 152(1A), 152(2), 153(1),
153(1A), 156, 233
Banking Company 149, 151(1)(a), 151(1)(b), 151(1)(d), 152(1),
152(1A), 152(2), 153(1), 154(1), 154(2),
154(3), 155, 156, 231A, 233,
Body corporate formed by or under any law in force in 149, 151(1)(d), 152(1), 152(1A), 152(2),
Pakistan 153(1), 153(1A), 155, 156, 233
Body incorporated by or under the law of a country outside 149, 152(1), 152(1A), 152(2), 153(1), 155,
Pakistan relating to incorporation of companies 156, 233
Collector of Customs 148
Company as defined under the Companies Ordinance, 1984 149, 151(1)(d), 152(1), 152(1A), 152(2),
153(1), 153(1A), 155, 156, 233
Consortium 149, 152(1), 152(1A), 152(2), 153(1),
153(1A), 156
Co-operative Society 149, 152(1), 152(1A), 152(2), 153(1),
153(1A), 155, 156, 233
Diplomatic mission of a foreign state 155
Direct Exporter 153(1A), 154(3B)
Electricity Consumption Bill Preparing Authority 235
Export House registered under DTRE Rule, 2001 153(1A), 154(3B)
Export Processing Zone Authority 154(3A)
Federal Government 149, 151(1)(a), 151(1)(c), 152(1), 152(1A),
152(2), 153(1), 153(1A), 155, 156, 233
Finance society 149, 151(1)(d), 152(1), 152(1A), 152(2),
153(1), 155, 156, 233
Financial Institution 149, 151(1)(b), 151(1)(d), 152(1), 152(1A),
152(2), 153(1), 154(1), 154(2), 155, 156, 233
Foreign association, whether incorporated or not, declared 149, 152(1), 152(1A), 152(2), 153(1), 155,
to be a company by the Federal Board of Revenue 156, 233
Foreign consultant 149, 152(1), 152(1A), 152(2), 153(1), 156,
233
Foreign contractor 149, 152(1), 152(1A), 152(2), 153(1), 156,
233
Individual 149, 152(1), 152(1A), 152(2), 153(1A), 156
Joint Venture 149, 152(1), 152(1A), 152(2), 153(1), 156
Local Authority 149, 151(1)(c), 152(1), 152(1A), 152(2),
153(1), 155, 156, 233
Modaraba 149, 152(1), 152(1A), 152(2), 153(1), 155,
156, 233
Motor Vehicle Tax Collection Authority 234
Non-profit organization 149, 152(1), 152(1A), 152(2), 153(1), 155,
156, 233
Pension Fund Manager 156B
48
Collection and Deduction of Tax at Source
Person paying profit on debt on National Saving Schemes 151(1)(a)
of Directorate of National Savings or Post Office Saving
Account
Persons selling petroleum products to petrol pump operators 156A
Trust 149, 152(1), 152(1A), 152(2), 153(1), 155,
156, 233
Prepaid Card Selling Person 236
Provincial Government 149, 151(1)(c), 152(1), 152(1A), 152(2),
153(1), 153(1A), 155, 156, 233
Resident Company 150
Society established or constituted by or under any law for 149, 152(1), 152(1A), 152(2), 153(1), 155,
the time being in force 156, 233
Stock Exchanges Registered in Pakistan 233A
Telephone Bill Preparing Person 236
Definitions
Company
An Association of Persons Company” means –
“Association of persons” includes a firm, a Hindu
undivided family, any artificial juridical person and (a) a company as defined in the Companies
any body of persons formed under a foreign law, Ordinance, 1984 (XLVII of 1984);
but does not include a company.
(b) a body corporate formed by or under any law
Approved Annuity Plan in force in Pakistan;
“Approved annuity plan” means an Annuity Plan
approved by Securities and Exchange (c) a modaraba;
Commission of Pakistan (SECP) under Voluntary
Pension System Rules, 2005 and offered by a (d) a body incorporated by or under the law of a
Life Insurance Company registered with the country outside Pakistan relating to
SECP under Insurance Ordinance, 2000 (XXXIX incorporation of companies;
of 2000).
(e) a trust, a co-operative society or a finance
Approved Income Payment Plan society or any other society established or
“Approved income payment plan” means an constituted by or under any law for the time
Income Payment Plan approved by Securities being in force;
and Exchange Commission of Pakistan (SECP)
under Voluntary Pension System Rules, 2005 (f) a foreign association, whether incorporated
and offered by a Pension Fund Manager or not, which the Federal Board of Revenue
registered with the SECP under Voluntary has, by general or special order, declared to
Pension System Rules, 2005. be a company for the purposes of this
Ordinance;
Approved Pension Fund
“Approved Pension Fund” means Pension Fund (g) a Provincial Government; or
approved by Securities and Exchange
Commission of Pakistan (SECP) under Voluntary (h) a local authority in Pakistan.
Pension System Rules, 2005, and managed by a (i) a Small Company as defined in section 2;]
Pension Fund Manager registered with the SECP
under Voluntary Pension System Rules, 2005. Co-operative Society
“Co-operative society” means a co-operative
Banking Company society registered under the Co-operative
“Banking company” means a banking company Societies Act, 1925 (VII of 1925) or under any
as defined in the Banking Companies Ordinance, other law for the time being in force in Pakistan
1962 (LVII of 1962) and includes any body for the registration of co-operative societies.
corporate which transacts the business of
banking in Pakistan.
49
Collection and Deduction of Tax at Source
Dividend substantial part of the business of the
“Dividend” includes - company; and
(a) any distribution by a company of (iii) any dividend paid by a company which is set
accumulated profits to its shareholders, off by the company against the whole or any
whether capitalized or not, if such distribution part of any sum previously paid by it and
entails the release by the company to its treated as a dividend within the meaning of
shareholders of all or any part of the assets sub-clause (c) to the extent to which it is so
including money of the company; set off.
(b) any distribution by a company, to its Eligible Person
shareholders of debentures, debenture-stock “Eligible Person”, for the purpose of Voluntary
or deposit certificate in any form, whether Pension System Rules, 2005, means an
with or without profit, to the extent to which individual Pakistani who holds a valid National
the company possesses accumulated profits Tax Number or Computerized National Identity
whether capitalized or not; Card issued by the National Database and
Registration Authority
(c) any distribution made to the shareholders of
a company on its liquidation, to the extent to Employee
which the distribution is attributable to the “Employee” means any individual engaged in
accumulated profits of the company employment.
immediately before its liquidation, whether
capitalized or not; Employer
“Employer” means any person who engages and
(d) any distribution by a company to its remunerates an employee.
shareholders on the reduction of its capital, to
the extent to which the company possesses Employment
accumulated profits, whether such “Employment includes –
accumulated profits have been capitalized or
not; or (a) a directorship or any other office involved in
the management of a company;
(e) any payment by a private company as
defined in the Companies Ordinance, 1984 or (b) a position entitling the holder to a fixed or
trust of any sum (whether as representing a ascertainable remuneration; or
part of the assets of the company or trust, or
otherwise) by way of advance or loan to a (c) the holding or acting in any public office.
shareholder or any payment by any such
company or trust on behalf, or for the
individual benefit, of any such shareholder, to Finance Society
the extent to which the company or trust, in “Finance society” includes a co-operative society
either case, possesses accumulated profits; which accepts money on deposit or otherwise for
the purposes of advancing loans or making
but does not include - investments in the ordinary course of business.
Financial Institution
(i) a distribution made in accordance with sub- “Financial institution” means an institution as
clause (c) or (d) in respect of any share for defined under the Companies Ordinance, 1984,
full cash consideration, or redemption of i.e.,-
debentures or debenture stock, where the
holder of the share or debenture is not Financial institution includes:
entitled in the event of liquidation to
participate in the surplus assets; a. a company or an institution whether
established under any special enactment and
(ii) any advance or loan made to a shareholder operating within or outside Pakistan which
by a company in the ordinary course of its transacts the business of banking or any
business, where the lending of money is a associated or ancillary business through its
branches;
50
Collection and Deduction of Tax at Source
(c) approved by the Commissioner for specified
b. a modaraba, leasing company, investment period, on an application made by such
bank, venture capital company, financing person in the prescribed form and manner,
company, housing finance company, a non- accompanied by the prescribed documents
banking finance company; and and, on requisition, such other documents as
may be required by the Commissioner;
c. such other institution or companies
authorized by law to undertake any similar and none of the assets of such person confers, or
business, as the Federal Government may, may confer, a private benefit to any other person.
by notification in the official Gazette, specify
for the purpose. Non-Resident Person
A person shall be a non-resident person for a tax
Industrial Undertaking year if the person is not a resident person for that
“Industrial undertaking” means – year.
a. an undertaking which is set up in Pakistan Permanent Establishment
and which employs, (i) ten or more persons “Permanent establishment” in relation to a
in Pakistan and involves the use of electrical person, means a fixed place of business through
energy or any other form of energy which is which the business of the person is wholly or
mechanically transmitted and is not partly carried on, and includes –
generated by human or animal energy; or (ii)
twenty or more persons in Pakistan and does (a) a place of management, branch, office,
not involve the use of electrical energy or any factory or workshop, premises for soliciting
other form of energy which is mechanically orders, warehouse, permanent sales
transmitted and is not generated by human or exhibition or sales outlet, other than a liaison
animal energy and which is engaged in,- office except where the office engages in the
negotiation of contracts (other than contracts
(i) the manufacture of goods or materials or of purchase);
the subjection of goods or materials to
any process which substantially changes (b) a mine, oil or gas well, quarry or any other
their original condition; place of extraction of natural resources;
(ii) ship-building; (c) an agricultural, pastoral or forestry property;
(iii) generation, conversion, transmission or (d) a building site, a construction, assembly or
distribution of electrical energy, or the installation project or supervisory activities
supply of hydraulic power; or connected with such site or project but only
where such site, project and its connected
(iv) the working of any mine, oil-well or any supervisory activities continue for a period or
other source of mineral deposits; and periods aggregating more than 90 days
within any 12 months period;
b. any other industrial undertaking which the
Board may by notification in the official (e) the furnishing of services, including
Gazette, specify. consultancy services, by any person through
employees or other personnel engaged by
Non-Profit Organization the person for such purpose;
“Non-profit organization” means any person other
than an individual, which is – (f) a person acting in Pakistan on behalf of the
person (hereinafter referred to as the
(a) established for religious, educational, “agent”), other than an agent of independent
charitable, welfare or development purposes, status acting in the ordinary course of
or for the promotion of an amateur sport; business as such, if the agent –
(b) formed and registered under any law as a (i) has and habitually exercises an authority
non-profit organization; to conclude contracts on behalf of the
other person;
51
Collection and Deduction of Tax at Source
(ii) has no such authority, but habitually (b) a company in which not less than 50% of the
maintains a stock-in-trade or other shares are held by a foreign government, or
merchandise from which the agent a foreign company owned by a foreign
regularly delivers goods or merchandise government;
on behalf of the other person; or
(c) a company whose shares were traded on a
(g) any substantial equipment installed, or other registered stock exchange in Pakistan at any
asset or property capable of activity giving time in the tax year and which remained
rise to income. listed on that exchange at the end of that
year; or
Pension fund manager
“Pension fund manager” means an asset (d) a unit trust whose units are widely available
management company registered under the Non- to the public and any other trust as defined in
Banking Finance Companies (Establishment and the Trust Act, 1882.
Regulations) Rules, 2003, or a life insurance
company registered under Insurance Ordinance, Real Estate Investment Trust (REIT)
2000 (XXXIX of 2000), duly authorized by the “Real Estate Investment Trust (REIT)” means a
Securities and Exchange Commission of scheme which consists of a closed-end collective
Pakistan and approved under the Voluntary investment scheme constituted as a unit trust
Pension System Rules, 2005, to manage the fund and managed by a REIT management
Approved Pension Fund company for the purposes of investment in real
estate, approved and authorized by the Security
Person and Exchange Commission of Pakistan under the
The following shall be treated as persons for the Real Estate Investment Trust Rules, 2006;
purposes of this Ordinance, namely:–
Real Estate Investment Trust Management
(a) An individual; Company
“Real Estate Investment Trust Management
(b) a company or association of persons Company” means a company licensed by the
incorporated, formed, organized or Security and Exchange Commission of Pakistan
established in Pakistan or elsewhere; under the Real Estate Investment Trust Rules,
2006.
(c) the Federal Government, a foreign
government, a political subdivision of a Resident Association of Persons
foreign government, or public international An association of persons shall be a resident
organization. association of persons for a tax year if the control
and management of the affairs of the association
Profit on Debt is situated wholly or partly in Pakistan at any time
“Profit on a debt” whether payable or receivable, in the year.
means –
Resident Company
(a) any profit, yield, interest, discount, premium A company shall be a resident company for a tax
or other amount, owing under a debt, other year if –
than a return of capital; or
(a) it is incorporated or formed by or under any
(b) any service fee or other charge in respect of law in force in Pakistan;
a debt, including any fee or charge incurred
in respect of a credit facility which has not (b) the control and management of the affairs of
been utilized. the company is situated wholly in Pakistan at
Public Company any time in the year; or
“Public company” means –
(c) it is a Provincial Government or local
(a) a company in which not less than 50% of the authority in Pakistan.
shares are held by the Federal Government
or Provincial Government;
52
Collection and Deduction of Tax at Source
Resident Individual
An individual shall be a resident individual for a
tax year if the individual –
Services
(a) is present in Pakistan for a period of, or “Services” includes the services of accountants,
periods amounting in aggregate to, 183 days architects, dentists, doctors, engineers, interior
or more in the tax year; decorators and lawyers.
(b) is an employee or official of the Federal Small Company
Government or a Provincial Government “Small Company” means a company registered
st
posted abroad in the tax year. on or after 1 July, 2005, under the Companies
Ordinance, 1984 having:
Resident Person
A person shall be a resident person for a tax year (a) Paid up capital plus undistributed
if the person is – reserves not exceeding Rs. 25 million.
(a) a resident individual, resident company or (b) Has employees not exceeding two
resident association of persons for the year; hundred and fifty any time during
or the year.
(b) the Federal Government. (c) Annual turnover upto Rs. 250 million; and
Sale of goods (d) Is not formed by splitting up or
“Sale of goods” includes a sale of goods for cash or reconstitution of business already in
on credit, whether under a written contract or not existence.
Shareholder Venture Capital Company
“Venture Capital Company” and “Venture Capital
“Shareholder” in relation to a company includes a Fund” shall have
modaraba certificate holder, a unit holder of a unit the same meanings as are assigned to them
trust and a beneficiary of a trust. under the Non-
Banking Finance Companies Establishment and
Regulation)
Rules, 2003.
53
Collection and Deduction of Tax at Source
