Tax law in Pakistan uses ordinary words in precise ways, and a good deal of confusion comes from assuming they mean what they mean in conversation. This is the vocabulary you will meet while registering, filing, or reading anything the FBR sends you.
Income, and how it is measured
Tax year. A twelve-month period ending on 30 June, named after the calendar year in which it ends. The year running 1 July 2025 to 30 June 2026 is therefore tax year 2026. That is a normal tax year; a business may be allowed a special tax year ending on a different date.
Heads of income. All income is classified under five heads: salary, income from property, income from business, capital gains, and income from other sources. The head matters — it decides which rules and rates apply to a receipt.
Total income. The sum of your income under all five heads.
Taxable income. Total income less the deductible allowances you are entitled to. This is the figure the slab rates are applied to — not your gross salary, which is why the tax on a payslip is rarely a neat percentage of it.
Deductible allowance and tax credit. Easily muddled and not the same thing. A deductible allowance comes off your income before tax is worked out. A tax credit comes off the tax after it is worked out. A credit is usually worth more.
Who the law is talking about
Person. Broader than it sounds. It covers an individual, a company, an association of persons, the Federal Government, a foreign government, a political subdivision of a foreign government, and a public international organisation.
Company. Also broader than it sounds. Beyond a company under the Companies Act 2017, it takes in bodies corporate, co-operative and finance societies, non-profit organisations, trusts, provincial and local governments, and a foreign association the Board declares to be a company.
Association of persons (AOP). Includes a firm — people who have agreed to share the profits of a business — a Hindu undivided family, an artificial juridical person, and a body of persons formed under a foreign law. It excludes a company.
Resident. The test differs by who you are:
- An individual is resident for a tax year if present in Pakistan for 183 days or more in that year, counting the days in aggregate rather than in one stretch. Government employees posted abroad are treated as resident.
- A company is resident if it is incorporated or formed under a law in force in Pakistan, or if control and management of its affairs sits wholly in Pakistan at any time in the year.
- An association of persons is resident if control and management of its affairs sits wholly or partly in Pakistan at any time in the year.
Note the difference: wholly for a company, wholly or partly for an AOP. It is not a drafting accident and it catches people out.
Non-resident. Simply a person who is not resident for that tax year. Residence is decided year by year, so it can change without you moving. It matters a great deal for overseas Pakistanis — see why residency decides everything.
Where the income came from
Pakistan-source income. Income with a defined connection to Pakistan — salary for work done here regardless of where it is paid, salary paid by government wherever you serve, rent from immovable property here, profit on debt paid by a resident, and pensions or payments made by a resident or by a non-resident’s permanent establishment in Pakistan.
Foreign-source income. Any income that is not Pakistan-source. A resident is generally taxed on worldwide income; a non-resident, on Pakistan-source income only. That single sentence is the reason residence matters so much.
Registering, filing and status
NTN (National Tax Number). The number you are registered under. For an individual it is the CNIC number — there is no separate number to obtain. Companies and AOPs get their own.
IRIS. The FBR’s online portal, where registration and filing actually happen.
Return of income. The annual declaration of your income and tax. Filing it is what makes you a filer — not having tax deducted from you.
Wealth statement. A statement of what you own and what you owe, reconciling the change since last year against your declared income. For a resident individual it accompanies the return rather than being optional. See who has to file one.
Active Taxpayers List (ATL). The FBR’s published list of people who filed for the relevant year. Published on 1 March each year and refreshed weekly.
Filer, late filer, non-filer. On the list; filed but after the due date; and not on the list at all. The middle one carries its own rate on property transactions. See what is a filer?
Tax taken before you see it
Withholding tax. Tax deducted at source by whoever pays you or processes your transaction — your employer, your bank, the registration authority — and paid to the FBR on your behalf.
Adjustable and final. The distinction that decides whether you ever see the money again. An adjustable deduction counts towards your annual bill and can produce a refund. A final deduction discharges the liability on that income outright: nothing is credited and nothing can be reclaimed.
Minimum tax. A floor. Where it applies, you pay at least that amount regardless of whether the ordinary calculation produces less.
Advance tax. Tax paid during the year, in instalments, ahead of the return — not a separate charge, but a prepayment of the same liability.
The rules themselves
Income Tax Ordinance 2001. The principal law for income tax. Its Schedules carry much of the practical detail — the Second Schedule holds exemptions and concessions, the Tenth Schedule the rules for people not on the Active Taxpayers List.
Finance Act. The annual Act that amends the Ordinance, normally taking effect on 1 July. It is what changes the slab rates from one year to the next — see what changed on 1 July.
SRO (Statutory Regulatory Order). A notification issued under powers the Ordinance delegates — used to grant exemptions, set reduced rates, and notify the return forms themselves. See what an SRO is, and what SRO codes are.
Where to go next
- How to become a filer — the process, start to finish.
- FAQs — the questions we are asked most.
- Calculators — put your own numbers in.
Last updated: 28 August 2026.
Sources: Income Tax Ordinance 2001 — in particular the definitions in section 80, the heads of income in section 11, and the residence tests in sections 82 to 84; the Second and Tenth Schedules; Companies Act 2017.
These are plain-language summaries, not statutory definitions. Where a decision turns on the precise wording, read the Ordinance itself or take advice from a registered tax practitioner.