INCOME TAX BASICS

Before Registration and Filing of your Income Tax Return, it is recommended that one
should establish basic understanding regarding these processes. Knowledge of basic
concepts would not only ensure that the tasks are performed easily but also in the
prescribed manner.

TAXABLE INCOME
Taxable Income means Total Income reduced by donations qualifying straight for
deductions and certain deductible allowances.

TOTAL INCOME
Total Income is the aggregate of Income chargeable to Tax under each head of Income.

HEAD OF INCOME
Under the Income Tax Ordinance, 2001, all Income are broadly divided into following five
heads of Income:

 Salary;
 Income from property;
 Income from business;
 Capital gains; and
 Income from Other Sources

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 :
o It is incorporated or formed by or under any law in force in Pakistan;
o The control and management of its affairs is situated wholly in Pakistan at any
time in the year; or
o It is a Provincial Government or a local Government in Pakistan.
o An individual is Resident for a Tax Year if he/she:
o Is present in Pakistan for a period of, or periods amounting in aggregate to, 183
days or more in the Tax Year; or
o 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:
 i. A co-operative society, a finance society or any other society;
ii. A non-profit organization;
iii. 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 Provincial Government;
 A Local Government in Pakistan;
 A Small Company

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 any body 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, 2019 shall be
denoted by calendar year 2019. It is called Normal Tax Year.

SPECIAL TAX YEAR

Means any period of twelve months and is denoted by the calendar year relevant to the
Normal Tax Year in which closing date of the Special Tax Year falls. For example, Tax Year
for the period of twelve months from January 01, 2017 to December 31, 2017 shall be
denoted by calendar year 2018 and the period of twelve months from October 01, 2017 to
September 30, 2018 shall be denoted by calendar year 2019.
Basic concepts on Income Tax would help answer a lot of fundamental questions, avoiding
unnecessary mistakes or errors that normally arise during Registration and Filing of Income
Tax Return.
 REQUIREMENTS BEFORE
REGISTRATION
AN INDIVIDUAL NEEDS TO
ENSURE THAT THE FOLLOWING
INFORMATION IS AVAILABLE
BEFORE STARTING E-
ENROLLMENT.
Requirements of e-enrollment for an individual are as follows:

 CNIC/NICOP/Passport number
 Cell phone number in use
 Active e-mail address
 Nationality
 Residential address
 Accounting period
 In case of business income
o business name
o business address
 Principal business activity
 Name and NTN of employer in case of salary income
 Address of property in case of property income
ONLINE REGISTRATION
Online registration is available only for:

a. Individual and not for Association of Person or Company;

b. Income Tax and not for Sales Tax;

Before starting online registration, the Taxpayer must have:

a. Read User Guide;

b. Income Tax and not for Sales Tax;
c. A computer, scanner and internet connection;
d. A cell phone with SIM registered against their own CNIC;
e. A personal email address belonging to them;
f. Scanned pdf files of:
I. Certificate of maintenance of personal bank account in his own name;
II. Evidence of tenancy / ownership of business premises, if having a business;
III. Paid utility bill of business premises not older than 3 months, if having a
business.
g. Online registration is available at Iris

REGISTRATION AT FACILITATION
COUNTERS OF TAX HOUSES
Registration at Facilitation Counters of Tax Houses is available for all:

a. Individual, Association of Person and Company;

b. Income Tax and Sales Tax;

FOR REGISTRATION OF AN
INDIVIDUAL, THE INDIVIDUAL
MUST:
a. Personally go to any Facilitation Counter of any Tax House;
b. Take the following documents with him:
i. Original CNIC;
ii. Cell phone with SIM registered against his own CNIC;
iii. Personal Email address belonging to him;
iv. Original certificate of maintenance of personal bank account in his own name;
 v. Original evidence of tenancy / ownership of business premises, if having a
business;
vi. Original paid utility bill of business premises not older than 3 months, if having a
business.

FOR REGISTRATION OF AN AOP,

ANYONE OF THE MEMBERS /
PARTNERS MUST:
a. Personally go to any Facilitation Counter of any Tax House
b. Take the following documents with him:
i. Original partnership deed, in case of Firm;
ii. Original registration certificate from Registrar of Firms, in case of Firm.
iii. CNICs of all Members / Partners;
iv. Original letter on letterhead of the AOP signed by all Members / Partners,
authorizing anyone of the Members / Partners for Income / Sales Tax
Registration;
v. Cell phone with SIM registered against his own CNIC but not already registered
with the FBR;
vi. Email address belonging to the AOP;
vii. Original certificate of maintenance of bank account in AOP’s name;
viii. Original evidence of tenancy / ownership of business premises, if having a
business;
ix. Original paid utility bill of business premises not older than 3 months, if having a
business.

FOR REGISTRATION OF A
COMPANY, THE PRINCIPAL
OFFICER MUST:
a. Personally go to any Facilitation Counter of any Tax House
b. Take the following document with him:
i. Incorporation Certificate of the Company;
ii. CNICs of all Directors;
iii. Original letter on letterhead of the company signed by all Directors, verifying the
Principal Officer and authorizing him for Income Tax / Sales Tax Registration;
iv. Cell phone with SIM registered against his own CNIC but not already registered
with the FBR;
v. Email address belonging to the Company;
vi. Original certificate of maintenance of bank account in Company’s name;
vii. Original evidence of tenancy / ownership of business premises, if having a
business;
viii. Original paid utility bill of business premises not older than 3 months, if having a
business.