GOVERNMENT OF PAKISTAN

FEDERAL BOARD OF REVENUE

INCOME TAX MANUAL

PART I

INCOME TAX ORDINANCE, 2001

AMENDED UPTO 30th JUNE, 2024

45
INCOME TAX ORDINANCE, 2001 AMENDED UPTO 30.06.2024
TABLE OF CONTENTS

CHAPTER 1 PAGE
SECTIONS
PRELIMINARY NO.
1. Short title, extent and commencement 1
2. Definitions 1
3. Ordinance to override other laws 30
CHAPTER II
CHARGE OF TAX
4. Tax on taxable income 31
4A. Omitted by Finance Act 2014 32
4AB. Subject to this Ordinance 32
4B. Super tax for rehabilitation of temporary displaced 32
persons.
4C. Super tax on high earning persons. 33
5. Tax on dividends 34
5A. Tax on undistributed Profits. 35
5AA. Tan on return on investments in Sukuks. 35
6. Tax on certain payments to non-residents 36
7. Tax on shipping and air transport income of a non- 37
resident person
7A. Tax on shipping of a resident person. 37
7B. Tax on profit on debt 38
7C. Tax on builders 38
7D. Tax on developers 39
7E. Tax on deemed income. 40
7F. Tax on builders and developers. 42
8. General provisions relating to taxes imposed under 43
sections 5, 6 and 7
CHAPTER III
TAX ON TAXABLE INCOME

PART I
COMPUTATION OF TAXABLE INCOME
9. Taxable income 45
10. Total income 45
11. Heads of income 45
 PART II
HEAD OF INCOME
SALARY
12. Salary 47
13. Value of perquisites 49
14. Employee share schemes 53
PART III
HEAD OF INCOME
INCOME FROM PROPERTY
15. Income from property 55
15A. Deductions in computing income chargeable under 56
the head “Income from Property”
16. Non-adjustable amounts received in relation to 59
buildings.
17. Omitted by the Finance Act, 2006. 59

PART IV
HEAD OF INCOME
INCOME FROM BUSINESS

Division I
Income from Business
18. Income from business 60
19. Speculation business 62
Division II
Deductions
General Principles
20. Deductions in computing income chargeable under 63
the head "Income from Business"
21. Deductions not allowed 63
Division III
Deductions
Special Provisions
22. Depreciation 68
23. Initial allowance 72
23A. Omitted by the Finance Act, 2021 73
23B. Accelerated depreciation to alternate energy 73
projects.
24. Intangibles 73
25. Pre-commencement expenditure 76
26. Scientific research expenditure 76
27. Employee training and facilities 77
28. Profit on debt, financial costs and lease payments 77
29. Bad debts 79
29A Provision regarding consumer loans 80
30. Profit on non-performing debts of a banking 81
company or development finance institution
31. Transfer to participatory reserve 81
Division IV
Tax Accounting
32. Method of accounting 83
33. Cash-basis accounting 83
34. Accrual-basis accounting 83
35. Stock-in-trade 84
36. Long-term contracts 86
PART V
HEAD OF INCOME
CAPITAL GAINS
37. Capital gains 87
37A. Capital gain on disposal of securities 91
38. Deduction of losses in computing the amount 93
chargeable under the head “Capital Gains”
PART VI
HEAD OF INCOME
INCOME FROM OTHER SOURCES
39. Income from other sources 94
40. Deductions in computing income chargeable under 96
the head “Income from Other Sources”
PART VII
EXEMPTIONS AND TAX CONCESSIONS
41. Agricultural income 98
42. Diplomatic and United Nations exemptions 99
43. Foreign government officials 99
44. Exemptions under international agreements 99
44A. Exemption under Foreign Investment (Promotion 100
and Protection) Act, 2022 (XXXV of 2022).
45. President’s honours 101
46. Profit on debt 101
47. Scholarships 102
48. Support payments under an agreement to live apart 102
49. Federal Governments, Provincial Government and 102
Local Government
50. Foreign-source income of short-term resident 103
individuals
51. Foreign-source income of returning expatriates 103
52. Omitted by Finance Ordinance, 2002 103
53. Exemptions and tax concessions in the Second 104
Schedule
54. Exemptions and tax provisions in other laws 105
55. Limitation of exemption 106
PART VIII
LOSSES
56. Set off of losses 107
56A. Set off of losses of companies operating hotels. 107
57. Carry forward of business losses 107
57A. Set off of business loss consequent to 109
amalgamation
58. Carry forward of speculation business losses 110
59. Carry forward of capital losses 110
59A. Limitations on set off and carry forward of losses 111
59AA. Group Taxation. 112
59B. Group relief 113
59C. Omitted by Finance Act, 2022 115
PART IX
DEDUCTIBLE ALLOWANCES
60. Zakat 116
60A. Workers’ Welfare Fund 116
60B. Workers’ Participation Fund 116
60C. Omitted by the Finance Act, 2022. 117
60D. Deductible allowance for education expenses 117
PART X
TAX CREDITS
61. Charitable donations 118
62. Omitted by the Finance Act, 2022. 119
62A. Omitted by the Finance Act, 2022. 121
63. Contribution to an Approved Pension Fund. 121
64. Omitted by Finance Act, 2015. 123
64A Section re-numbered as 60C 123
64AB Section re-numbered as 60D 123