The National Tax Number (NTN) is a unique identifier issued by the Federal Board of Revenue (FBR) in Pakistan to individuals and businesses for tax purposes. For individuals, the NTN is typically their Computerized National Identity Card (CNIC) number, while businesses receive a separate 7-digit NTN upon registration.

How to Obtain an NTN in Pakistan

To obtain an NTN, follow these steps:

1. Visit the FBR IRIS Portal: Go to the official FBR IRIS portal.

2. Register as an Unregistered Person: Click on “Registration for Unregistered Person” and provide necessary details such as CNIC, mobile number, and email address.

3. Verify Your Identity: You’ll receive a verification code via SMS and email. Enter this code to proceed.

4. Complete the Registration Form: Fill out the required information, including personal details, income sources, and bank account information.

5. Upload Supporting Documents: Attach scanned copies of necessary documents, such as:

   • CNIC

   • Recent utility bill

   • Proof of business (if applicable)

   • Bank account maintenance certificate

6. Submit the Application: Review all information and submit the application.

7. Receive Your NTN Certificate: Upon approval, you’ll receive your NTN certificate, which can be downloaded from the IRIS portal.

How to Verify Your NTN Online

To confirm your NTN status:

1. Access the FBR IRIS Portal: Go to the official FBR IRIS portal.

2. Navigate to ‘Online Verifications’: Scroll down and click on “Online Verifications.”

3. Select ‘Taxpayer Profile Inquiry’: Choose this option to proceed.

4. Enter Your CNIC or NTN: Input your CNIC (without dashes) or NTN and the captcha code.

5. Submit the Information: Click “Submit” to view your taxpayer profile, including your NTN status.

How to Check Filer or Non-Filer Status

Being a filer means you’re listed in the Active Taxpayer List (ATL), which offers benefits like lower tax rates. Here’s how to check your status:

Method 1: Online via FBR Portal

1. Visit the ATL Page: Go to the official FBR website and navigate to the “Active Taxpayer List.”

2. Enter Your CNIC or NTN: Input your CNIC (without dashes) or NTN.

3. View Your Status: The system will display whether you’re an active taxpayer.

Method 2: Via SMS

1. Compose a New SMS: Type your CNIC number (without dashes).

2. Send to 9966: Send the SMS to 9966.

3. Receive Status: You’ll get a reply indicating your filer status.

Are Reference Number and NTN Number the Same?

Yes, the terms “Reference Number” and “NTN” are used interchangeably by the FBR. On newer NTN certificates, “Reference Number” is the term displayed, but it serves the same purpose as the NTN.

Benefits of Having an NTN

• Legal Compliance: Mandatory for filing income tax returns and conducting taxable activities.

• Financial Transactions: Required for opening bank accounts and executing large financial transactions.

• Business Operations: Essential for registering a business and participating in government tenders.

• Property Transactions: Necessary for buying or selling property.

Conclusion

Obtaining and verifying your NTN is a crucial step toward financial transparency and compliance in Pakistan. By following the outlined procedures, you can ensure your tax obligations are met and take advantage of the associated benefits.

If you need assistance with the registration process or have further questions, feel free to ask!

Public limited companies (PLCs) are corporate entities that can offer their shares to the general public and are governed under the Companies Act, 2017 in Pakistan. These companies play a vital role in the capital market and economy due to their larger operational scope, extensive shareholder base, and stricter compliance requirements. As separate legal entities, PLCs are subject to corporate income taxation under the Income Tax Ordinance, 2001. This article explains how public limited companies are taxed in Pakistan, including tax rates, exemptions, credits, deductions, compliance obligations, and filing procedures.

Legal and Regulatory Framework
The taxation of public limited companies is regulated by the following laws and authorities:

• Income Tax Ordinance, 2001

• Income Tax Rules, 2002

• Finance Acts issued annually

• Federal Board of Revenue (FBR)

• Securities and Exchange Commission of Pakistan (SECP)

• Sales Tax Act, 1990 and Federal Excise Act, 2005 for indirect tax matters

A PLC is treated as a separate taxable person, and its tax liability is computed independently from its shareholders or directors.

Types of Public Limited Companies
There are two kinds of public limited companies in Pakistan:

• Listed Companies – whose shares are listed on the Pakistan Stock Exchange (PSX)

• Unlisted Public Companies – not listed on PSX but with at least three directors and the ability to offer shares to the public

Both types are subject to corporate tax, but listed companies may enjoy additional tax benefits and credits under special provisions.

Corporate Income Tax Rates for Public Limited Companies
As per Finance Act 2024, applicable for Tax Year 2025:

1. General Corporate Tax Rate (Listed/Unlisted):

• 29% on taxable profits

2. Reduced Rate for Listed Companies (Section 65C):

• 20% tax credit allowed for the year of listing on the PSX

• Effective reduction in tax burden during the listing year

3. Minimum Tax on Turnover (Section 113):

• In case of declared loss or lower-than-minimum tax, a minimum tax of 1.25% on turnover is applicable

• Certain sectors enjoy reduced turnover tax rates through SROs

4. Super Tax (Section 4C):

• Applicable on high-income companies with income exceeding Rs. 300 million

• 1% to 10% super tax based on income slabs and industry classification (e.g., banking, oil & gas, textiles)

Tax Filing Requirements for Public Companies

1. Annual Income Tax Return:

• Due by December 31 (financial year ending June 30)

• Filed through FBR’s IRIS portal

• Must include:

  • Income Tax Return (IT-2 Form)

  • Audited financial statements

  • Tax computation and reconciliation

  • Directors’ report and Board resolutions (if required)

2. Advance Tax (Section 147):

• Public companies must pay advance tax quarterly

• 25% of estimated annual tax each quarter

• Due by September 15, December 15, March 15, and June 15

3. Withholding Statements:

• Monthly statements (Form 45) for all taxes withheld

• Filed by 15th of every month

Withholding Tax Obligations for PLCs
Public limited companies are designated withholding agents and must deduct taxes on various payments:

Non-filers are charged higher withholding tax rates as per applicable law. Failure to deduct or deposit tax leads to disallowance of expense and penalty.

Allowable Deductions and Business Expenses

Under Section 20 and related rules, the following expenses are deductible when computing taxable income:

• Salaries and employee benefits

• Directors’ remuneration (approved via board resolution)

• Rent, utilities, office expenses

• R&D expenses and certifications

• Depreciation under Third Schedule

• Financial costs and loan servicing

• Marketing, travel, and freight

• Legal and consultancy fees

• Provision for bad debts (based on FBR guidelines)

Non-Deductible Expenses (Section 21):

• Personal expenses of directors

• Entertainment beyond allowable limits

• Undocumented cash expenses over Rs. 50,000

• Salary paid to persons without NTN

• Unverified utility bills and travel

Tax Credits and Incentives for Public Companies

1. Tax Credit for Listing (Section 65C):

• 20% tax credit in the year of listing

• Applicable only once and must be availed in the same tax year

2. Investment in Plant & Machinery (Section 65B):

• 10% tax credit on investment in new plant and machinery

3. Employment Generation (Section 64B):

• Tax credit for hiring fresh graduates and apprentices

4. Donations (Section 61):

• Up to 10% of taxable income as tax credit for donations to approved charitable organizations

5. Green Tax Incentives:

• Companies investing in renewable energy, energy-efficient machinery, or climate-smart technology may receive custom and tax exemptions under special FBR SROs

Capital Gains Tax (CGT) for Public Companies
CGT is applicable on the disposal of capital assets such as:

• Listed shares

• Securities

• Real estate

• Business assets

CGT on Listed Securities (held for trading):

• 15% for filers

• 30% for non-filers

• Exempt if held for more than one year, subject to conditions

CGT on Real Estate:

• Based on fair market value

• Holding period-based rates apply

Sales Tax and Federal Excise Compliance

1. Sales Tax:

• 17% GST applicable on taxable goods and services

• Monthly filing of sales tax return (STR) via eFBR portal

• Companies must issue tax invoices, maintain purchase/sales registers

2. Federal Excise Duty (FED):

• Applicable on telecom, beverages, tobacco, air travel, etc.

• Rates vary from 5% to 25%, depending on sector

Audit and Record-Keeping Requirements
Public limited companies are subject to mandatory annual audit under the Companies Act, 2017:

• Conducted by an approved Chartered Accountant

• Must be submitted to SECP and FBR

• Books of accounts must be maintained for at least 6 years

Additional Compliance Requirements:

• Filing of Form A, 29 with SECP for annual and director updates

• AGM filing and statutory board meeting documentation

• Maintenance of share register and directors’ records

Dividend Taxation for Public Companies
When a public company distributes dividends to shareholders:

• Must withhold tax under Section 150

  • 15% for ATL filers

  • 30% for non-filers

• Dividend is treated as final tax for individuals

• Corporate shareholders may treat dividend as part of income from other sources

Taxation of Foreign-Owned Public Companies
Foreign public companies operating in Pakistan or holding stakes in listed companies are subject to:

• Corporate tax on Pakistan-source income

• Withholding tax on profit repatriation, royalties, and dividends

• State Bank of Pakistan (SBP) regulations for fund remittance

Key Tax Challenges for PLCs

• High compliance burden due to multiple taxes and filing schedules

• Discrepancies in withholding, advance tax, and turnover tax calculations

• Frequent SRO changes impacting planning and forecasting

• Documentation requirements for deductions and exemptions

FAQs on Taxation of Public Limited Companies

Q. What is the corporate tax rate for public limited companies?
A. 29%, with a 20% tax credit in the year of stock exchange listing.

Q. Is advance tax mandatory for PLCs?
A. Yes, under Section 147, advance tax must be paid quarterly.

Q. Can a PLC avail tax benefits on donations?
A. Yes, up to 10% of taxable income as a tax credit under Section 61.

Q. What happens if a PLC declares a loss?
A. Minimum tax of 1.25% on turnover applies under Section 113.

Q. Are PLCs subject to audit?
A. Yes, annual audit by a Chartered Accountant is mandatory under SECP and tax laws.

Q. How is dividend income taxed?
A. At 15% for filers and 30% for non-filers. It is treated as final tax.

Conclusion
Public limited companies in Pakistan face a structured and rigorous tax regime that includes corporate income tax, turnover-based minimum tax, withholding obligations, and sales tax compliance. However, they also benefit from tax credits, investment incentives, and lower effective tax rates through strategic planning. Timely filing, robust documentation, and a clear understanding of applicable laws are essential for avoiding penalties and optimizing the company’s financial position. As key players in Pakistan’s formal economy, PLCs must maintain full compliance with FBR and SECP requirements to grow sustainably and responsibly.

Limited Liability Companies (LLCs), commonly referred to in Pakistan as Private Limited Companies, are a popular form of corporate structure due to their legal status, limited liability protection, and scalability. These companies are taxed as separate legal entities under the Income Tax Ordinance, 2001. Understanding how taxation works for LLCs in Pakistan is crucial for business compliance, financial planning, and long-term sustainability. This article outlines the key elements of corporate taxation, including income tax rates, allowable deductions, withholding tax obligations, filing requirements, and other compliance matters related to LLCs.

Legal Framework for LLC Taxation
The taxation of LLCs in Pakistan is governed by:

• Income Tax Ordinance, 2001

• Income Tax Rules, 2002

• Sales Tax Act, 1990 (if applicable)

• Federal Excise Act, 2005 (for certain industries)

• Finance Acts issued annually

• SECP regulations and corporate governance rules

An LLC registered with the Securities and Exchange Commission of Pakistan (SECP) is considered a separate taxable entity, distinct from its owners (shareholders) and directors.

Corporate Tax Rates for Limited Liability Companies
As of Tax Year 2025, the following corporate income tax rates apply to LLCs:

1. General Rate for Companies:

• 29% flat corporate income tax on net taxable profits

2. Small Company Rate (Section 2(59A)):

• 20% for entities qualifying as a small company

Eligibility criteria for small company:

• Paid-up capital + reserves not exceeding Rs. 50 million

• Annual turnover not exceeding Rs. 250 million

• Not formed by splitting or reconstruction of an existing business

• Registered with SECP and FBR

3. Minimum Tax on Turnover (Section 113):

• If the company incurs a loss or pays less than the minimum tax, a minimum tax of 1.25% of turnover applies

• For certain sectors (e.g., distributors, oil marketing companies), reduced rates apply via SROs

Filing Requirements and Due Dates

1. Annual Income Tax Return:

• Deadline: September 30 of every year (unless extended by FBR)

• Filed via FBR’s IRIS portal

• Must include:

  • Income Tax Return (Form C)

  • Audited financial statements (for companies with turnover over Rs. 10 million)

  • Tax computation

  • Wealth reconciliation (if applicable to directors)

2. Monthly Withholding Statements:

• Due by 15th of each month

• Include details of taxes deducted on salaries, services, supplies, rent, etc.

3. Advance Tax Payments (Section 147):

• Companies must pay advance tax quarterly

• 25% of estimated annual tax each quarter

• Due in September, December, March, and June

Withholding Tax Obligations for Companies
LLCs are legally required to act as withholding agents under multiple sections of the Income Tax Ordinance:

Rates may vary depending on filer status, type of payment, and exemptions. Non-compliance leads to penalties, disallowance of expenses, and legal action.

Allowable Business Deductions and Expenses
The following business-related expenses are deductible from gross income when computing taxable profits:

• Salaries and wages

• Rent and utilities

• Depreciation and amortization

• Repairs and maintenance

• Professional fees (legal, audit, consultancy)

• Insurance premiums

• Advertising and promotion

• Travel and vehicle expenses

• Bad debts written off

• Donations to approved charities (subject to limits)

Key Conditions for Deductibility:

• Must be wholly and exclusively for business

• Properly supported by documentation

• Paid via banking channels (cash payments over Rs. 50,000 are disallowed)

Disallowance of Expenses (Section 21):

• Salary paid without NTN declaration

• Unverified utility bills

• Personal expenses disguised as business costs

• Entertainment and hospitality beyond limits

Tax Credits and Exemptions Available to LLCs

1. Tax Credit for Enlistment on Stock Exchange (Section 65C):

• 20% tax credit for the year of listing

2. Investment Tax Credit (Section 65B):

• 10% credit on purchase of new plant and machinery

3. Employment Generation Tax Credit (Section 64B):

• Credit for hiring fresh graduates or apprentices

4. Charitable Donations (Section 61):

• Tax credit for donations to FBR-approved charities

• Limited to 10% of taxable income

Sales Tax and FED Obligations
If an LLC supplies taxable goods or services, it must register for:

• Sales Tax (ST): Charged at 17%, filed monthly

• Federal Excise Duty (FED): Applicable to specific sectors (e.g., tobacco, telecom, beverages)

Filing of monthly sales tax returns (STRs) via FBR’s eFBR portal is mandatory.

Record Keeping and Audit Requirements
LLCs are required to maintain:

• Accounting records for 6 years

• Sales and purchase ledgers

• Payroll and salary details

• Tax challans and withholding certificates

• Annual audited accounts if turnover exceeds Rs. 10 million

All companies must appoint a Chartered Accountant or Cost Accountant (depending on size) for statutory audit, which must be submitted with the tax return.

Penalties for Non-Compliance

Dividend Distribution and Taxation
Dividends paid by LLCs to shareholders are subject to withholding tax under Section 150:

• 15% for filers

• 30% for non-filers

This is a final tax for the recipient. However, if the shareholder is another corporate entity, different rules may apply.

Repatriation of Profits for Foreign-Owned LLCs
Foreign investors operating as LLCs can repatriate profits through:

• Dividend payments (after tax)

• Royalty and technical service fees

• Management fees and inter-company charges

Subject to:

• FBR clearance and tax payment

• State Bank of Pakistan (SBP) approval

Tax Planning Tips for LLCs

• Classify as a small company if eligible for 20% rate

• Avail investment and employment tax credits

• Ensure all expenses are properly documented and paid through banking channels

• Stay compliant with withholding tax obligations

• Optimize depreciation claims and capital allowances

FAQs on LLC Taxation in Pakistan

Q. What is the current income tax rate for private limited companies?
A. 29% for general companies; 20% for qualifying small companies.

Q. Can LLCs claim tax credits?
A. Yes, for listing, machinery investment, employment generation, and donations to approved charities.

Q. Are LLCs required to withhold tax?
A. Yes, on various payments such as salaries, rent, services, contracts, and dividends.

Q. What happens if a company has no profit?
A. A minimum tax of 1.25% of turnover applies if there’s no taxable income or the tax is below the minimum threshold.

Q. Is audit mandatory for all LLCs?
A. Yes, if turnover exceeds Rs. 10 million. Audit by a Chartered or Cost Accountant is required.

Q. Can losses be carried forward?
A. Yes. Business losses can be carried forward for 6 years to offset future profits.

Q. Are directors’ salaries taxable?
A. Yes, and the company must deduct tax at source under Section 149.

Conclusion
Taxation of Limited Liability Companies in Pakistan is comprehensive, with clear rules on income, withholding obligations, allowable expenses, and documentation. While the corporate tax regime offers incentives for investment and growth, it also imposes strict compliance requirements. LLCs must maintain accurate records, timely file tax and withholding statements, and fully understand their tax obligations to avoid penalties and optimize business operations. Proper planning and consultation with tax professionals can ensure both compliance and efficiency in managing tax liabilities.

Property tax is a significant source of revenue for provincial governments in Pakistan. It is levied on real estate properties such as land, residential homes, commercial buildings, and industrial units. The revenue collected through property taxes supports local development, infrastructure maintenance, municipal services, and urban planning. In Pakistan, property tax laws and collection are primarily governed by the provincial excise and taxation departments, with each province having its own rules, rates, exemptions, and payment procedures. This article explores the fundamentals of property tax in Pakistan, how it is assessed, who is liable, how to pay it, and common issues faced by taxpayers.

What is Property Tax?

Property tax is a levy imposed on the ownership or occupancy of real estate. It is assessed annually and collected by provincial governments based on the valuation of land and buildings. The tax is imposed regardless of whether the property is occupied or rented, and applies to both individuals and entities that own or lease immovable property.

Governing Authorities for Property Tax in Pakistan

Since property is a provincial subject under the Constitution of Pakistan, each province has its own excise and taxation department responsible for the assessment and collection of property tax.

• Punjab: Punjab Excise, Taxation & Narcotics Control Department

• Sindh: Sindh Excise, Taxation & Narcotics Control Department

• Khyber Pakhtunkhwa: KP Excise, Taxation & Narcotics Control Department

• Balochistan: Balochistan Excise and Taxation Department

• ICT (Islamabad Capital Territory): CDA and FBR for federal areas

Legal Basis of Property Tax

• Punjab Urban Immovable Property Tax Act, 1958

• Sindh Urban Immovable Property Tax Act, 1958

• KP Urban Immovable Property Tax Rules, 1958

• Balochistan Urban Immovable Property Tax Act, 1958

• Capital Development Authority Ordinance, 1960 (for Islamabad)

Types of Properties Subject to Tax

• Residential houses and flats

• Commercial plazas, shops, and markets

• Industrial premises and factories

• Rental properties

• Vacant plots with construction permissions in urban areas

• Mixed-use buildings (part residential, part commercial)

Who Pays Property Tax?

The owner or occupant of the property is liable to pay the property tax. In cases where the property is rented, the landlord may transfer the burden to the tenant contractually, but the legal liability remains with the registered owner.

Basis of Property Tax Assessment

Property tax is calculated based on one of the following:

• Annual Rental Value (ARV) of the property

• Capital Value (in some jurisdictions or under revised rules)

• Location and classification of property zone (A, B, C etc.)

• Type of property (residential vs commercial)

• Covered area or floor space

• Use of property (owner-occupied or rented)

Common Formula for Assessment (e.g., Punjab)
Property Tax = Annual Rental Value × Tax Rate
Where:

• Annual Rental Value = Estimated rent the property would fetch in the open market

• Tax Rate = Ranges between 5% to 20%, depending on property type and use

Zonal Classification and Rates

Cities are divided into zones or categories based on development and location:

• Category A: Posh areas with higher rental values

• Category B–E: Mid- and low-income areas with lower assessed values

For example:

Exemptions and Concessions

Certain types of properties or owners may be exempt from property tax, including:

• Residential properties with annual rental value under PKR 4,800

• Houses measuring 5 Marla or less (subject to zone)

• Government buildings

• Educational institutions

• Religious buildings (mosques, churches, temples)

• Registered charitable organizations

• Self-occupied houses by widows or senior citizens (with limitations)

• Properties in rural areas (in most provinces)

Property Tax for Rental Properties

Rental properties often attract a higher property tax rate. The ARV is calculated based on actual or estimated rent, and commercial-use properties are taxed at a steeper rate than owner-occupied residential properties.

How to Calculate Property Tax in Punjab

Step-by-step example:

1. Covered area: 2,000 sq. ft.

2. Located in Category B (urban residential)

3. ARV: PKR 100 per sq. ft. → Annual Value = PKR 200,000

4. Tax rate: 5%

5. Annual Property Tax = 5% × 200,000 = PKR 10,000

Payment Procedure for Property Tax

Property tax can be paid in the following ways:

• Manually at Excise and Taxation offices

• Online via:

  • Punjab: https://ePay.punjab.gov.pk

  • Sindh: https://excise.gos.pk

  • KP: https://kpra.gov.pk

• Through banks partnered with the provincial departments

• JazzCash, Easypaisa, and other digital payment gateways in Punjab and Sindh

Late Payment and Penalties

• Late payment may result in penalty up to 1% per month

• Legal notices and potential sealing of the property

• Publication of defaulters list and legal proceedings under provincial tax laws

How to Obtain Property Tax Challan

• Visit your Excise and Taxation Department or its website

• Provide property number or CNIC

• Request challan form for current or previous year(s)

• Print or download challan and pay via any listed bank or mobile app

How to Check Property Tax Record Online

In provinces like Punjab, you can check your tax liability and payment status:

1. Visit https://ePay.punjab.gov.pk

2. Choose “Property Tax”

3. Enter Property ID or CNIC

4. View challan details, outstanding dues, and payment options

Importance of Property Tax in Urban Development

Property taxes are a major source of funding for local municipal bodies. Funds are used for:

• Road repairs and infrastructure

• Water and sanitation projects

• Street lighting and public spaces

• Urban planning and zoning enforcement

• Garbage collection and environmental management

Common Issues Faced by Taxpayers

• Incorrect property classification or valuation

• Double assessment due to mutation errors

• Lack of awareness about online payment options

• Delayed property transfer or mutation

• Disputes over arrears on inherited properties

• Non-availability of updated tax challans in some districts

How to Dispute a Wrong Tax Assessment

If you believe your tax has been wrongly assessed:

• File an appeal with the Excise and Taxation Officer (ETO)

• Submit documentary evidence (title deed, area map, rent agreement)

• Request a site inspection or reassessment

• If unresolved, appeal further to the Director General of the Excise Department

Difference Between Property Tax and Other Real Estate Taxes

Property Tax Incentives and Discounts

Some provinces offer discounts for early payment, e.g.:

• Punjab: 5% discount if paid in first quarter of fiscal year

• Sindh: Waiver of penalty during announced amnesty periods

• Digital payment incentives via mobile apps or banks

How Accountants and Tax Advisors Can Help

• Accurately assess your property tax liability

• Assist in reconciliation of old tax arrears

• Prepare and file appeals against incorrect assessments

• Help integrate property tax with business books

• Provide advisory on property tax planning and exemptions

Role of Sterling.pk in Property Tax Compliance

At Sterling.pk, we assist individuals, companies, and real estate investors by:

• Performing property tax due diligence before acquisitions

• Helping resolve disputes and over-assessments

• Filing appeals and supporting documentation

• Advising clients on zoning classifications and rebates

• Assisting with online tax payments and digital records

Conclusion

Property tax in Pakistan is a provincial obligation that property owners must fulfill annually. Despite its complexity and variation from province to province, understanding how property tax is assessed, calculated, and paid can save taxpayers from penalties and help ensure compliance. Whether you are an individual homeowner, a commercial developer, or a business tenant, staying updated on property tax obligations is crucial for financial and legal peace of mind. Partnering with an experienced tax advisory firm like Sterling.pk can simplify the process and help you take full advantage of available exemptions, discounts, and compliance tools

Capital Gains Tax (CGT) in Pakistan is a tax levied on the profit earned from the sale or transfer of capital assets such as real estate, securities, and shares. It is a key component of the country’s direct taxation system and is governed primarily under the Income Tax Ordinance, 2001. The tax is applicable to both individuals and companies, and its rates vary based on the type of asset, holding period, and residency status of the taxpayer. Understanding CGT is essential for investors, property owners, and business entities alike, as it directly impacts decisions related to asset disposal and portfolio management.

What Are Capital Gains?

Capital gains are defined as the difference between the sale price and the purchase/acquisition price of a capital asset. If an asset is sold for more than its cost, the resulting gain is termed a capital gain and is subject to tax under Pakistani law.

There are two types of capital gains:

• Short-term Capital Gains: Gains on assets held for a short period (e.g., less than one year for securities)

• Long-term Capital Gains: Gains on assets held for a longer period (e.g., more than four or six years for real estate)

Legal Framework Governing CGT in Pakistan

• Income Tax Ordinance, 2001

• Income Tax Rules, 2002

• Annual Finance Acts for rate changes

• Administered by the Federal Board of Revenue (FBR)

Applicability of Capital Gains Tax

CGT in Pakistan applies to the following types of capital assets:

1. Shares and Securities (Stock Market)

2. Immovable Property (Real Estate)

3. Units of Mutual Funds

4. Business Assets

5. Foreign Capital Assets (for resident persons)

1. Capital Gains Tax on Shares and Securities

The taxation of gains on the disposal of listed securities is governed under Section 37A of the Income Tax Ordinance, 2001.

Who Pays?

• Individual investors

• Companies (resident and non-resident)

• Mutual funds and brokers

Tax Rates for Listed Securities (Tax Year 2025)

Exemptions

• Securities acquired before July 1, 2013

• Gifts or inheritances (subject to certain conditions)

Filing and Compliance

• Gains are usually subject to withholding by NCCPL (National Clearing Company of Pakistan Limited)

• Taxpayers must still declare and reconcile gains in their annual income tax returns

2. Capital Gains Tax on Real Estate

Capital gains on the sale of immovable properties (plots, houses, apartments) are taxed under Section 37(1A) of the Income Tax Ordinance.

Applicability

• Sale of open plots, constructed property, or agricultural land (if held for commercial purposes)

Rates on Real Estate (For Tax Year 2025)

Important Points

• The valuation is based on FBR notified rates or market value, whichever is higher

• Advance tax (Section 236C) is also applicable at the time of property transfer

• CGT is not applicable if property was acquired before July 1, 2016 (subject to conditions)

Exceptions and Exemptions

• First-time sale of self-occupied property (under specific thresholds)

• Transfer through inheritance or gift

• Agricultural land not used for commercial purposes

3. Capital Gains on Mutual Funds and REITs

Units of mutual funds, real estate investment trusts (REITs), and similar collective investment schemes are also subject to CGT.

Rates (as per Finance Act 2024)

4. CGT on Business or Personal Assets

When business owners sell plant, machinery, or other capital assets, gains are also subject to CGT:

• Depreciable assets – Gains taxed under Section 22(8) as business income

• Non-depreciable assets – Taxed as capital gains

• Personal assets like jewelry or art are generally not subject to CGT unless used for business

5. Capital Gains on Foreign Assets

For resident individuals, capital gains on foreign property, stocks, or investments are taxable under Pakistan law:

• Foreign tax credits may be available under Section 103

• Double Taxation Avoidance Agreements (DTAAs) may reduce or eliminate tax

• Foreign income must be declared in the annual wealth statement

Capital Losses and Set-Off Rules

• Capital losses can only be set off against capital gains

• Unadjusted losses may be carried forward for 6 years

• Losses cannot be adjusted against salary or business income

How CGT Is Collected and Paid

1. Through NCCPL for stock market investors

• Auto-deducted based on investor category and holding period

2. Through FBR for property sellers

• Payable at the time of registration via tax challan

• Taxpayers must declare the gain in their annual return

3. Manual payment for other assets

• Declare the gain in the annual income tax return

• Pay through advance tax or on assessment

Capital Gains vs. Other Taxes

• Capital Value Tax (CVT) – Tax on acquisition of property or assets

• Advance Income Tax – Collected on sale of property or shares

• Stamp Duty – A transaction cost on sale/purchase

• CGT is different – It’s based on profit, not value or transaction

Recent Updates (2024–2025)

• Increase in CGT rates for non-filers to 30% across all holding periods

• Enhanced documentation requirement under Section 165A

• Integration with NADRA and land records to detect underreporting

• Provisions for automatic exchange of property sale data with FBR

• Mandatory filing of wealth statements for capital asset sellers

Filing Requirements and Documentation

To comply with CGT rules, taxpayers must:

• Maintain records of purchase and sale (date, cost, commission, taxes)

• Use valuation certificates if the cost is not available

• Declare capital gains in the annual income tax return (IRIS portal)

• Submit wealth statements and reconciliation with bank statements

• Keep property transfer letters or share sale agreements as evidence

Penalties for Non-Compliance

• Non-filing of returns can lead to penalties under Section 182

• Understatement of gains may result in audit and additional tax

• FBR may impose default surcharge and initiate recovery proceedings

How Accountants and Tax Consultants Help

Given the complexities, most taxpayers consult professionals who assist with:

• Accurate CGT calculations based on documentation

• Advising on holding period strategies to reduce tax

• Filing tax returns with FBR and reconciling CGT paid

• Managing disputes, audits, or notices from tax authorities

• Structuring investments to legally minimize tax exposure

Conclusion

Capital Gains Tax is an integral part of Pakistan’s taxation system, especially as investment in real estate and securities continues to rise. Whether you’re selling property, trading stocks, or disposing of business assets, understanding CGT laws can help you stay compliant and make smarter financial decisions. The evolving legal framework, stricter documentation requirements, and enhanced digital tracking make it more important than ever to properly assess your capital gains, maintain supporting records, and file taxes on time. Consulting with a tax professional can help you navigate the complexities and avoid unnecessary liabilities.

Introduction

Filing tax returns is a legal obligation and civic duty for individuals and businesses in Pakistan. It is essential for compliance with the Income Tax Ordinance, 2001, and is required to maintain Active Taxpayer (ATL) status, avoid penalties, and gain access to numerous financial and legal benefits. With the Federal Board of Revenue (FBR) transitioning to digital platforms, tax filing has become more accessible—but still requires understanding the right process and documentation.

Who Must File a Tax Return in Pakistan

According to FBR, the following individuals and entities must file a tax return annually:

• Salaried persons earning more than PKR 600,000/year

• Business individuals or AOPs with income above PKR 400,000/year

• Companies registered with SECP

• Anyone owning immovable property, motor vehicles, or receiving foreign income

• Anyone claiming tax refunds or filing wealth statements

Benefits of Filing a Tax Return

• ATL Status: Reduces withholding tax rates

• Banking Benefits: Required for opening business accounts

• Visa and Loan Applications: Required for embassies and banks

• Tax Refunds: Claim refunds for excess tax deductions

• Legal Compliance: Avoid fines and legal notices from FBR

Documents Required to File Income Tax Returns

For Salaried Individuals

• CNIC

• Salary certificate or payslips

• Bank statements

• Tax deduction certificate

• Investment records

• Property and asset details

For Business Owners/AOPs

• CNIC and NTN

• Invoices and bills

• Expense records

• Rent agreements and bank statements

• Utility bills

• Advance tax payment records

For Companies

• Audited accounts

• NTN and SECP registration

• Tax challans

• Withholding statements

Step-by-Step Guide to File Tax Returns in Pakistan

Step 1: Register for an FBR Account

Visit https://iris.fbr.gov.pk and register using your CNIC, email, and mobile number.

Step 2: Log in to IRIS

Log in using CNIC and password. Update personal and contact details.

Step 3: Select the Relevant Tax Year

Choose the tax year for which you are filing (e.g., income from July 2022–June 2023 is filed under Tax Year 2023).

Step 4: Prepare Your Income Tax Return

For Salaried Individuals

Declare salary income, deductions, investments, and any other income.

For Business Individuals/AOPs

Declare business income, expenses, and applicable deductions.

For Companies

Fill in corporate revenue, financials, tax deductions, and attach audited statements.

Step 5: File Wealth Statement

Declare assets, liabilities, and reconciliation of net wealth with prior year.

Step 6: Review and Validate Entries

Check all data, correct errors, and validate before submission.

Step 7: Pay Tax (if applicable)

Generate PSID, pay through bank or online, and upload the CPR to IRIS.

Step 8: Submit and Acknowledge

Submit the return and wealth statement. Download acknowledgment for records.

Important Dates and Deadlines

Common Mistakes to Avoid

• Skipping wealth statement

• Incorrect salary or income details

• Forgetting to declare bank profit or tax credits

• Failure to pay due tax before filing

• Not submitting return after validation

How to Check Active Taxpayer Status (ATL)

Visit https://www.fbr.gov.pk/atl and enter your CNIC or NTN to verify ATL status. ATL is updated every Monday.

Filing Tax Returns for Previous Years

You can file late returns with a penalty under Section 114(6). However, ATL benefits may not apply immediately.

Hiring a Tax Consultant – When and Why

• Multiple income sources

• Claiming tax refunds

• Business audits or FBR notices

• Missed previous years

• Complex deductions or credits

Recent Developments in Tax Filing (2024–2025)

• Launch of Tax Asaan mobile app

• Auto-import of salary and bank data

• CNIC-based verification with OTP

• Digital receipts and challan uploads

• Real-time taxpayer dashboard and alerts

Conclusion

Filing income tax returns in Pakistan is easier than ever, thanks to FBR’s digital systems. Whether you’re a salaried individual, business owner, or company, timely and accurate filing protects you from penalties and gives access to legal and financial benefits. Stay compliant, keep records, and consult a professional when needed to ensure your filings are error-free.

Preparation of accounts is a fundamental process in any business and a legal requirement for tax compliance in Pakistan. Whether for internal financial management or statutory reporting, accurate and timely preparation of accounts ensures better control over finances, supports informed decision-making, and helps avoid penalties from the Federal Board of Revenue (FBR).

Here’s how an accountant would explain the process of preparing accounts for a business in Pakistan, in a structured and easy-to-follow manner.

Record Transactions

Start by maintaining a complete and chronological record of all financial transactions that occur within the business. This includes:

• Sales and purchases (cash or credit)

• Payments to suppliers and expenses

• Receipts from customers and other incomes

• Loans, advances, and repayments

Transactions can be recorded manually in ledgers or journals, but it is recommended to use accounting software such as QuickBooks, Xero, Peachtree, or Wave Accounting for greater accuracy and efficiency. In Pakistan, digital recordkeeping is increasingly encouraged, especially for businesses registered under FBR’s POS or Sales Tax regimes.

Classify Transactions

Once transactions are recorded, classify them into proper accounting heads based on nature. The main categories include:

• Assets (Cash, bank, receivables, property)

• Liabilities (Payables, loans, tax obligations)

• Income (Sales, service income, rental income)

• Expenses (Utilities, rent, salaries, depreciation)

• Capital or Equity (Owner’s investment, retained earnings)

Proper classification ensures that transactions are accurately reflected in financial statements.

Journalize Transactions

The next step is to transfer the classified transactions into the Journal, which records entries in a chronological order. Every transaction is recorded using double-entry accounting, which means each transaction affects at least two accounts.

Here’s an example of journalizing typical transactions:

Example – January Transactions
• Sold goods worth PKR 50,000 on credit
• Purchased goods worth PKR 30,000 on credit
• Paid PKR 10,000 in rent
• Received PKR 15,000 in cash from a customer

Journal Entries:

Post Transactions to Ledger Accounts

Once journal entries are made, post them to the General Ledger. A ledger groups all similar transactions under one account. For example, the Cash Ledger will show all receipts and payments involving cash.

Each ledger account shows the cumulative effect of transactions and their running balances. Maintaining updated ledgers is essential for trial balance preparation and later for the preparation of financial statements like the Balance Sheet and Income Statement.

Prepare Trial Balance

A Trial Balance is prepared to verify that the total debits and credits are equal. This step helps ensure that entries were posted correctly and provides a foundation for financial statement preparation.

Steps to prepare a trial balance:

1. List all ledger accounts with their debit or credit balances

2. Total the debit and credit sides separately

3. Compare totals to ensure they match

Example:

Totals:

• Total Debit = PKR 35,000

• Total Credit = PKR 20,000

In this case, the trial balance doesn’t balance, indicating that an error exists and must be corrected.

Prepare Financial Statements

Once the trial balance is correct, proceed to prepare the business’s financial statements.

• Income Statement (Profit & Loss Account): Summarizes revenue and expenses to show net profit or loss.

• Balance Sheet (Statement of Financial Position): Displays the company’s assets, liabilities, and equity at a specific date.

• Cash Flow Statement: Shows inflows and outflows of cash over a period (optional for small businesses).

These statements are used for internal management, external reporting, tax filing with FBR, and decision-making by stakeholders.

Additional Best Practices in Pakistan (2025)

• Use of Accounting Software: FBR recommends the use of compliant digital accounting systems that integrate with the IRIS portal and Sales Tax modules.

• Bank Reconciliation: Perform monthly reconciliations of bank statements with your cash/bank ledger to ensure there are no omissions or errors.

• Maintain Tax Records: For tax year 2025, FBR requires taxpayers to maintain all financial and tax-related documents for at least 6 years under Section 174 of the Income Tax Ordinance.

• Hire a Qualified Accountant: It is advisable for companies and large businesses to appoint a CA, ACCA, or ICMA qualified accountant to manage accounts and ensure compliance with Pakistani financial reporting standards.

Compliance with SECP and FBR

If your business is a registered company with the Securities and Exchange Commission of Pakistan (SECP), you must prepare annual audited financial statements in accordance with International Financial Reporting Standards (IFRS). These must be submitted to SECP and FBR within prescribed timelines.

Sole proprietors and partnerships are not subject to SECP requirements but must submit income tax returns and accounts with FBR via IRIS.

In Pakistan, individuals and businesses are required to pay income tax if their taxable income exceeds the threshold prescribed under the Income Tax Ordinance, 2001. The Federal Board of Revenue (FBR) administers the income tax collection system and facilitates online tax filing through its IRIS portal.

Who is Required to File Income Tax in Pakistan?

The following categories of taxpayers must file their income tax returns in Pakistan:

• Salaried individuals: If your annual salary exceeds the taxable limit (currently Rs. 600,000 for Tax Year 2025), you are required to file an income tax return. Tax is usually deducted at source by employers, but a return must still be filed.

• Business owners: Sole proprietors, partnerships, and companies are obligated to file annual income tax returns if their income exceeds the prescribed threshold or if they are registered under sales tax laws.

• Freelancers and consultants: Any income earned by self-employed individuals, whether through local or foreign clients, is subject to tax. With rising exports in the IT and services sector, FBR now requires freelancers earning above Rs. 600,000 annually to file returns and become active taxpayers.

• Rental income recipients: Individuals receiving rent from property are taxed under Section 15 of the Income Tax Ordinance. The tax can be final or adjustable depending on whether the tenant is a withholding agent.

• Capital gains earners: Individuals who earn profits from the disposal of shares, securities, or immovable property must pay capital gains tax (CGT) as per current CGT schedules provided by the FBR.

• Foreign income residents: Pakistani residents who receive foreign-sourced income must declare it in their tax returns. Double taxation treaties may apply depending on the source country.