INCOME TAX RATES,

REBATES & DEDUCTIONS

Tax rates for individuals and AOP for the Tax Year 2024:
[Tax rates are also called slab rates or progressive rates or marginal rates]
1.1 Tax rates for Individuals
Category 1 (for individual non-salaried case i.e. where taxable salary is nil or up to 75%
of taxable income and for AOP)

Mr. A Mr.B Mr.C

Taxable salary 5,100,000 6,600,000 1,500,000
Other source 2,400,000 1,400,000 500,000
Taxable income 7,500,000 8,000,000 2,000,000

Non-Salaried case Salaried case Non-Salaried case

Category 1 Category 2 Category 1
Category 1: Non-salaried
Taxable individual
income of non-salaried individual 3,200,000
Taxable Income Rate of Tax
Tax on Rs.3,000,000 465,000
1 Up to Rs.600,000 Tax on Rs.200,000
Nil @ 30% 60,000
2 600,001 – 800,000 Total tax liability
7.5% of amount exceeding Rs.600,000 525,000

3 800,001 – 1,200,000 Rs.15,000

Taxable income of+non-salaried
15% of amount exceeding 5,800,000
individual
Rs.800,000
Taxable income of non-salaried individual 5,800,000
4 1,200,001 – 2,400,000 Rs.75,000 + 20% of amount exceeding
Tax on Rs.4,000,000
Rs.1,200,000 765,000
Tax on Rs.1,800,000 @ 35% 630,000
5 2,400,001 – 3,000,000 Rs.315,000 + 25% of amount exceeding 1,395,000
Total tax liability
Rs.2,400,000

6 3,000,001 – 4,000,000 Applicable tax rate +35%

Rs.465,000 30% of amount exceeding
Rs.3,000,000
Average tax rate = 1,395,000 / 5,800,000 = 24.05%
7 Over 4,000,000 Rs.765,000 + 35% of amount exceeding
Rs.4,000,000
Category 2: Salaried Individual i.e. where taxable
salary exceeds 75% of taxable income)

Taxable Income Rate

1 Up to Rs.600,000 Nil
2 600,001 – 1,200,000 2.5% of amount exceeding Rs.600,000

3 1,200,001 – 2,400,000 Rs.15,000 + 12.5% of amount exceeding

Rs.1,200,000
4 2,400,001 – 3,600,000 Rs.165,000 + 22.5% of amount exceeding
Rs.2,400,000
5 3,600,001 – 6,000,000 Rs.435,000 + 27.5% of amount exceeding
Rs.3,600,000
6 Over 6,000,000 Rs.1,095,000 + 35% of amount exceeding
Rs.6,000,000
Tax rate for a company 29%
Tax rate for a banking company 39%

No basic exemption for a company

3. The following tax credits and rebates are allowable:
a) Tax reduction in case of full time teacher or researcher
b) Tax credit on profit on Bahbood Savings Certificates etc.
c) Foreign tax credit (also called Unilateral relief) – S 103
d) Tax credit on:
i) Charitable donations – s 61
ii) Approved Pension Fund – s 63
iii) Point of sale machine
3.1 Tax reduction in case of full time teacher or researcher –
Clause 2 Part-III 2nd Schedule.
A full time teacher or a researcher of a recognized non-profit educational or
research institution including government training and research institutions shall
be allowed a reduction of 25% of tax payable.
The institution must be recognized by Higher Education Commission or a Board
of Education or a University recognized by Higher Education Commission; and
This additional tax reduction would be allowed on tax liability on taxable salary.
Other income, if any, would be excluded for this purpose.
This rebate shall not apply to teachers of medical profession who derive income
from private medical practice or who receive share of consideration from
patients.
Mr. B
Taxable salary as a full time teacher from
an approved non-profit organization 3,300,000
Taxable other sources 500,000
Taxable income 3,800,000 Working of Full Time Teacher
Allowance (FTTA)
Tax liability (Salaried case)
Taxable salary 3,300,000
Tax on Rs.3,600,000 435,000
Tax on Rs.200,000 @ 27.5% 55,000 Tax on Rs.2,400,000 165,000
490,000 Tax on Rs.900,000 @ 22.5% 202,500
367,500
Less: Full time teacher allowance
(as per working) 91,875 Full time teacher allowance
398,125 25% of Rs.367,500 91,875
Mr. Z
Taxable salary as a full time teacher from
an approved non-profit organization 5,800,000
Taxable other sources 1,700,000 Working of Full Time Teacher
Allowance (FTTA)
Taxable income 7,500,000
Taxable salary 5,800,000
Tax liability (Salaried case)
Tax on Rs.3,600,000 435,000
Tax on Rs.6,000,000 1,095,000
Tax on Rs.2,200,000
Tax on Rs.1,500,000 @ 35% 525,000 @ 27.5% 605,000
1,620,000 1,040,000
Less: Full time teacher allowance
Full time teacher allowance
(as per working) 260,000 25% of Rs.1,040,000 260,000
1,360,000
Para 43(d)(iii) of FBR Circular 6 of 2013 relevant to FTTA

Full time teacher means a person employed purely for teaching and not performing any
admn or managerial jobs e.g. principals, headmasters, directors, vice-chancellors,
chairmen, controllers etc.

Similarly a full time researcher means a person purely employed for research job only in a
research institution and such institution is purely performing research activities.
Key points for FTTA:
(1) If salary income from NPO is up to Rs.600,000 included in taxable income then FTTA
shall not be calculated

(2)
Salary from NPO as full time teacher 4,800,000
Other income 2,400,000
Taxable income 7,200,000

The above case is non-salaried but for FTTA it is a salaried case

Mr. Kamal
Taxable salary as a full time teacher from
an approved non-profit organization 4,800,000
Working of Full Time Teacher
Taxable other sources 2,400,000 Allowance (FTTA)
Taxable income 7,200,000
Taxable salary 4,800,000

Tax liability (Non-salaried case) Salaried Case

Tax on Rs.4,000,000 765,000 Tax on Rs.3,600,000 435,000
Tax on Rs.3,200,000 @ 35% 1,120,000 Tax on Rs.1,200,000
@ 27.5% 330,000
1,885,000 765,000
Less: Full time teacher allowance
(as per working) 191,250 Full time teacher allowance
25% of Rs.765,000 191,250
1,693,750
3.2 Tax credit for profit on Bahbood Savings Certificates or Pensioners’ Benefit
account or Shuhada Family Welfare Account

(a) Profit on Certificates issued by, or accounts maintained with, National Savings Centres
is taxable at 15% fixed tax and therefore normal slab rates do not apply on such profit.
Withholding tax shall also be deducted by the National Saving Centres at the time of
payment of profit on debt.
(b) Profit on Bahbood Savings Certificates issued by, or Pensioners’ Benefit account
or Shuhada Family Welfare Account maintained with, National Savings Centres (such
profit) is not subject to withholding tax and normal slab rates apply on such profit.

However, tax rate shall not exceed 5% of such profit which means that if average rate of
tax on income including such profit is more than 5% then tax credit on such profit would
apply to reduce the tax on 5% on such profit.

[Average rate of tax is A/B where A is the tax liability before tax credit for profit on
Bahbood Certificates etc and B is the taxable income]
Example: Mr. A
Income from business 3,300,000
Profit on Bahbood Savings Certificate 1,000,000
Taxable income 4,300,000

Tax liability (Non-salaried case)

Income tax on Rs.4,000,000 765,000
Income tax on Rs.300,000 @ 35% 105,000
870,000
Tax credit on Profit on Bahbood Certificate
Tax on profit on certificate at average tax rate
(870,000 / 4,300,000) x 1,000,000 202,326
Tax @ 5% on profit on certificate 50,000
Tax credit 152,326
Tax liability 717,674
Example 2: Mr. B
Salary income 4,200,000
Profit on Bahbood Savings Certificate 600,000
Taxable income 4,800,000

Tax liability (Salaried case)

Income tax on Rs.3,600,000 435,000
Income tax on Rs.1,200,000 @ 27.5% 330,000
765,000
Tax credit on Profit on Bahbood Certificate
Tax on profit on certificate at average tax rate
(765,000 / 4,800,000) x 600,000 95,625
Tax @ 5% on profit on certificate 30,000
Tax credit on Bahbood Certificate 65,625
Tax liability 699,375
Foreign Tax Credit (also called Unilateral Relief or Cross Border
Transaction Relief)
– Section 103
a) Foreign source income derived by a resident is normally exempt in Pakistan under
tax treaty or if he is a short term resident or a returning expatriate.

However, if foreign source income is taxable in Pakistan despite the fact that the
taxpayer has already paid income tax in the foreign country then the resident taxpayer
shall be allowed a tax credit in respect of foreign income tax paid by him as lower of:

Foreign income tax paid; and

Pakistan tax payable in respect of foreign source income at average rate of
tax

Average rate of tax is A/B where A is the tax liability before foreign tax
credit and B is the taxable income

Note for students: Foreign tax credit is not applicable for foreign source salary
earned by a resident person as the same is exempt in Pakistan if the tax on that salary
is paid in the foreign country.
b) Example C1:
Mr. A’s income for the tax year 20X8 is as under:
Taxable Pakistan source income:
Salary 3,600,000
Other source 2,000,000
Foreign source business
taxable in Pakistan 3,000,000
Tax paid in the foreign country @ 20% 600,000
Solution:
Taxable salary 3,600,000
Taxable other source 2,000,000
Foreign source income 3,000,000
Taxable income 8,600,000
Tax liability (Non-salaried case)
Tax on Rs.4,000,000 765,000
Tax on Rs.4,600,000 @ 35% 1,610,000
2,375,000
Less: Foreign tax credit
(a) Pakistan average rate of tax
on foreign source income
2,375,000 / 8,600,000 x 3m 828,488
(b) Foreign income tax paid 600,000
Whichever is lower 600,000
Total tax liability 1,775,000
Solution:
Taxable salary 3,600,000
Taxable other source 2,000,000
Foreign source income 3,000,000
Taxable income 8,600,000
Tax liability (Non-salaried case)
Tax on Rs.4,000,000 765,000
Tax on Rs.4,600,000 @ 35% 1,610,000
2,375,000
Less: Foreign tax credit
(a) Pakistan average rate of tax
on foreign source income
2,375,000 / 8,600,000 x 3m 828,488
(b) Foreign income tax paid 900,000
Whichever is lower 828,488
Total tax liability 1,546,512
c) Example C2:
Mr. Junaid’s income for the tax year 20X8 is as under:

Taxable Pakistan source income:

Salary 1,800,000
Other source 1,000,000

Foreign source business taxable in Pakistan 1,500,000

Tax paid in the foreign country 330,000
Solution:
Taxable salary 1,800,000
Taxable other source 1,000,000
Foreign source income 1,500,000
Taxable income 4,300,000
Tax liability (Non-salaried case)
Tax on Rs.4,000,000 765,000
Tax on Rs.300,000 @ 35% 105,000
870,000
Less: Foreign tax credit
(a) Pakistan average rate of tax
on foreign source income
870,000 / 4,300,000 x 1,500,000 303,488
(b) Foreign income tax paid 330,000
Whichever is lower 303,488
Total tax liability 566,512
c) Foreign income tax is to be paid in the foreign country
within a period of 2 years from the end of the tax year.
If not paid within 2 years then tax credit allowed in
Pakistan shall be treated as tax payable by the person.
d)The foreign levy paid on the foreign income may be regarded as a foreign
income tax if the following conditions are satisfied:

- the levy is a tax;

- the tax is substantially equivalent to the income tax imposed by the Income
Tax Ordinance, 2001 on the related foreign income;

- A foreign levy is a tax if it requires a compulsory payment pursuant to the

authority of the foreign country to levy taxes other than penalty or fine.
Mr. C
Taxable salary 4,800,000
Taxable other source 1,300,000
Total income 6,100,000
Less: Zakat paid under the Zakat Ordinance 50,000
Taxable income 6,050,000
Tax liability (Salaried case)
Tax on Rs.6,000,000 1,095,000
Tax on Rs.50,000 @ 35% 17,500
1,112,500
Less: Full time teacher allowance 191,250
921,250
Less: Rebate on donation of Rs.200,000
(A ÷ B) × C = (921,250 ÷ 6,050,000) × 200,000 30,455
890,795
Less: Rebate on approved pension fund of Rs.300,000
(A ÷ B) × C = (921,250 ÷ 6,050,000) × 300,000 45,682
845,113
 3.4 Rebate on Donations – section 61
3.4.1 A person shall be entitled to a tax credit / rebate on the donation,
voluntary contribution or subscription in cash through banking channel or in
kind i.e. any property is given by the person to the following:
a) Any board of education or university in Pakistan established under any law
b) Any educational institution or hospital in Pakistan established or run by
Federal, provincial or local government
c) Any non-profit organization, trust or welfare organization approved by the
tax authorities established for the purpose of religious, education,
charitable, welfare or for promotion of sports.
d) Entities, organizations and funds mentioned in 13th Schedule to the Income
Tax Ordinance, 2001 such as The Citizen Foundation and Pakistan
Disabled Foundation
“charitable purpose” includes relief of the poor, education, medical relief and the
advancement of any other object of general public utility – section 2(11A).

“non-profit organization” [section 2(36)] means any person other than an

individual, which is:
(a) established for religious, educational, charitable, welfare purposes for general
public, or for the promotion of an amateur sport;

(b) registered under any law as a non-profit organization [such as under Trust Act or
section 42 of the Companies Act 2017];

(c) approved by the Commissioner for specified period; and

(d) none of its assets confers a private benefit to any other person.
Tax credit shall be allowed at average rate of tax on the lower of the following:
i) actual amount of donation, or FMV of property at the time it is given, or
ii) 30% of taxable income (20% in case of a company)

Note for students: Rebate on donation is allowed at average rate of tax which is A/B
where:
A is the tax liability before rebate on donation; and
B is the taxable income.

Same average rate of tax shall be taken for the purpose of rebates under sections 61 and
63 i.e. rebate on donations and approved pension fund.
However, where donation is given to an associate by the donor then tax credit shall be
allowed at average rate of tax on the lower of the following:
i) actual amount of donation, or FMV of property at the time it is given, or
ii) 15% of taxable income (10% in case of a company)
Donation in kind
3.4.2 Value of donation in kind:
Value of items donated in kind shall be valued as per Rule
228(4) of the Income Tax Rules 2002, summary of which is
as under:
a) Imported items: value for the purpose of custom
duty along with all duties and charges paid by the donor

b) Items manufactured in Pakistan: purchase price

along with duties and charges paid by the donor

c) Used depreciable items: tax WDV i.e. cost – tax

depreciation
Donation of motor vehicles
d) Motor vehicles:
i) New vehicles imported by the donor shall be valued at CIF value (i.e. Cost,
Insurance and Freight) plus all duties and charges till their registration.

ii) New vehicles locally purchased shall be valued at price paid by the donor plus
all duties and charges till their registration.

iii) Used vehicles imported by the donor shall be valued at the import price
adopted by the Custom Authorities plus all charges and duties till their
registration.

iv) Value adopted in the first year shall be reduced by 10% of the said value (i.e.
on straight line basis) for each successive year up to a maximum of 5 years.
 v) Used vehicles locally purchased shall be valued as:

- If vehicles are up to 5 years old, value shall be original cost as reduced by

10% for every year following the year in which it was imported or purchased

- If vehicles are more than 5 years old, value shall be purchase price paid by
the donor for the used car or 50% of the original value whichever is higher

e) Other items: Fair market value as determined by the Commissioner. The

most common example in this category is used personal assets
 [Q.4 March 2002 ICAP CAF]:

Mr. Ashraf made the following donations during the year:

a) Rs.2,000,000 to a relief fund sponsored by the Government.

b) Personal car to an institution (approved). This car was purchased

by Mr. Ashraf four years ago at the cost of Rs.800,000. FMV is
Rs.600,000.

c) Medicines to a private hospital (unapproved) purchased at the total

cost of Rs.100,000.
Advice Mr. Ashraf regarding the allowance for donation which may be
claimed by him if his salary income is Rs.8,000,000. (Marks 8)
 Answer:
a) Donation to a relief fund sponsored by the Govt. is eligible for
rebate.

b) Rebate shall be allowed on Rs.480,000 i.e. Rs.800,000 less 10%

per annum reduction for 4 years.

c) No rebate shall be allowed on donation to unapproved private

hospital

d) Amount of rebate on donation is Rs.538,500

Amount eligible for rebate on donation is lower of the following amounts:

– Actual amount of donation i.e. 2,000,000 + 480,000 = Rs.2,480,000; or

– 30% of taxable income = Rs.2,400,000

The amount of donation and tax liability would be as under:

Tax liability (Salaried case)

Income tax on Rs.6,000,000 1,095,000
Income tax on Rs.2,000,000 @ 35% 700,000
1,795,000
Less: Rebate on donation
1,795,000 / 8,000,000 x 2,400,000 538,500
Tax liability 1,256,500
Question
Mr. A
# Taxable salary Rs.4,000,000 from NPO as full time teacher
# Taxable other source Rs.1,020,000
# Cheque received under inheritance Rs.8,200,000
# Zakat paid Rs.148,000
# Donations to approved charitable organizations through banking channel
Rs.1,500,000
Answer

Working of FTTA
Taxable salary 4,000,000

Tax on Rs.3,600,000 435,000

Tax @ 27.5% on Rs.400,000 110,000
545,000

FTTA 25% of Rs.545,000 136,250

 Name of Taxpayer: Mr. A
Residential Status: Resident
NTN: xxxx
Tax Year: 20X8
Computation of Taxable Income & Tax Liability
Rs.
Taxable salary 4,000,000
Taxable other source 1,020,000
Amount received through inheritance 8,200,000 exempt
Total Income 5,020,000
Less: Zakat 148,000
Taxable Income 4,872,000
Tax liability (Salaried case)
Tax on Rs.3,600,000 435,000
Tax on Rs.1,272,000 @ 27.5% 349,800
784,800
Less: Full Time Teacher Allowance 136,250
648,550
Amount eligible for rebate on donation: Lower of
Actual donation 1,500,000
30% of taxable income 1,461,600
Rebate on donation
648,550 / 4,872,000 x 1,461,600 194,565
Tax liability 453,985
Question
Mr. F
# Taxable salary Rs.1,700,000 from NPO as full time teacher
# Taxable other source Rs.1,320,000
# Cheque received under inheritance Rs.5,000,000
# Zakat paid Rs.148,000
# Donations to approved charitable organizations through banking channel
Rs.900,000
Answer

Working of FTTA
Taxable salary 1,700,000

Tax on Rs.1,200,000 15,000

Tax @ 12.5% on Rs.500,000 62,500
77,500

FTTA 25% of Rs.77,500 19,375

 Name of Taxpayer: Mr. A
Residential Status: Resident
NTN: xxxx
Tax Year: 20X8
Computation of Taxable Income & Tax Liability
Rs.
Taxable salary 1,700,000
Taxable other source 1,320,000
Amount received through inheritance 5,000,000 exempt
Total Income 3,020,000
Less: Zakat 148,000
Taxable Income 2,872,000
Tax liability (Non-Salaried case)
Tax on Rs.2,400,000 315,000
Tax on Rs.472,000 @ 25% 118,000
433,000
Less: Full Time Teacher Allowance 19,375
413,625
Amount eligible for rebate on donation: Lower of
Actual donation 900,000
30% of taxable income 861,600
Rebate on donation
413,625 / 2,872,000 x 861,600 124,087
Tax liability 289,538
1.5 Allowance for contribution to Approved Pension Fund (APF) – S 63
An eligible person deriving salary income or business income is entitled to a
tax credit on contribution or premium paid to APF under Voluntary Pension
System Rules at the average rate of tax on the lower of:
Same average tax
i) total contribution or premium paid during the year; or rate which is used
for rebate on
ii) 20% of taxable income of the current tax year. donation

Eligible person – section 2(19A):

An individual Pakistani who holds a valid NTN or CNIC

Transfer of existing balance of an account to another account under Voluntary

Pension Scheme Rules shall not qualify for rebate. It means that the original
investment by a person shall be eligible for such rebate.
3.6 Tax credit for point of sale machine – S 64D

(1) Any person who is required to integrate with FBR’s computerized system for real
time reporting of sale or receipt, shall be entitled to tax credit on purchase cost of
point of sale machine.

“point of sale machine” means a machine meant for processing and recording the
sale transactions for goods or services, either in cash or through credit and debit
cards or online payments in an internet enabled environment.

(2) The amount of tax credit for a tax year in which point of sale machine is installed,
integrated and configured with the FBR’s computerized system shall be lesser of –

(i) purchase cost of point of sale machine; or

(ii) Rs.150,000 per machine.
3.7 If the amount of tax rebates is more than the tax liability then no refund
shall be allowed nor is the same allowed to be carried forward or carried
back (except few cases as mentioned in chapter of losses)

However, if tax paid or deducted at source is more than the tax liability then
the excess shall be refunded or carried forward.

Transfer of rebate to an AOP by a member

If the person is a member of an AOP, any unadjusted tax credit can be
claimed by the AOP of which he is member, in the same year. For this
purpose, a copy of written agreement between the member and the AOP
shall be furnished along with the return of income of AOP – refer chapter 6.
4. Deductions from total income to arrive at taxable income

4.1 Income is taxable under any of the five heads of income as under:

- Income from Salary;

- Income from Property;
- Income from Business;
- Capital Gain; and
- Income from Other Sources
4.2 Total income is the sum of all incomes under five heads of income net of deductions
admissible under respective heads of income. The total income shall also be reduced by
the following amounts to arrive at taxable income:

– Education expenses – s 60D

– Zakat paid under Zakat and Ushr Ordinance – s 60
– Workers’ Welfare Fund (WWF) – s 60A
– Workers’ Profit Participation Fund (WPPF) – s 60B
4. Deductions from total income to arrive at taxable income

4.3 Where the total deductions from total income exceed the amount of total income then
the excess shall not be carried forward to the next tax year.
4.4 Education Expenses – section 60D
(a) An individual is entitled to a deductible allowance in respect of tuition fee paid provided
that his taxable income is less than Rs.1.5 million.
(b) Deductible allowance in respect of education expense shall be lower of the following:
- 5% of the tuition fee paid by the individual; or
- 25% of taxable income; or
- Rs.60,000 multiplied by the number of children of the individual.
(c) Deduction of education expense can be claimed by either of the parents making
payment of the fee on furnishing NTN or name of the educational institution.
Question
Determine the amount of deductible allowance that a resident individual can claim on
account of education expenses, if his taxable income for the year was Rs.800,000 and he
paid monthly fee of Rs.6,000 per child for his three children.

Answer
The deduction allowed on account of education expense is the lower of:
Rs.
– 5% of tuition fee paid Rs.6,000 x 12 x 3 x 5% 10,800
– 25% of taxable income Rs.800,000 x 25% 200,000
– Rs.60,000 multiplied by number of children 180,000

Therefore, the deduction allowed is Rs.10,800