Income Tax Rates in Pakistan 2020-21

income tax rates 2021

Here are the income tax rates in Pakistan for year 2022-21

Also Read: What is withholding tax

Important Note:

Please note as for these income tax rates in Pakistan where a persons is not appearing in the active taxpayers’ list, the rate of tax required to be deducted or collected, as the case may be, shall be increased by hundred percent of the rate specified to be deducted or collected. However, these provisions shall not apply on tax collectible or deductible in case of the following sections.

  • Tax deducted under section 149
  • Tax deducted under section 152 other than sub-section (1), (1AA), (2), (2A)(b) and (2A)(c) of section 152
  • Tax collected or deducted under section 154
  • Tax deducted under section 156B
  • Tax deducted under section 155
  • Tax deducted under section 231A
  • Tax deducted under section 231AA
  • Tax collected under section 233AA
  • Tax deducted under section 235
  • Tax deducted under section 235A
  • Tax collected under section 235B
  • Tax collected under section 236
  • Tax collected under section 236B
  • Tax collected under section 236D
  • Tax collected under section 236F
  • Tax collected under section 236I
  • Tax collected under section 236J
  • Tax collected under section 236L
  • Tax collected under section 236P
  • Tax collected under section 236Q
  • Tax collected under section 236R
  • Tax collected under section 236U
  • Tax collected under section 236V
  • Tax collected under section 236X

Pakistan Customs Computerized System (PACCS)

Pakistan Custom Computerized System

Pakistan Customs Computerized System (PACCS) is one composed system covering all procedures, activities, and techniques relating to customs and custom tax.

A need for a computerized system was felt to redo and change the entire framework utilizing data Technology and business process reengineering after facing many issues by the Pakistan Customs Administration.


The purpose of the Customs Reform Process was to enhance the organizational performance of Pakistan Customs, transforming it into a modern organization that is performing its duties in the best possible manner and in accordance with international standards. Since international cargo clearance is the core of basic customs, the best way to measure the performance of a customs organization is to measure its dwell time.

KEY HIGHLIGHTS OF THE SYSTEM:

  1. It covers the entire field of customs activities.
  2. PACCS is ONE WINDOW OPERATION according to which declarants do not have to leave the comfort of their office for cargo Clearance from the port over the web anywhere inside or outside Pakistan.
  3. A concept of a completely paperless environment as all documents except in outer correspondences with specific foundations like the courts are generated by the system without any manual need.
  4. All information is organized and is redesigned distinctly through specific and committed input points. At the customer end, the information input is through drop-down menus and codes which helps to eliminate input mistakes.
  5. The exchange of all trade with customary partners is electronic
  6. Rapid clearance of cargo within 24/7 hours within hours of arrival.
  7. Self-assess duties and taxes and exclude customs before filing a declaration.
  8. Online Cargo Clearance Status Report.
  9. Online and instant duty drop approval
  10. Electronic filing and refund approval.
  11. Trouble-free and selective examination based on risk management
  12. Manifest data online.
  13. Secure assessment and evaluation condition.
  14. It is perfect with CSI and ISPS.
  15. No un-receipted costs.

The above impacts are being accomplished by the ideal utilization of data innovation. In IT phrasing, PACCS has an expert decision-making system.

For more information related to Customs, please visit Customs Basics.





What is the custom tax in Pakistan?

custom tax in pakistan

The custom tax in Pakistan is defined as an indirect tax levied on import and export of goods is known as customs duty tax, also classified as import duty and export duty respectively.
Before registering and performing the various customs procedures, it is recommended that individuals familiarize themselves with all the basic concepts related to these procedures. A basic understanding of these concepts will not only ensure that things are done smoothly but also in a consistent manner.

Recommended: Property Tax in Pakistan 2019-20

Pakistan Custom Functions:

Custom tax in Pakistan is entrusted with guaranteeing that the following tasks are done in a lawfully endorsed way:

  • Trade Regulator

  • Trade Facilitation

  • Import & Export of legitimate cargo

  • Revenue Collection

  • Preventive (Control of contraband Goods)

TERMINOLOGies and definitions

Account:
“Account” signifies all books, records, correspondence, bank and other budget summaries.

Act:
“Act” means the Customs Act, the Act number IV of 1969 which is agreed on 3rd March 1969.

Decision authority:
Any authority which is eligible to pass an order under the Customs Act, 1969.

Appropriate officer:
An officer whose specific duties have been assigned under the Customs Act, 1969.

Collector:
“Collector”, “Additional Collector”, “Deputy Collector” and “Assistant Collector “meant a person who collects customs and is designated under Section 3 of the Act to an area of ​​its jurisdiction.

Customs airport /Customs port:
Any airport or port designated by the Board as a customs airport or board for clearance of imported goods in Pakistan.

Duties:
“Duties” means customs duties under the first schedule of the Customs Act, 1969.

Importer:
An importer is a person who imports goods and is responsible for completing the necessary legal import customs clearance procedures and formal commitments upon arrival of the goods in the country.

Pakistan Customs Computerized System(PACCS):
The PACC is a coordinated framework that covers all exercises and procedures identified with customs as defined in clause (IA) of section 2 of the Customs Act, 1969 (IV of 1969).

Vehicle:
Vehicle signifies an engine vehicle, motorcycle, van, microbus, transport, jeep, truck, and tractor with trailer or semi-trailer, etc.


Pakistan Customs is one of the elite cadres of Pakistan’s civil services. It is serving as Pakistan’s border guard against the movement of illicit goods and encourages substandard trade. It gave a significant wellspring of income to the Government of Pakistan as assessments. It also helps protect the domestic industry and boost trade.

Also for your reference, please check out the following documents for more information:
1. Pakistan Customs Tarif 2019-20
2. Fifth Schedule to the Customs Act, 1969 (2019-20)






 







Tax Appeals in Pakistan

tax appeals in pakistan

What is Tax Appeal:

Most of the tax appeals in Pakistan arise between taxpayers and tax collectors (Inland Revenue Department) over the verification of the amount of taxable income and the imposition of default surcharges and penalties on it.

Right of Appeal:

To resolve such disputes, the law provides the procedure, which gives taxpayers the right to appeal to the Commissioner (Appeals) and, if still not satisfied, then there is more right to appeal to the high courts.

Also Read: Property Tax In Pakistan 2019-20

Who can appeal/Eligibility:

  1. Any individual disappointed with any order passed by a Commissioner/Officer Inland Revenue has the privilege to appeal.


  2. On account of an individual, the individual himself.


  3. On account of the Association of Persons (AOP), any partner or individual from the Association.

  4. On account of any company any the Principle officer


  5. On account of the deceased person, any legal representative of the deceased.


  6. On account of a person with a legal disability or unrelated or non-resident person, his / her representative.

Requirements for Making Tax Appeals in Pakistan:

In order to appeal, the person has to pay tax on the declared income along with the return of income.
Documents required to file an appeal with the Commissioner (Appeals) are:

1.      Appropriately checked from of Appeal in copy 
2.      Grounds of Appeal in copy 
3.      Two duplicates of the Order against which an appeal is filed. 
4.      Two duplicates of Notice of Demand issused u/s 137(2)
5.      Certificate of communication of memorandum/form of appeal and grounds of appeal to the Officer who issued the order.
6.      Certificate of service of order
7.      Proof of deposited appeal fee

8.      Powerof Attorney

Time limit for appeal:

The limitation of appeal filling is before the Commissioner (Appeals) is thirty (30) days from the date of receipt of the notice of demand identifying with an assessment, penalty, or some other enforcement action.

Source: Income Tax Appeals – FBR



Property tax in Pakistan 2019-20

Property tax in Pakistan

Property tax in Pakistan is a tax that is owned by an individual or another legal entity, such as a corporation. Property taxes are paid by the property owner calculated by the government on property value and location basis.

Before going into the changes in property tax for the year 2019-20, the government has done, we need to understand what kind of taxes apply in Pakistan.

Types of Tax:

Basically, there are four types of tax:
• Capital Gains Tax
• Capital Value Tax
• Stamp Duty
• Withholding tax

Concept Of Tax Year:

Basically, the tax year is 12 months but for different from the year that starts in January and ends in December. The tax year 2019 starts from 01 July 2018 to 30 June 2019. The tax year ends on June 30. The tax year 2020 begins on July 1, 2019, and ends on June 30, 2020.

Amount of Tax Needs to Pay While Selling A Property:

When you are selling property in Pakistan, you will need to pay capital gains tax on the profit.

Capital Gain tax:

This is the tax that the seller has to pay. When the seller makes a profit when selling the property, it is the same capital that is taxable. Capital gains tax is levied when the property is sold within three years of purchase.

For the first year, a 10% tax is paid, while in the second-year sales are taxed at 7.5% and in the third year at 5%. Profitable tax collection is calculated with reference to the appropriate market value. If the property has been held for more than three years, the seller will not pay capital gains tax.

Amount of Tax Needs to Pay While Buying A Property:

Different types of tax need to pay while purchasing a property in the year 2019-2020 are mentioned below:

Capital Value Tax:

A provincial tax paid by the buyer while buying a property is known as capital value tax. Capital value tax is payable on the value of the asset acquired. According to the Finance Act, 2006, capital value tax is levied at the rate of 2% of the recorded value.

According to the new budget 2019-2020, the federal government has supported the abolition of DC rates. Currently, the total capital value tax for the urban property is 2%.

Stamp Duty:

Stamp duty is a tax on a legal document when buying a property. Basically, stamp duty is levied at 3% of the property’s DC rates.

Withholding Tax (WHT):

Withholding tax is very important. This is the federal tax that buyers and sellers have to pay when dealing with property paid at the time of the property deal

Withholding Tax for Buyer:

An individual who is an income tax filer is buying a property that has to pay a 2% holding tax and non-filers have to pay 45% tax.

People who are buying property need to pay tax only if the value of the property is more than Rs 4 million.

Withholding Tax For Seller:

If the seller of the property is an income tax filer then he has to pay a 1% tax whereas non-filers have to pay 25% tax. This rule has been passed so that more people can file income tax every year.

Source: https://www.fbr.gov.pk/












What are the functions of FBR?

federal board of revenue

Federal Board of Revenue (FBR), formerly known as Central Board of Revenue (CBR) was formed on April 1, 1924, with the enactment Central Board of Revenue  Act of 1924. The Federal Board of Revenue (FBR) is a special government association of Pakistan to investigate money laundering and tax evasion crimes. The FBR works with all individuals and organizations to strengthen tax assessment in the nation.


The FBR perform special duties for FBR headquarters through tax inspectors who monitor tax evaders. The FBR also collects tax evasion intelligence and manages tax laws for the government of Pakistan and acts as Pakistan’s central agency of collection of revenue.

Mission of FBR

Federal Board of Revenue’s mission is to increase the capacity of the tax system through modern techniques by providing taxpayer guidelines, support, and the ability to pay taxes through a motivated, devoted, satisfied, and professional workforce.

Also Read: What is Value Added Tax

Functions of FBR

The FBR is a semi-autonomous federal agency of Pakistan responsible for enforcing financial laws and collecting taxes for the Government of Pakistan. Provides approval for appeal/reference before High Courts and CPL / review before the Supreme Court and approval for litigation in courts. The responsibilities of FBR are:

  • Formulating and managing fiscal policies.
  • Federal duties and collection of revenues, taxes and other levies,
  • Intentional court work in deciding tax cases and appeals

FBR basically works through its main collection branches across the country involving Regional Tax Offices (RTOs) and Large Taxpayer Units (LTUs). To perform functions accurately on the basis of different duties FBR consist of following wings:

  S.No.
FBR Wings
01 Inland Revenue
02 Customs
03 Admin
04 Taxpayers Audit
05 Legal
06 Facilitate and Taxpayer Education (Fate)
07 Strategic Planning Reforms &Statistics(SPR&S)
08 Human Resource Management (HRM)
09 Information Technology
10 Accounting
11 Legal and Accounting – Customs

FBR Wing has responsibilities and functions according to their specifications. Rather than other wings there are two major wings of FBR with major function

A) The Inland Revenue
The Inland Revenue Service (formerly known as the Income Tax Department) levies domestic taxes, including Income Tax, Sales tax and Federal excise duty, and is a central component of the FBR.

B) The Custom
The Pakistan Customs Service directs import obligations and various taxes levied at the import stage, also manages international trade and manages the limits and restrictions imposed by government legislation.

For the purpose of tax collection and prosecution of tax evaders, the powers and functions of the FBR include yet are not restricted to:

  • Investigating and auditing tax matters,

  •  Arrest warrants, with attachments.

  • Also, the public auction of movable and immovable assets was non-compliant.



What Is Value Added Tax (VAT)?

Value Added Tax

Value Added Tax is a consumption tax that is levied on a product whenever it is added to the price at every stage of the supply chain from production to sales. The VAT that the consumer pays is on the cost of the product, less than the price of the material used in the product that has already been taxed.

Scope of VAT:

Value Added Tax is usually expressed as a percentage of the total cost and increases government revenue without punishing success or wealth. VAT covers the supply of both goods and services (including imported) at a uniform rate of 15% unless subject to VAT exemption. Businesses with an annual turnover of less than Rs 7.5 lakh will be out of the VAT net.

Advantages of VAT:

  1. VAT offers more benefits than the national sales tax as :

  2. It is very easy to track.

  3. Exact tax is levied on every step of production.

  4. Furthermore, because VAT is only levied on every price increase, it is not a sale of a product itself due to which it ensures that no double tax has been levied on the same product.

Also Read: What is Withholding tax?

Impact of VAT on Improving Economy Documentation And Revenue Collection:

All commercial activities related to rallies, production, and distribution of goods and provision of services are brought under the tax net which is tolerated to the extent of default registration. As a result of documenting each body in the supply chain. People who are not registered in the chain are not in a position to claim or deduct the tax paid at the purchase level. VAT promotes financial documents using its built-in invoice-based credit mechanism. The tax invoice is a bloodline of documents related to VAT. VAT includes self-enforced features and business transaction documents through tax invoicing.

Source: Investopedia




What is Withholding Tax (WHT)?

withholding tax

Withholding tax is a requirement of government for the buyer of any service or item of income to withhold or the deduction of tax from the payment which is paid to the government.

Why Withholding Tax?

  • Less interference with the tax authority
  • Helps to expand the tax net
  • Daily basis revenue generation
  • Includes Tax Evasion
  • Economics documents
  • Maintaining flow with the least cost

Withholding Tax Trend:

Withholding tax (WHT) regime is a worldwide trend and the largest source of national revenue in Pakistan. The dependence on WHT has also been on the rise in recent years. Of the 740 (b) direct tax reserves for the financial year 2012, Rs.422 (b) with a share percentage of 57% was derived from different holding taxes.

Scores Of Withholding Tax:

WHT has been part of the tax system in one way or another since Government and taxpayers directly taxed the two scores.

  • Provides regular revenue to the government for its expenses and operations throughout the year
  • It provides taxpayers with an opportunity to meet their obligations in qualifying installments.

Directorate General of Withholding Tax:

Currently, globalization has forced many countries to adapt their economies to new trade and investment policies included in free trade agreements, tax policies, and alignment. Countries cannot close their borders or their economies. Tax policies are inseparable from international economies. Therefore, the Directorate General of Withholding Tax has been set up by the Finance Act 2008 under Section 230A of the Income Tax Ordinance 2001 to review and manage these holding tax systems while maintaining this competitive environment.

Also Read: What are the penalties of being non-filer?

Efficient Source Of Revenue:

WHT is an efficient source of revenue. Their share of direct tax revenue is about 41%. Rise of Rs.422(b) in 2012 as compared to Rs. 5(b) in 1991 talks about rapid growth and consequent heavy dependence on withholding tax.

According to the Income Tax Act, 1922 tax deduction was from two source salaries and interest on securities. Different provision of the tax law was introduced later to extend WHT net in the 1990s, by providing WHT on large-scale transactions.

The main withholding provisions are related to salaries, imports, exports, commissions and brokerage, dividends, contracts, loan interest, utilities, car taxes, stock exchange provisions, and non-residents, etc. with different rates.



What are the penalties of being non-filer?

penalties of being non-filer

Being a responsible Pakistani, if you haven’t filed your tax then you will have to face the penalties of being non-filer. According to PkRevenue , the date on which you pay your taxes has expired or you may not have the information for your return completion, or you may not have enough money to pay taxes and you may be afraid to file your return. In any case, the non-payment of taxes has serious consequences.

Those who do not file their tax will be caught sooner or later.

We have all heard many stories of income tax denials, whether they are straightforward tax dodgers or political demonstrators everyone has to face major civil penalties as well as criminal penalties of fines and imprisonment.

 Beware, the thing you were not told is that failure in filing tax returns can be very costly.

According to Tax laws:

According to Income Ordinance, 2001, tax laws define both lenient and severe penalties for the individuals who have taxable income but not paying their tax or the individuals who are registered with tax authority but their annual returns are not filed or filed after the due date.

Specification of the number of Fines and penalties :

The Income Tax Ordinance, 2001 specifies the number of fines and penalties for non-compliance. Section 114 of the Ordinance deals with the persons who are required to file their annual income tax returns and Section 116 relates to wealth-related statements.

Penalties Under Section 114:

According to section 114 the person who fails to return the required income within the due date will have to face penalties of being non-filer which are the following :

Penalties for late filing income tax   0.1% of the tax payable in respect of the defaulted tax year on each day and a maximum of 50% of the tax payable

Provided that the above-mentioned fine is less than Rs. 40,000 or no tax is paid in this tax year, then such a person will have to pay a fine of Rs. 40,000


Provided that if the income amount is 75% of the income amount coming from salary and the amount of income from salary is under Rs.50 lakhs, the penalty amount, in that case, will be at least Rs.5,000



Penalties for failure to present the statement of wealth and Reconciliation of Wealth Statement   Such a person will have to pay a penalty of 0.1% per week of taxable income or Rs.100,000 whichever is excessive
Penalty for failure to submit foreign assets and income statement within the due date An individual has to pay 2 % of the income of foreign income or assets each year  
Penalty for the fake or misleading written, oral or electronic statement to Inland Revenue Authority or to an Income Tax Authority   Rs. 25,000 or 100% of tax amount whichever is higher an individual has to pay

According to section 182 A:

According to section 182 A, FBR declares that the taxpayers who will not file their returns within the due date will not appear in the active taxpayer’s list for the year the returns have been paid that person will be included in active taxpayer list only in the condition if he pays he following surcharges:

Categories of Taxpayers   Surcharges at Rupees
For Individual 1000  
For Company   20,000  
For an Association of a Persons   10,000

Penalties Under Section 191:

Further penalties according to the income tax ordinance under Section 191 for the person who fails to submit a notice under subsection (3) and subsection (4) of section 114 of subsection (1) of section 116. Commit a crime or offense with a fine or imprisonment for a term not exceeding one year.

More Penalties of being non-filer:

Taxpayer’s failure for presenting a return of income or wealth statement without any excuse within the period prescribed by the court is considered as a crime and is punishable according to which a person is liable to a fine, not more than fifty thousand rupees or imprisonment not more than two years, or both.

What are the consequences of missing tax deadline?

What are the consequences of missing tax deadline

It is the duty of every filer to tax their files before the deadline in order to protect him from the consequences of missing the tax deadline. However, If any person failed to tax his filer before the deadline, he should file his tax as soon as possible. In case of failure of pay tax, you will have options for a tax extension, late payment, or penalties of late payment.

Note: The last date for federal tax return filing for tax year 2019 is July 15, 2020

Filing for an Extension:

In case of missing tax deadline, you can go for a file for an extension if you want to get yourself protected from penalties. You will have to pay a 5% amount each month after missing the deadline. However, if IRS is paying you the refund, then there is no need to ask for tax extension but if you are not getting a refund then there is a need to filing a tax extension. Moreover, if you are getting refind from IRS for 3 to 4 taxpayers every month in a year then there will be no penalty for missing the deadline.

If the balance is pending:

In case if you have paid your tax before the deadline but you still have a pending amount due then every month, you will have to pay the penalty of 0.5% of the total amount per month and it will be a maximum of 25% payment of late payment. You can also end up likely to owe interest to the remaining amount.

If you are not given with extension, then you will have to pay a penalty of 5% of the pending amount per month with interest as well.

Extension of time for tax payment:

You also have an option to apply for an extension of time in order to pay your tax after the deadline but you will have to meet the legal requirements as well in order to get a time extension. You can apply for a time extension here: Application form for Extension of Time for Tax Payment.

If you want to pay your income tax, visit ‘How to pay income tax‘.