INCOME TAX ORDINANCE, 2001 AMENDED UPTO …

1 INCOME TAX ordinance , 2001 amended upto TABLE OF CONTENTS. SECTIONS CHAPTER 1 PAGE NO. PRELIMINARY. 1. Short title, extent and commencement 1. 2. Definitions 1. 3. ordinance to override other laws 24. CHAPTER II. CHARGE OF TAX. 4. Tax on taxable INCOME 25. 4B. Super tax for rehabilitation of temporary displaced 26. persons. 5. Tax on dividends 27. 5A. Tax on undistributed profits. 27. 5AA. Tan on return on investments in Sukuks. 28. 6. Tax on certain payments to non-residents 28. 7. Tax on shipping and air transport INCOME of a non- 29. resident person 7A. Tax on shipping of a resident person. 29. 7B. Tax on profit on debt 30. 7C. Tax on builders 30. 7D. Tax on developers 31. 8. General provisions relating to taxes imposed under 32. sections 5, 6 and 7. CHAPTER III.

2 TAX ON TAXABLE INCOME . PART I. COMPUTATION OF TAXABLE INCOME . 9. Taxable INCOME 34. 10. Total INCOME 34. 11. Heads of INCOME 34. PART II. HEAD OF INCOME . SALARY. 12. Salary 36. 13. Value of perquisites 38. 14. Employee share schemes 42. PART III. HEAD OF INCOME . INCOME FROM PROPERTY. 15. INCOME from property 44. 15A. Deductions in computing INCOME chargeable under the 45. head INCOME from Property . 16. Non-adjustable amounts received in relation to buildings 47. 17. Omitted by the Finance Act, 2006. PART IV. HEAD OF INCOME . INCOME FROM BUSINESS. Division I. INCOME from Business 18. INCOME from business 49. 19. Speculation business 50. Division II. Deductions General Principles 20. Deductions in computing INCOME chargeable under the 52. head " INCOME from Business".

3 21. Deductions not allowed 52. Division III. Deductions Special Provisions 22. Depreciation 56. 23. Initial allowance 60. 23A. First Year Allowance 61. 23B. Accelerated depreciation to alternate energy projects. 61. 24. Intangibles 61. 25. Pre-commencement expenditure 64. 26. Scientific research expenditure 64. 27. Employee training and facilities 65. 28. Profit on debt, financial costs and lease payments 65. 29. Bad debts 67. 29A Provision regarding consumer loans 68. 30. Profit on non-performing debts of a banking company or 69. development finance institution 31. Transfer to participatory reserve 69. Division IV. Tax Accounting 32. Method of accounting 71. 33. Cash-basis accounting 71. 34. Accrual-basis accounting 71. 35. Stock-in-trade 72. 36. Long-term contracts 74.

4 PART V. HEAD OF INCOME . CAPITAL GAINS. 37. Capital gains 76. 37A. Capital gain on disposal of securities 78. 38. Deduction of losses in computing the amount 79. chargeable under the head Capital Gains . PART VI. HEAD OF INCOME . INCOME FROM OTHER SOURCES. 39. INCOME from other sources 81. 40. Deductions in computing INCOME chargeable under the 83. head INCOME from Other Sources . PART VII. EXEMPTIONS AND TAX CONCESSIONS. 41. Agricultural INCOME 85. 42. Diplomatic and United Nations exemptions 85. 43. Foreign government officials 86. 44. Exemptions under international agreements 86. 45. President's honours 87. 46. Profit on debt 87. 47. Scholarships 88. 48. Support payments under an agreement to live apart 88. 49. Federal Governments, Provincial Government and Local 88.

5 Government 50. Foreign-source INCOME of short-term resident individuals 89. 51. Foreign-source INCOME of returning expatriates 89. 52. Omitted by Finance ordinance , 2002. 53. Exemptions and tax concessions in the Second 90. Schedule 54. Exemptions and tax provisions in other laws 91. 55. Limitation of exemption 92. PART VIII. LOSSES. 56. Set off of losses 93. 56A. Set off of losses of companies operating hotels. 93. 57. Carry forward of business losses 93. 57A. Set off of business loss consequent to amalgamation 94. 58. Carry forward of speculation business losses 95. 59. Carry forward of capital losses 96. 59A. Limitations on set off and carry forward of losses 96. 59AA. Group Taxation. 97. 59B. Group relief 98. PART IX. DEDUCTIBLE ALLOWANCES. 60. Zakat 101. 60A.

6 Workers' Welfare Fund 101. 60B. Workers' Participation Fund 101. 60C. Deductible allowance for profit on debt 101. 60D. Deductible allowance for education expenses 102. PART X. TAX CREDITS. 61. Charitable donations 103. 62. Tax credit for investment in shares and insurance 104. 62A. Tax credit for investment in health insurance 106. 63. Contribution to an Approved Pension Fund. 107. 64. Omitted by Finance Act, 2015. 64A Section re-numbered as 60C. 64AB Section re-numbered as 60D. 64B. Tax credit for employment generation by manufacturers 109. 65. Miscellaneous provisions relating to tax credits 110. 65A. Omitted by the Finance Act, 2017. 65B. Tax credit for investment 111. 65C. Tax credit for enlistment 113. 65D. Tax credit for newly established industrial undertakings 113.

7 65E. Tax credit for industrial undertakings established before 115. the first day of July, 2011. CHAPTER-IV. COMMON RULES. PART I. GENERAL. 66. INCOME of joint owners 118. 67. Apportionment of deductions 118. 68. Fair market value 119. 69. Receipt of INCOME 120. 70. Recouped expenditure 120. 71. Currency conversion 120. 72. Cessation of source of INCOME 120. 73. Rules to prevent double derivation and double 121. deductions PART II. TAX YEAR. 74. Tax year 122. PART III. ASSETS. 75. Disposal and acquisition of assets 124. 76. Cost 124. 77. Consideration received 126. 78. Non-arm's length transactions 127. 79. Non-recognition rules 127. CHAPTER V. PROVISIONS GOVERNING PERSONS. PART I. CENTRAL CONCEPTS. Division I. Persons 80. Person 129. Division II. Resident and Non-resident Persons 81.

8 Resident and non-resident persons 131. 82. Resident individual 131. 83. Resident company 131. 84. Resident association of persons 132. Division III. Associates 85. Associates 132. PART II. INDIVIDUALS. Division I. Taxation of Individuals 86. Principle of taxation of individuals 134. 87. Deceased individuals 134. Division II. Provisions Relating to Averaging 88. An individual as a member of an association of persons 135. 88A. Omitted by Finance Act, 2014. 89. Authors 135. Division III. INCOME Splitting 90. Transfers of assets 136. 91. INCOME of a minor child 137. PART III. ASSOCIATIONS OF PERSONS. 92. Principles of taxation of associations of persons 138. 93. Omitted by the Finance Act, 2007. PART IV. COMPANIES. 94. Principles of taxation of companies 139. 95. Disposal of business by individual to wholly-owned 139.

9 Company 96. Disposal of business by association of persons to 141. wholly-owned company 97. Disposal of asset between wholly-owned companies 143. 97A. Disposal of asset under a scheme of arrangement and 144. reconstruction. PART V. COMMON PROVISIONS APPLICABLE TO. ASSOCIATIONS OF PERSONS AND COMPANIES. 98. Change in control of an entity 146. PART VA. TAX LIABILITY IN CERTAIN CASES. 98A. Change in the constitution of an association of persons 147. 98B. Discontinuance of business or dissolution of an 147. association of persons 98C. Succession to business, otherwise than on death 147. CHAPTER-VI. SPECIAL INDUSTRIES. PART I. INSURANCE BUSINESS. 99. Special provisions relating to insurance business 149. 99A. Special provisions relating to traders 149. PART II. OIL, NATURAL GAS AND OTHER MINERAL.

10 DEPOSITS. 100. Special provisions relating to the production of oil and 151. natural gas, and exploration and extraction of other mineral deposits 100A. Special provisions relating to banking business. 151. 100B. Special provision relating to capital gain tax. 152. 100C. Tax credit for certain persons 152. CHAPTER VII. INTERNATIONAL. PART I. GEOGRAPHICAL SOURCE OF INCOME . 101. Geographical source of INCOME 156. 102. Foreign source salary of resident individuals 160. 103. Foreign tax credit 160. 104. Foreign losses 161. PART III. TAXATION OF NON-RESIDENTS. 105. Taxation of a permanent establishment in Pakistan of a 162. non-resident person 106. Thin capitalization 163. PART IV. AGREEMENTS FOR THE AVOIDANCE OF. DOUBLE TAXATION AND. PREVENTION OF FISCAL EVASION. 107.