Tax is the amount of money that a government requires people to pay according to their income, the value of their property, etc., and that is used to pay for the things done by the government.
In Pakistan, taxes are collected by the Federal Board of Revenue (FBR) and are used to fund government operations, services and infrastructure. There are several different types of taxes in Pakistan, including:
- Income Tax: Paid by individuals and businesses on their income, including salary, rental income, and business profits.
- Sales Tax: Paid on the sale of goods and services, and is usually included in the price of the item.
- Customs Duty: Paid on imported goods.
- Federal Excise Duty: Paid on certain goods and services, such as tobacco and cigarettes.
- Property Tax: Paid on the ownership of property, such as real estate.
- Capital Value Tax: Paid on the value of immovable properties.
- Withholding Tax: Paid by employers on behalf of their employees, and is deducted from the employee’s salary.
Tax year Is a period of twelve months ending on 30th day of June i.e. the financial year and is denoted by the calendar year in which the said date falls. For example, tax year for the period of twelve months from July 01, 2021 to June 30, 2022 shall be denoted by calendar year 2022 and the period of twelve months from July 01, 2022 to June 30, 2023 shall be denoted by calendar year 2023. It is called Normal Tax Year.
The amount of tax that must be paid depends on the individual or business’s income, and is calculated based on the tax rates set by the FBR. The FBR also sets exemptions, deductions, and other tax incentives to encourage economic growth and development.