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

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 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.

How to pay Income tax?

how to pay income tax

If you are a filer or taxpayer and want to pay income tax, you can pay it either online or manually. Please see the payment methods:

Factors of Income Tax Calculation:

Calculating income tax depends on various factors that contain your status whether you are an individual, a company, a firm or a local authority, The amount of your income and its nature, and your age.

Heads of Income:

According to Income Tax Ordinance, 2001, taxable income is divided into five categories:

Salary

Business

Capital Gains

Income from Property

Income from Other Sources

Benefits of Paying Income Tax:

Paying your tax returns and wealth statements is good for your government as well as for you to get filer benefits to enjoy a minimum withholding tax on all of your services at excise offices, airports, banking transactions, in purchasing new cars and for real-estate matters. Earlier, the FBR had separate portals for companies and individuals. But now, they’ve made it easier for everyone.

Online Tax Payment

Steps for FBR E-Enrollment:
Here are the ways for FBR E-Enrollment to start paying your income tax: 

  • Get yourself register with FBR and start paying your tax returns online.
  • For unregistered person go to FBR IRIS portal provide all relevant information by clicking on the registration tab
  • For different options again open the IRIS portal and click on e-enrollment.
  • To complete the registration process, enter all the asked details like your mobile number, CNIC, etc.
  • Login into your account and fill the form by entering all your income information.
  • Now you are a Tax Filer.
  • In order to check that you are on active taxpayer list or not type ATL give space then enter 13-digit CNIC number and send SMS it to 9966.

Guidelines to Pay Income Tax:

Once, you become tax filer you need to pay your income tax by following these steps:

  • First of all, log into e-file
  • Click on the e-Payments tab.
  • Then, go to Create Payment, select Income Tax Annual Return option.

Creating Payment Slip:

  • Selection of related tax year
  • Entering the Tax amount due
  • Selecting a payment mode
  • Clicking on create a button and confirm the e-payment created.
  • Select the nearest city branch of State Bank (SBP)or National Bank (NBP) for payment slip deposit. (you can download the PSID by printing it)
  • After the payment of due tax, the COMPUTERIZED PAYMENT RECEIPT (CPR)is generated. It is reflected in Iris within 24 hours of payment being submitted

Manually Tax Payment:

If you can’t go online and pay taxes then you can manually submit your statements on paper at the Taxpayer Facility Counters of the relevant regional tax office.

However, if you want to pay your income tax but you are not a filer, then check the relevant blog ‘How to become filer‘.

Late Tax Payment Penalty:

Failure to pay your taxes is punishable by a fine or a penalty of one year or two in prison.

How to apply for NTN number online?

Other than apply for NTN manually, you can apply for NTN number online through the FBR official website by following steps given below:

Online Procedure:

apply for NTN online

Step 1: First of all, you need to go to the website: https://e.fbr.gov.pk in order to apply for your NTN number.

Step 2: Here you will see the ‘e-Registration’ tab. All you need to do is select a new e-registration in order to start with a new application.

Step 3: In this step, you need to select the type of application according to your requirements.

Step 4: After that, select the taxpayer type (Individual, AOP, or Company).

Step 5: Here you will have to Enter the CNIC / Reg. Inc according to the type of selected taxpayer, Name and image character then click Ok in order to continue the process.

Step 6: Now you will see the already selected category on the next screen.

Step 7: Once completing the online registration form, verify it and submit that application if you want to apply online. To process from TFC, you need to submit the application at the TFC counter along with your all required documents.

Step8: A Token number will be assigned to that application for further processing/ approval/inquiry. After login, go to the Registration=> Enrollment=> Change profile and update the information accordingly. Moreover, if you want to apply for NTN number manually other than applying for NTN number online, follow the steps:

Manual Procedure:

Step 1: Download the taxpayer registration form by clicking here.

Step 2: After filling the form, submit it to concern NTN Cell/RTO.

Recommended Blogs:
How to become Filer
Check NTN number