Income Tax Rates in Pakistan 2024 On Salaried & Non Salaried Person

Income Tax is the tax that you pay on your income. Income Tax is paid by wage earners i.e., salaried class, self-employed and non-incorporated firms. Income Tax is one of the important sources through which a government finances its activities. The personal income tax revenue is only 1.1% of GDP in Pakistan (11% of total tax revenues) and only 2% of working age population is registered as taxpayer. Income Tax Rates in Pakistan On Salaried & Non Salaried Person.

Income Tax Rates in Pakistan On Salaried & Non Salaried Person

RESIDENT

An Association of Persons is Resident for a Tax Year if the control and management of its affairs is situated wholly or partly in Pakistan at any time in that year;

A Company is Resident for a Tax Year if : It is incorporated or formed by or under any law in force in Pakistan; The control and management of its affairs is situated wholly in Pakistan at any time in the year; or It is a Provincial Government or a local Government in Pakistan. An individual is Resident for a Tax Year if he/she: Is present in Pakistan for a period of, or periods amounting in aggregate to, 183 days or more in the Tax Year; or Is an employee or official of the Federal Government or a Provincial Government posted abroad in the Tax Year.

NON-RESIDENT

An Association of Persons, a Company and an Individual are Non-Resident for a Tax Year if they are not Resident for that year.

PAKISTAN SOURCE INCOME

Is defined in section 101 of the Income Tax Ordinance, 2001, which caters for Incomes under different heads and situations. Some of the common Pakistan source Incomes are as under: –

• Salary received or receivable from any employment exercised in Pakistan wherever paid;
• Salary paid by, or on behalf of, the Federal Government, a Provincial Government, or a local Government in Pakistan, wherever the employment is exercised;
• Dividend paid by Resident Company;
• Profit on debt paid by a Resident Person;
• Property or rental Income from the lease of immovable property in Pakistan;
• Pension or annuity paid or payable by a Resident or permanent establishment of a Non-Resident;.

FOREIGN SOURCE INCOME

Is any Income, which is not a Pakistan source Income.

PERSON

An Individual;

A Company or Association of Persons incorporated, formed, organized or established in Pakistan or elsewhere;

The Federal Government, a foreign government, a political subdivision of a foreign government, or public international organization

COMPANY

A Company as defined in the Companies Ordinance, 1984 (XLVII of 1984);

A body corporate formed by or under any law in force in Pakistan;

A modaraba;

A body incorporated by or under the law of a country outside Pakistan relating to incorporation of Companies;

An amendment has been made through Finance Act, 2013 to enlarge the scope of definition of a Company. Now as per Income Tax Ordinance, 2001 a company includes:

A co-operative society, a finance society or any other society;

A non-profit organization;

A trust, an entity or a body of persons established or constituted by or under any law for the time being in force.

A foreign association, whether incorporated or not, which the Board has, by general or special order, declared to be a company for the purposes of this Ordinance;

• A Small Company
• A Provincial Government;
• A Local Government in Pakistan;

ASSOCIATION OF PERSONS

Includes a firm (the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all), a Hindu undivided family, any artificial juridical person and anybody of persons formed under a foreign law, but does not include a Company.

TAX YEAR

Is a period of twelve months ending on 30th day of June i.e. the financial year and is denoted by the calendar year in which the said date falls. For example, tax year for the period of twelve months from July 01, 2017 to June 30, 2018 shall be denoted by calendar year 2018 and the period of twelve months from July 01, 2018 to June 30, shall be denoted by calendar year . It is called Normal Tax Year.

Tax Rates :

• Where the taxable salary income does not exceed Rs. 600,000 the rate of income tax is 0%.
• Where the taxable salary income exceeds Rs. 600,000 but does not exceed Rs. 1,200,000 the rate of income tax is 5% of the amount exceeding Rs. 600,000.
• Where the taxable salary income exceeds Rs. 1,200,000 but does not exceed Rs. 1,800,000 the rate of income tax is Rs. 30,000 + 10% of the amount exceeding Rs. 1,200,000.
• Where the taxable salary income exceeds Rs. 1,800,000 but does not exceed Rs. 2,500,000 the rate of income tax is Rs. 90,000 + 15% of the amount exceeding Rs. 1,800,000.
• Where the taxable salary income exceeds Rs. 2,500,000 but does not exceed Rs. 3,500,000 the rate of income tax is Rs. 195,000 + 17.5% of the amount exceeding Rs. 2,500,000.
• Where the taxable salary income exceeds Rs. 3,500,000 but does not exceed Rs. 5,000,000 the rate of income tax is Rs. 370,000 + 20% of the amount exceeding Rs. 3,500,000.
• Where the taxable salary income exceeds Rs. 5,000,000 but does not exceed Rs. 8,000,000 the rate of income tax is Rs. 670,000 + 22.5% of the amount exceeding Rs. 5,000,000.
• Where the taxable salary income exceeds Rs. 8,000,000 but does not exceed Rs. 12,000,000 the rate of income tax is Rs. 1,345,000 + 25% of the amount exceeding Rs. 8,000,000.
• Where the taxable salary income exceeds Rs. 12,000,000 but does not exceed Rs. 30,000,000 the rate of income tax is Rs. 2,345,000 + 27.5% of the amount exceeding Rs. 12,000,000.
• Where the taxable salary income exceeds Rs. 30,000,000 but does not exceed Rs. 50,000,000 the rate of income tax is Rs. 7,295,000 + 30% of the amount exceeding Rs. 30,000,000.
• Where the taxable salary income exceeds Rs. 50,000,000 but does not exceed Rs. 75,000,000 the rate of income tax is Rs. 13,295,000 + 32.5% of the amount exceeding Rs. 50,000,000.
• Where the taxable salary income exceeds Rs. 75,000,000 the rate of income tax is Rs. 21,420,000 + 35% of the amount exceeding Rs. 75,000,000.