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.
