INCOME TAX ORDINANCE 2001 TABLE OF CONTENTS

1 INCOME TAX ORDINANCE 2001. TABLE OF CONTENTS . CHAPTER I. PRELIMINARY. 1. Short title, extent and commencement 2. Definitions 3. ORDINANCE to override other laws CHAPTER II. CHARGE TO TAX. 4. Tax on taxable INCOME 5. Tax on dividends 6. Tax on certain payments to non-residents 7. Tax on shipping and air transport INCOME of a non-resident person 8. General provisions relating to taxes imposed under sections 5, 6 and 7. CHAPTER III. TAX ON TAXABLE INCOME . PART I. COMPUTATION OF TAXABLE INCOME . 9. Taxable INCOME 10. Total INCOME 11. Heads of INCOME PART II. HEAD OF INCOME . SALARY. 12. Salary 13. Value of perquisites 14. Employee share schemes PART III. HEAD OF INCOME . INCOME FROM PROPERTY. 15. INCOME from property 16. Non-adjustable amounts received in relation to buildings 17.

2 Deductions in computing INCOME chargeable under the head " INCOME from property". 2. PART IV. HEAD OF INCOME . INCOME FROM BUSINESS. Division I. INCOME from Business 18. INCOME from business 19. Speculation business Division II. Deductions General Principles 20. Deductions in computing INCOME chargeable under the head " INCOME from Business". 21. Deductions not allowed Division III. Deductions Special Provisions 22. Depreciation 23. Initial allowance 24. Intangibles 25. Pre-commencement expenditure 26. Scientific research expenditure 27. Employee training and facilities 28. Profit on debt, financial costs and lease payments 29. Bad debts 30. Profit on non-performing debts of a banking company or development finance institution 31.

3 Transfer to participatory reserve Division IV. Tax Accounting 32. Method of accounting 33. Cash-basis accounting 34. Accrual-basis accounting 35. Stock-in-trade 36. Long-term contracts 3. PART V. HEAD OF INCOME . CAPITAL GAINS. 37. Capital gains 38. Deduction of losses in computing the amount chargeable under the head "Capital Gains". PART VI. HEAD OF INCOME . INCOME FROM OTHER SOURCES. 39. INCOME from other sources 40. Deductions in computing INCOME chargeable under the head " INCOME from Other Sources". PART VII. EXEMPTIONS AND TAX CONCESSIONS. 41. Agricultural INCOME 42. Diplomatic and United Nations exemptions 43. Foreign government officials 44. Exemptions under international agreements 45. President's honours 46. Profit on debt 47.

4 Scholarships 48. Support payments under an agreement to live apart 49. Federal and Provincial Government, and local authority INCOME 50. Foreign-source INCOME of short-term resident individuals 51. Foreign-source INCOME of returning expatriates 52. Omitted by Finance ORDINANCE , 2002. 53. Exemptions and tax concessions in the Second Schedule 54. Exemptions and tax provisions in other laws 55. Limitation of exemption PART VIII. LOSSES. 56. Set off of losses 57. Carry forward of business losses 58. Carry forward of speculation business losses 59. Carry forward of capital losses 4. PART IX. DEDUCTIBLE ALLOWANCES. 60. Zakat PART X. TAX CREDITS. 61. Charitable donations 62. Investment in shares 63. Retirement annuity scheme 64. Profit on debt 65.

5 Miscellaneous provisions relating to tax credits CHAPTER IV. COMMON RULES. PART I. GENERAL. 66. INCOME of joint owners 67. Apportionment of deductions 68. Fair market value 69. Receipt of INCOME 70. Recouped expenditure 71. Currency conversion 72. Cessation of source of INCOME 73. Rules to prevent double derivation and double deductions PART II. TAX YEAR. 74. Tax year PART III. ASSETS. 75. Disposal and acquisition of assets 76. Cost 77. Consideration received 78. Non-arm's length transactions 79. Non-recognition rules 5. CHAPTER V. PROVISIONS GOVERNING PERSONS. PART I. CENTRAL CONCEPTS. Division I. Persons 80. Person Division II. Resident and Non-resident Persons 81. Resident and non-resident persons 82. Resident individual 83.

6 Resident company 84. Resident association of persons Division III. Associates 85. Associates PART II. INDIVIDUALS. Division I. Taxation of Individuals 86. Principle of taxation of individuals 87. Deceased individuals Division II. Provisions Relating to Averaging 88. An individual as a member of an association of persons 89. Authors Division III. INCOME Splitting 90. Transfers of assets 91. INCOME of a minor child PART III. ASSOCIATIONS OF PERSONS. 92. Principles of taxation of associations of persons 93. Taxation of members of an association of persons 6. PART IV. COMPANIES. 94. Principles of taxation of companies 95. Disposal of business by individual to wholly-owned company 96. Disposal of business by association of persons to wholly-owned company 97.

7 Disposal of asset between wholly-owned companies PART V. COMMON PROVISIONS APPLICABLE TO ASSOCIATIONS OF PERSONS. AND COMPANIES. 98. Change in control of an entity CHAPTER VI. SPECIAL INDUSTRIES. PART I. INSURANCE BUSINESS. 99. Special provisions relating to insurance business PART II. OIL, NATURAL GAS AND OTHER MINERAL DEPOSITS. 100. Special provisions relating to the production of oil and natural gas, and exploration and extraction of other mineral deposits CHAPTER VII. INTERNATIONAL. PART I. GEOGRAPHICAL SOURCE OF INCOME . 101. Geographical source of INCOME PART II. TAXATION OF FOREIGN-SOURCE INCOME OF RESIDENTS. 102. Foreign source salary of resident individuals 103. Foreign tax credit 104. Foreign losses PART III. TAXATION OF NON-RESIDENTS.

8 105. Taxation of a permanent establishment in Pakistan of a non-resident person 106. Thin capitalization 7. PART IV. AGREEMENTS FOR THE AVOIDANCE OF DOUBLE TAXATION. AND. PREVENTION OF FISCAL EVASION. 107. Agreements for the avoidance of double taxation and prevention of fiscal evasion CHAPTER VIII. ANTI-AVOIDANCE. 108. Transactions between associates 109. Re-characterization of INCOME and deductions 110. Salary paid by private companies 111. Unexplained INCOME or assets 112. Liability in respect of certain security transactions CHAPTER IX. MINIMUM TAX. 113. Minimum tax on the INCOME of certain persons CHAPTER X. PROCEDURE. PART I. RETURNS. 114. Return of INCOME 115. Persons not required to furnish a return of INCOME 116. Wealth statement 117.

9 Notice of discontinued business 118. Method of fur nishing returns and other documents 119. Extension of time for furnishing returns and other documents PART II. ASSESSMENTS. 120. Assessments 121. Assessment of persons who have not furnished a return 122. Amendment of assessments 123. Provisional assessment in certain cases 124. Assessment giving effect to an order 124A. Powers to tax authorities to modify orders, etc. 125. Assessment in relation to disputed property 126. Evidence of assessment 8. PART III. APPEALS. 127. Appeal to the Commissioner (Appeals). 128. Procedure in appeal 129. Decision in appeal 130. Appointment of the appellate Tribunal 131. Appeal to the appellate Tribunal 132. Disposal of appeals by the appellate Tribunal 133.

10 Reference to High Court 134. Appeal to Supreme Court 135. Omitted by Finance ORDINANCE , 2002. 136. Burden of proof PART IV. COLLECTION AND RECOVERY OF TAX. 137. Due date for payment of tax 138. Omitted by Finance ORDINANCE , 2002. 138. Recovery of tax out of property and through arrest of taxpayer 138A. Recovery of tax by District Officer (Revenue). 139. Collection of tax in the case of private companies and associations of persons 140. Recovery of tax from persons holding money on behalf of a taxpayer 141. Liquidators 142. Recovery of tax due by non-resident member of an association of persons 143. Non-resident ship owner or charterer 144. Non-resident aircraft owner or charterer 145. Collection of tax from persons leaving Pakistan permanently 146.