Who Must File Income Tax Return in Pakistan — a Practical, Law-Backed Guide

Under the Income Tax Ordinance, 2001, the persons required to file a return and the procedure for returns are set out in Section 114 (return of income), and related rules on wealth statements, due dates and notices appear in Sections 115–117. The FBR’s IRIS portal is the official channel for registration and filing.

1) Salaried individuals

Who: Employees whose total income in a tax year exceeds the statutory exemption/threshold or who otherwise fall into categories that must file (e.g., to claim refunds, to be on the Active Taxpayers List, or when required by an employer/authority). The Ordinance and FBR guidance explain filing obligations and due dates.

What matters now (2025): The Finance Act / budget measures for 2025 updated tax slabs and relief for lower and middle income salaried classes — see official FBR summaries and tax-memoranda from professional firms for the exact slab tables for tax year 2025–26. If you are salaried, compare your taxable income to those slabs and check withheld (PAYE) tax amounts on your payslips.

Practical: Keep employer payslips, Form-B/withholding certificates, and any investment/insurance proofs for deductions. File on IRIS even if tax was fully withheld to maintain filer status and claim refunds.

2) Freelancers & self-employed persons

Who: Individuals earning income from personal services, freelancing (Upwork, Fiverr, direct clients), consulting, or self-employment must register (NTN) and file returns if income reaches the taxable threshold or if they wish to be filers. FBR has increasingly emphasised taxation of the digital economy and freelancers.

How taxed?:

• Income from foreign clients is taxable in Pakistan if you are resident or the income source is Pakistan-situs under the Ordinance.

• New/2025 simplified measures and sectoral guidance aim to bring online service providers into the tax net; professional briefs and FBR circulars set withholding and registration rules. Check FBR notices and sector guidance for exact withholding rates or fixed regimes (if any).

Practical: Maintain clear records of invoices, client receipts (including foreign receipts), bank statements, and expenses. Consider a simplified presumptive regime if the law offers it for small freelancers — but confirm current rules before opting.

3) Business tax (sole proprietors, partnerships, small firms)

Who: Sole proprietors, partners and business entities carrying on trade, profession or vocation must file business income under the Ordinance and keep prescribed books of account when turnover/conditions require it. Section 114 procedures apply.

How it works: Many businesses pay advance tax or presumptive tax depending on their sector/turnover. Withholding taxes on payments (supplies, services, rent) may be adjustable or final depending on the category — consult the FBR withholding rate card for specifics.

Practical: Keep sales records, purchase invoices, bank statements, and reconcile GST/Sales Tax (where applicable) with income tax. Register on IRIS and choose the correct return type (normal, presumptive, or final as allowed).

4) Corporate tax (companies)

Who: All companies incorporated or registered under Pakistani law must file corporate income tax returns and pay tax on net profits per company rules. Filing deadlines differ (companies generally have different return deadlines under the Ordinance).

Rates & recent change (2025): Standard corporate tax rates and special rules (e.g., for banks, small companies, etc.) are set out in the First Schedule and modified by Finance Acts; major tax advisers (PwC, KPMG) publish up-to-date rate tables. For example, corporate tax and super-tax rules were adjusted in Finance Act 2025 — check the official Finance Act text or firm memoranda for precise percentages applicable to your company.

Practical: Corporates must maintain audited accounts (when required), file returns timely, and reconcile tax payments/withholdings on advance tax and tax deducted at source.

5) Non-resident taxpayers

Who: Persons resident outside Pakistan but earning Pakistan-sourced income (rent, salary for services in Pakistan, capital gains from Pakistan assets, business income having PE) may have filing obligations in Pakistan. The Ordinance defines residency rules and taxation of Pakistan-sourced income.

Practical: If you earn rent or capital gains on Pakistani property, or you carry on business through a permanent establishment in Pakistan, you must check withholding rules and whether a return is required to claim reliefs or treaty benefits (if applicable).

6) Property taxpayers & rental income

Who: Owners of immovable property who receive rental income or dispose of property may face: (a) taxation of rental income under normal/progressive rates or (b) advance tax withholding on sale/purchase transactions (e.g., Sections 236C/K). FBR provides valuation and withholding guidance.

Deemed income on property: The law includes provisions for deemed income on owned immovable property (valuation rules and tax rates); consult FBR valuation rules and Tax Code for calculation mechanics. Professional firm summaries (PwC/KPMG) explain the effective rates and exemptions.

Practical: Keep sale deeds, rent agreements, rent receipts, municipal tax bills; ensure advance tax collected at sale/purchase is reconciled in your return. Non-filers generally face higher withholding rates on property transactions.

7) Rental tax (residential & commercial)

Who & how: Rental income is taxable; the tax base and allowable deductions (repairs, municipal taxes, insurance) depend on whether the owner files under normal rules or is subject to final/presumptive regimes. Withholding tax on rent payments is also frequently applied and the rate depends on filer status and payer type (individual vs company). Refer to FBR withholding rate card and relevant sections.

Practical: Tenancy agreements and rent receipts are essential. If you are a resident owner, include net rental in your return; if you are non-resident, special withholding rules will apply.

8) Agriculture tax

Federal vs provincial: Historically, agricultural income has been outside federal income tax and is taxed at provincial level under provincial agricultural income tax laws. In 2025, provinces enacted/updated agricultural income tax laws (Punjab, Sindh, Khyber Pakhtunkhwa, Balochistan enacted rules/bills) to align with certain federal thresholds and introduce progressive rates; details vary by province. Follow the specific provincial law where the land is located.

Practical: If you earn agricultural income, check your provincial agriculture tax law (e.g., Sindh Agricultural Income Tax Act, KP Act 2025) — many provinces set an exemption floor (e.g., annual income up to Rs 600,000 exempt in some schemes) and then progressive brackets above that. Keep land records and produce/area documentation.

Filing procedure — short checklist

1. Register for NTN / IRIS on FBR if you’re not already registered. (FBR IRIS is the official portal.) Federal Board of Revenue

2. Gather documents: salary certificates/pay slips, bank statements, invoices, rent deeds, sale deeds, expense receipts, investment/insurance proofs.

3. Choose correct return type: individual (salaried), business, presumptive, company, etc., as per Ordinance. (See Sections 114–116). FBR Download

4. Compute tax & claim credits/deductions under applicable Heads and Schedules (First Schedule and other clauses in Ordinance).

5. File on IRIS before due date; if late, penalties under the Ordinance may apply. FBR Download

Where to read the law and official guidance (primary sources)

• Income Tax Ordinance, 2001 (consolidated / amended text) — the principal legal text on income tax. FBR Download+1

• FBR IRIS pages & official FBR circulars — step-by-step filing guidance, withholding rate cards, valuation rules, and circulars. Federal Board of Revenue+1

• Finance Act 2025 and firm memoranda (KPMG/PwC briefs) — for latest slab changes, withholding rates and sectoral reliefs introduced in 2025. KPMG Assets+1

• Provincial laws (Sindh, Punjab, KP, Balochistan) — for agricultural income tax specifics. srb.gos.pk+1

Final practical advice

1. If in doubt, register and file. Filing preserves filer status, reduces higher withholding rates for non-filers, and avoids many administrative notices under Section 114(4). Sidekick

2. Keep records for at least 5–7 years (audit/statute considerations).

3. Use a tax professional for business, corporate, cross-border or large property matters—tax law is technical and changes frequently (see Finance Act updates). KPMG Assets