Section Existing

“income” includes any amount chargeable to tax under this Ordinance,

any amount subject to collection or deduction of tax under section
2(29) 148, 150, 152(1), 153, 154, 156, 156A, 233, sub-section (5)
of section 234 and any amount treated as income under any
provision of this Ordinance and any loss of income;

2(41)

2(41)(d) the furnishing of services, including consultancy services, by

any person through employees or other personnel engaged by
the person for such purpose

2(59A)

“small and medium enterprise” means a person who is engaged in

manufacturing as defined in clause (iv) of sub-section (7) of section 153
of the Ordinance and his business turnover in a tax year does not exceed
two hundred and fifty million rupees:
Provided that if annual business turnover of a small and medium
enterprise exceeds two hundred and fifty million rupees, it shall not
qualify as small and medium enterprise in the tax year in which annual
turnover exceeds that turnover or any subsequent tax year.

4C

39(1)
44A

65I
 Subject to sub-section (2), two persons shall be associates where the
relationship between the two is such that one may reasonably be
expected to act in accordance with the intentions of the other, or both
persons may reasonably be expected to act in accordance with the
85(1) intentions of a third person.

85(5)
 99D

Sub-section (1) does not apply to any amount of foreign exchange

remitted from outside Pakistan through normal banking channels not
exceeding five million Rupees in a tax year that is en-cashed into rupees
by a scheduled bank and a certificate from such bank is produced to that
111 effect

113(2)(c)
146 D

147

152(5A)

154(3B)
154A(2)(c)

168(3)

169(1)

230J

231AB

231C

Provided that if the buyer or transferee is a non-resident individual

holding a Pakistan Origin Card (POC) or National ID Card for Overseas
Pakistanis (NICOP) or Computerized National ID Card (CNIC) who has
acquired the said immovable property through a Foreign Currency Value
Account (FCVA) or NRP Rupee Value Account (NRVA) maintained with
authorized banks in Pakistan under the foreign exchange regulations
issued by the State Bank of Pakistan, the tax collected under this section
from such persons shall be final discharge of tax liability for such buyer or
236K transferee.
236Z
 Proposed/Explanation

“income” includes any amount chargeable to tax under this Ordinance,

any amount subject to collection or deduction of tax under section
148, 150, 152(1), 153, 154, 156, 156A, 233, sub-section (5)
of section 234, 236Z and any amount treated as income under any
provision of this Ordinance and any loss of income;

A new section 236Z has been inserted to the ordinance which defines the
tax to be levied on bonus shares.(Discussed later)

Word "Fixed" wherever occuring in the clause have been ommitted.

1

the furnishing of services, including consultancy services, by

any person through employees or other personnel "or entity" engaged
by the person for such purpose

“(59A) “small and medium enterprise” means a person whose business

turnover in a tax year does not exceed eight hundred million rupees and
who is engaged in –
(i) manufacturing as defined in clause (iv) of sub-section (7) of section
153 of the Ordinance; or
(ii) providing or rendering IT services or IT enabled services as defined in
clauses (30AD) and (30AE) of section 2:
Provided that if annual business turnover of a small and medium
enterprise exceeds eight hundred million rupees, it shall not qualify as
small and medium enterprise in the tax year in which annual turnover
exceeds that turnover or any subsequent tax year.”

Proposed changes are Increase in business turnover limit of a

manufacturer from Rs. 250 (m) to Rs. 800 (m) to qualify for
concessionary tax regime for SMEs and inclusion of IT & ITeS in SMEs
definition.

After sub-section (5) ,the new sub-section (5A) has been inserted which
defines the "The provisions of section 147 shall apply on tax payable
under this section"
Rationalization of Super Tax under section 4C to apply on all persons
across the board on income above Rs. 150 (m): insertion of additional
three new income slabs of Rs. 350(m) to Rs. 400(m), Rs. 400(m) to Rs.
500(m) and Rs. 500(m) above to be taxed at 6%, 8% and 10% respectively
from tax year 2023 and onwards.
After clause (la) ,the new clause (Ib) has been inserted which defines the
"Income arising to sharholder of a company, from the issuance of bonus
shares"
 New Section Inserted
Exemption under Foreign Investment (Promotion and Protection)
Act, 2022 (XXXV of 2022).

(1) Taxes on income (including capital

gains), withholding taxes, minimum and final taxes under the Ordinance
shall be exempt to the extent provided in Second and Third Schedule to
the Foreign Investment (Promotion and Protection) Act, 2022 (XXXV of
2022) in respect of qualified investment as specified at Sr. No.1 of the
First Schedule to the said Act.

(2) All investors and shareholders of the qualified investment,

their associates and companies specified in Second and Third Schedule
including third party lenders on account of any loan shall also be exempt
from taxes and other provisions of the Ordinance to the extent provided
in Second and Third Schedule to the said Act.

(3) Provisions of the Ordinance relating to Anti-Avoidance to

the extent specified in the said Act including sections 106, 106A, 108,
109 and 109A shall not apply to the persons mentioned in sub-sections
(1) and (2).

(4) Rates of depreciation, initial allowance and precommencement

expenditure under sections 22, 23 and 25 as on March
20th, 2022 shall continue to be applicable for thirty years as provided in
Third Schedule to the said Act in respect of persons mentioned in
subsections (1) and (2).”;

New Section Inserted

Tax credit for construction of house:

(1) For tax years 2024 to 2026, a person, being an individual, shall be
entitled to a tax credit for a tax year in respect of construction of a new
house, provided that the said house is completed during the said tax year
and completion certificate is furnished along with return.

(2) The amount of tax credit allowed under sub-section (1)

shall be lesser of –
(a) 10% of tax assessed to the person for the tax
year; or
(b) Rs. 1,000,000/-.

(3) For the purpose of this section, new house means a residential house,
layout plan of which is approved by the concerned authority on or after
the 1st day of July, 2023.”;
Subject to sub-section (2), two persons shall be associates
where –

(i) the relationship between the two is such that one may
reasonably be expected to act in accordance with the
intentions of the other, or both persons may reasonably be
expected to act in accordance with the intentions of a third
person;

(ii) one person sufficiently influences, either alone or together

with an associate or associates, the other person;
Explanation. - For the purpose of this section, two persons
shall be treated as sufficiently influencing each other,
where one or both persons, directly or indirectly, are
economically and financially dependent on each other and,
decisions are made in accordance with the directions,
instructions or wishes of each other for common economic
goal; or

(iii) one person enters into a transaction, directly or indirectly,

with the other who is a resident of jurisdiction with zero
taxation regime.”; and

Following new point has been included to the subsection 5 of section

85:
(ii) jurisdiction with zero taxation regime means
jurisdiction as may be prescribed.”
Additional tax on certain income, profits and gains:

(1) Notwithstanding anything contained in this Ordinance or any other

law for the time being in force, for any of the preceding five tax years
from tax year 2023 and onwards, in addition to any tax charged, paid or
payable under any of the provision of the Ordinance, an additional tax
shall be imposed on every person who has any income, profit or gains
that have arisen to any person or class of persons due to any economic
factor or factors that resulted in unexpected income, profits or gains
whether or not disclosed in the financial statements.

(2) Federal Government, may through a notification in the official

Gazette –
(a) determine economic factor or factors including but not limited to
international price fluctuation having bearing on any commodity price in
Pakistan or any sector of the economy or difference in income, profit or
gains on account of foreign currency fluctuation;
(b) provide the rate not exceeding fifty percent of such income,
profits or gains;
(c) provide for the scope, time and payment of tax payable under this
section in such manner and with such conditions as may be
specified; and
(d) exempt any person or classes of persons, any income or classes of
income from the application of this section,
subject to any condition as may be specified.”;

Sub-section (1) does not apply to any amount of foreign exchange

remitted from outside Pakistan through normal banking channels not
exceeding rupees equivelent of one hundered thousand United States
dollars in a tax year that is en-cashed into rupees by a scheduled bank
and a certificate from such bank is produced to that effect

Following explaination shall be added at the end of clause:

“Explanation. – For the removal of doubt it is clarified that the aforesaid
Part referred to in this clause means clause (1) of Division I or Division II
of Part I of the First Schedule.”;
 New Section Inserted
Recovery of liability outstanding under other laws:
(1)Where any outstanding liability in or under any other statute or law
for the timebeing in force, in respect of any defaulter is –
(a) treated as Income Tax arrears in that law;
(b) required to be recovered or collected by Commissioner
(Inland Revenue); or
(c) is referred to Commissioner (Inland Revenue) for the
recovery –
the Commissioner (Inland Revenue) shall recover the said
liability and deposit the receipts in the designated account
specified in that law.”;

Following ammendments shall be made to section 147:

(i) in sub-section (4), in the explanation, after the word “sections”, the
expression “4C,” shall be inserted;

(ii) in sub-section (4AA), after the word “sections”, the expression

“4C,” shall be inserted;

(iii) in sub-section (4B), after the full stop occurring at the end, the
following new explanation shall be added, namely: –
“Explanation. – For removal of doubt, it is clarified that tax
assessed includes tax liability under section 4C.”;

Explaination:
According to the ammendments the tax assessed to the taxpayer for the
latest tax year, Advance tax liability for current year and shall include tax
charged under section 4C(Super Tax).

Following additions shall be made to the sub section:

“Provided that the Commissioner shall be deemed to have
issued the exemption certificate upon the expiry of thirty days and the
certificate shall be automatically processed and issued by Iris subject to
the condition that in computing the said period of thirty days, there shall
be excluded days taken for adjournment by the applicant:
Provided further that the Commissioner may modify or cancel
the certificate issued automatically by Iris on the basis of reasons to be
recorded in writing after providing an opportunity of being heard.”;
Under this subsection Every direct exporter and an export house
registered Export Facilitation Scheme, 2021 shall also be required to
deduct tax of an indirect exporter at the time of payment.
According to the new addition the condition of filing of sales tax returns
either fedral or provincial to opt for export of services under FTR will not
be applicable to exports of computer software or IT services or IT
enabled services where the exporter is registered with and duly certified
by the Pakistan Software Export Board (PSEB).
Tax paid by a shareholder under section 236Z shall not be allowed for tax
credit under section 168(3)
The provisions of the section 169 shall also be applicable to tax deducted
under section 236Z

International Centre of Tax Excellence.

This section states that an institute shall be set up known as
International Centre of Tax Excellence. The functions of the Institute shall
be to help contribute to the development of tax policy, prepare model
national tax policy, deliver interdisciplinary research in tax administration
and policy, international tax cooperation, revenue forecasting, conduct
international seminars, workshops and conferences on the current issues
faced by tax authorities in the field of international taxation, capacity
building of Inland Revenue Officers, tax analysis, improve the design and
delivery of tax administration for maximising revenue within existing
provisions to close the tax gap or any other function as directed by the
Board or the Federal Government.
Further rules and policies of the center are described in the section.

Advance tax on cash withdrawal.

Adjustable advance tax @ 0.6% shall be deducted at the time of cash
withdrawal from a person whose name is not appearing in the active
taxpayers list at the time of withdrawal where the aggregated cash
withdrawal in a day exceeds 50 thousand rupees.

Advance tax on foreign domestic workers.

An advance tax of Rs. 200,000/- shall be collected from a foriegn national
at the time of renewal of visa by any agency. The said tax shall be
adjustable.

The tax deducted at the purchase of property shall not be applicable on a

non resident individual holding Pakistan Origin Card (POC) or National ID
Card for Overseas Pakistanis (NICOP) or Computerized National ID Card
(CNIC) who has acquired the said immovable property through a Foreign
Currency Value Account (FCVA) or NRP Rupee Value Account (NRVA)
maintained with authorized banks in Pakistan under the foreign
exchange regulations issued by the State Bank of Pakistan upon
submission of certificate as may be prescribed.
The section states that a company issuing bonus shares to the
shareholders shall withhold 10% of the bonus shares to be issued. The
withheld bonus shares shall only be issued to the shareholder if company
collect 10% of the value of the bonus shares issued including bonus
shares withheld.
The above said tax shall be deposited by the company within 15 days of
closure of books whether or not tax has been collected from
shareholder.
If shareholder does not make the payment in 15 days of the issuance the
company may proceed to dispose off the bonus shares withheld to the
extent it has paid tax in this regard.
Tax paid under this section shall be treated as final tax for the
shareholder.
(The above said 10% of the value shall be 20% in case of unregistered
person)
Ammendments to The First Schedule
Previous Ammended

Rate applicable to a company

Division IX Rate applicable to all the cases listed on PSX shall be 1% if it does
other than those described in the not fall within S.no. 1-3 and shall
S. no. 1-3 was 1.25% except be 1.25% in all other cases

Advance tax under section 148

shall be charged @ 6% of the
Part II import value by a commercial
Advance tax under section 148 importer on import of goods
shall be charged @ 5.5% of the classified in Part III of 12th
import value by an importer on Schedule. Other than commercial
import of goods classified in Part importer 5.5% shall still be
III of 12th Schedule. applicable.

Tax deducted at source under Tax deducted at source under

Part III Division II section 152(2A)(a) on payment to section 152(2A)(a) on payment to
non resident shall be in case of non resident shall be in case of
company 4% and in all other company 5% and in all other cases
cases 4.5% of the gross amount. 5.5% of the gross amount.

Part III Division II Tax deducted at source under Tax deducted at source under
section 152(2A)(b) on payment to section 152(2A)(b) on payment to
non resident for specified services non resident for specified services
shall be 3% of the gross amount. shall be 4% of the gross amount.

Tax deducted at source under Tax deducted at source under

Part III Division II section 152(2A)(b) on payment to section 152(2A)(b) on payment to
non resident for other than non resident for other than
specified services shall be, in case specified services shall be, in case
of company 8% and in all other of company 9% and in all other
cases 10% of the gross amount. cases 11% of the gross amount.

Tax deducted at source under Tax deducted at source under

Part III Division II section 152(2A)(c) on payment section 152(2A)(c) on payment
against contracts to non resident against contracts to non resident
for other than sports person shall for other than sports person shall
be 7% of the gross amount. be 8% of the gross amount.

Tax deducted at source under Tax deducted at source under

section 153(1)(a) on payment for section 153(1)(a) on payment for
Part III Division III goods other than specified shall goods other than specified shall
be in case of company 4% and in be in case of company 5% and in
all other cases 4.5% of the gross all other cases 5.5% of the gross
amount. amount.

Tax deducted at source under Tax deducted at source under

Part III Division III section 153(1)(b) on payment for section 153(1)(b) on payment for
specified services shall be 3% of specified services shall be 4% of
the gross amount. the gross amount.
 Tax deducted at source under Tax deducted at source under
section 153(1)(b) on payment for section 153(1)(b) on payment for
Part III Division III other than specified services shall other than specified services shall
be, in case of company 8% and be, in case of company 9% and in
in all other cases 10% of the gross all other cases 11% of the gross
amount. amount.

Tax deducted at source under Tax deducted at source under

section 153(1)(c) on payment for section 153(1)(c) on payment for
Part III Division III contracts other than contracts other than sportsperson
sportsperson shall be in case of shall be in case of company 7.5%
company 6.5% and in all other and in all other cases 8% of the
cases 7% of the gross amount. gross amount.

The rate of advance tax for export

Part III Division IV A The rate of advance tax for export of IT Services, IT Enabled Services
of IT Services, IT Enabled Services and Export of software shall be
and Export of software shall be 0.25% of the proceeds for tax
0.25% of the proceeds years 2024 to 2026 only
Tax shall be deducted @1% on Tax shall be deducted @5% on
Part IV Division XXVII foriegn payments through foriegn payments through
credit/debit card. credit/debit card.

Ammendments to The Second Schedule

The income of following

istitutions shall be exempt from
tax:
Addition to the clause 1) The Prime Minister's Relief
Part I Clause 66 Fund for Flood,
Earthquake and Other Calamities
2) Film and Drama Finance Fund
3) Export-Import Bank of Pakistan
4) Shaheed Mohtarma Benazir
Bhutto Institute
of Trauma, Karachi
5) Shaheed Zulfikar Ali Bhutto
Institute of
Science and Technology

Exemption extended from Tax

Part I Clause 99A Ammendment Year 2023-24 on gain on transfer
of immoveable property to any
type of REIT Scheme
Part I Clause 145A Ammendment Exemption extended for one
more Tax year.
Expemption under this clause is
Part I Clause 150 Addition to the clause also given to Alteraz Engineering
Consultants
Part I Clause 154 New Addition Exemption shall be given from Tax
Year 2024-28 to any agro based
newly established SME on or after
1st of July 2023, in a rural area

For Tax Year 2024-26 Exemption

on tax payable shall be granted to
Part III Caluse 21 New Addition a builder registered with
Directorate General of Designated
Non-Financial Business and
Professionls at an amount lower
of 10% of profit or gain or Rs
5,000,000/- regarding
construction plans approved on or
after 1st of July 2023.

For Tax Year 2024-26 Exemption

on tax payable shall be granted to
a Youth Enterprises established
Part III Caluse 22 New Addition on or after 1st of July 2023. In
case of Individual or AOP Lower of
50% of tax payable or
2,000,000/-. In case of company
Lower of 50% of tax payable or
5,000,000/-.

The provisions of section 113 shall

not apply to The Prime Minister's
Part IV Clause 11A Ammendment Relief Fund for Flood, Earthquake
and Other Calamities with effect
on and from the 5th August,
2022.
Part IV Clause 100 Omitted

The provisions of section 151 shall

not apply to The Prime Minister's
Part IV Clause 121 New Addition Relief Fund for Flood, Earthquake
and Other Calamities with effect
on and from the 5th August,
2022.

The provisions of section 236 shall

not apply to amount donated to
Part IV Clause 122 New Addition The Prime Minister's Relief Fund
for Flood, Earthquake and Other
Calamities through SMS, with
effect on and from the 5th
August, 2022.
 The provisions of section 148 shall
for a period of three months from
the 1st day of December, 2022
Part IV Clause 123 not apply to goods required and
imported for relief operation for
flood affectees, duly certified by
the National Disaster
Management Authority or the
Provincial Disaster Management
Authority.

The provisions of section 148 shall

Part IV Clause 124 not apply to tomato (PCT heading
0702.0000) and onion (PCT
heading 0703.1000) imported till
the 31st day of December, 2022.

Ammendments to The Fourth Schedule

The provisions of section 99D
Rule 6DB shall apply to the taxpayers under
New Rule this Schedule.

Ammendments to The Fifth Schedule

The provisions of section 99D
Rule 4AC shall apply to the taxpayers under
New Rule this Schedule.

Ammendments to The Seventh Schedule

Super tax to be charged on banks

Rule 7CA shall be at rates specified in
Second schedule from tax year
Amendment 2023 onwards
The provisions of section 99D
Rule 7CB shall apply to the taxpayers under
New Rule this Schedule.
Rule 7D, 7E, 7F The rule shall be applicable till Tax
Sub Rule 1 Amendment Year 2025 now

The taxable income arising from

additional advances for IT and IT
7G Enabled Services in Pakistan for
the tax years 2024 to 2025, shall
be taxed at the rate of 20%
instead of the rate provided in
Division II of Part 1 of the First
New Rule Schedule.
 Profit on debt and capital gains
from Federal Government’s
sovereign debt or a sovereign
Rule 8 Sub Rule 4 debt instrument shall be exempt
from tax chargeable under this
Ordinance, derived by any non-
resident banking company
approved by the Federal
Government under a sovereign
agreement for the purpose of this
New Sub Rule sub-rule.

The provisions of sub-rule (6A) of

Rule 8 Sub Rule 5 rule 6C shall not apply to a
banking company for tax year
New Sub Rule 2024.

Ammendments to The Eighth Schedule

Computation, collection and

payment of tax under section 4C.
– In addition to capital gains tax,
Rule 4A NCCPL shall also compute and
collect tax under section 4C at the
rates specified in Division IIB of
Part I of the First Schedule on the
amount of capital gains computed
under this Schedule in the
manner specified in this Schedule
New Rule and rules made thereunder.

Ammendments to The Thirteenth Schedule

63) The Prime Minister's Relief

Fund for Flood, Earthquake and
Other Calamities with effect on
and from the 5th August, 2022

64) Film and Drama Finance

Additions to the table Fund.”

Ammendments to The Fourteenth Schedule

 An SME shall be required to be
registered with FBR on IRIS portal
or Small and Medium Enterprises
Rule 2 Development Authority on its
SME registration portal (SMERP).
And Small and medium enterprise
engaged in IT services or IT
enabled services shall be required
to be registered with and duly
certified by the Pakistan Software
Export Board, in addition to
Amendments registration on SMERP.

If the turn over of a SME falls

Rule 3 between 250 million to 800
Million them tax will be charged
at the rate of 20% of the taxable
Additions to the rule income.

If the turn over of a SME falls

Rule 4 between 250 million to 800
Million them tax will be charged
at the rate of 0.75% of the gross
Additions to the rule turnover.
INCOME TAX ORDINANCE 2001
 INCOME TAX ORDINANCE 2001

Broadening the scope of definition of Permanent Establishment in Pakistan of non- resident person.

Re-imposition of 0.6% advance adjustable withholding tax on non-ATL persons on cash withdrawal.

Re-imposition of 10% final withholding tax on issuance of bonus shares by a company (20% for non-ATL).
Imposition of additional tax at the rate not exceeding fifty percent on income profit and gains of a person
or class of persons on account of extraordinary gains due to exogenous factors.
Foreign remittance limit increased from Rs.5,0000,000 to amount equal to Rupees 100 Thousand USD
Introduction of enabling provision for the purpose of effecting recovery of outstanding non-tax revenue
under any other statute or law by the Commissioner Inland Revenue.
0.5% increase in withholding tax rate for commercial importer on import of goods falling in Part III of
Twelfth Schedule to the Income Tax Ordinance, 2001.
Rationalization of Super Tax under section 4C to apply on all persons across the board on income above Rs.
150 (m): insertion of additional three new income slabs of Rs. 350(m) to Rs. 400(m), Rs. 400(m) to Rs.
500(m) and Rs. 500(m) above to be taxed at 6%, 8% and 10% respectively.
Increase in business turnover limit of manufacturing company from 250 million to 800 million for defined
as SMEs and inclusion of IT & ITeS in SMEs definition
Five years tax holiday for agro based industries being SMEs set up on or after 1st July, 2023 from tax year
2024 to tax year 2028.
Increase in withholding tax from 1% to 5% on payment to non-resident credit/debit card or prepaid card
holder.(2% to 10% for Non-ATL person).
10% reduction in tax liability or Rs. 5 (m) whichever is lower for a builder and 10% reduction or Rs. 1 (m)
whichever is lower for an individual for own construction of house for three years.
Waiver of 2% final withholding tax on purchase of immovable property for non- resident individual
POC/NICOP holder where immovable property is acquired through foreign remittances remitted from
abroad.
Concessionary tax rate of 20% on banking company’s income from additional advances to IT & ITeS sector
instead of standard rate of 39%.