By Tax Ordinance 2001 , the income classified into different types which include Income from property, Salary, income from a business, income from any other sources or capital gains on investments.

The taxation structure of a country determines the strength of the economy. Under the law, it is a responsibility of the Pakistani citizens to declare their assets, document the annual tax returns and pay due taxes timely. The new tax reforms are announced while ago, to restructure the taxation system in Pakistan by making it easier, simpler and convenient in order to get people under tax net by encouraging them to document tax returns and pay the due taxes timely.

A common misconception is revolving among people that tax paying is optional. However, tax evasion is the criminal offense and the tax evader may be penalized for the violation of the law.

The tax regulations in Pakistan are defined in the Income Tax Ordinance 2001. The Federal Board of Revenue (FBR) is responsible to regulate the taxation system in the country. For documenting tax returns, a person must have NTN registration.

By Federal Budget of 2019-2020 presented by Government of Pakistan, following tax rates and tax slabs are applicable for salaried and non-salaried persons for the 2019-2020:

TAX SLABS FOR SALARIED PERSONS

If an individual’s income is under the ‘Salary’ head exceeds 75% of its taxable income, the mentioned below tax rates will be applied:

Taxable Income Rate of Tax:

1. If the taxable income remains below Rs. 600,000 – Income tax rate= 0%.

2. If taxable income surpasses Rs. 600,000 but below to Rs. 1,200,000 – Income tax rate= 5% on the amount above to Rs. 600,000.

3. If taxable income surpasses Rs. 1,200,000 but below to Rs. 1,800,000 – Income tax rate= Rs. 30,000 plus 10% on the amount above to Rs. 1,200,000.

4. If taxable income surpasses Rs. 1,800,000 but below to Rs. 2,500,000 – Income tax rate= Rs. 90,000 plus 15% on the amount above to Rs. 1,800,000.

5. If taxable income surpasses Rs. 2,500,000 but below to Rs. 3,500,000 – Income tax rate= Rs. 195,000 plus 17.5% on the amount above to Rs. 2,500,000.