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Pakistan Individual - Significant developments

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  • Taxation slabs of individuals have been increased, with maximum rate of tax enhanced up to 35% in case of incomes exceeding 75 million Pakistani rupees (PKR). Applicable rates for different slabs of income are provided in the Taxes on personal income section.
  • An individual shall be considered as ‘salaried’ if salary income constitutes 75% or more of the total taxable income for the year, as against the earlier applicable threshold of 50%.
  • Tax rates applicable for taxation of interest income are also revised, with the lower slab tax rate thereon enhanced from 10% to 15% (see Interest income in the Income determination section for details).
  • Rates applicable for taxation of dividend income are also revised in certain cases (see Dividend income in the Income determination section for details).
  • Streams of income earlier subject to tax under the final tax regime (with the exception of exports, dividends, prizes, and sale of petroleum products), have now been made subject to the ‘minimum tax regime’, with tax deducted/deductible considered as minimum discharge of tax liability.
  • The scheme for taxation of capital gains arising on disposal of immovable properties has been revamped. Onwards, the gain arising on disposal of open plots as well as constructed properties shall be taxed at specified rates, depending upon the amount of gain and holding period (see Capital gains in the Income determination section for details).
  • The definition of resident now also includes an individual who is present in Pakistan for 120 days in any one tax year and in aggregate 365 days in four preceding years.
  • Previously, property income derived by individuals was subject to tax on a gross basis. An option has been provided to such individuals whose property income exceeds PKR 4 million to offer for tax such income on a net income basis on the basis of personal income tax (PIT) rates. Moreover, rates of taxation have also been revised (see Income from property in the Income determination section for details).
  • The monetary threshold relating to immunity from explanation of source of income in case of foreign exchange remitted through normal banking channels has been reduced from PKR 10 million to PKR 5 million.
  • Non-monetary gifts made to any person other than a close/immediate relative shall be considered as taxable transfer, and gain or loss arising on such transfer will be taxed.
  • The concept of ‘filer’ and non-filer’ has been slashed, and the persons whose names are not appearing on the Active Taxpayers’ List (ATL) are subject to 100% more withholding of tax as against the persons whose names appear on the ATL.
  • Loss on disposal of listed and other securities that could only be set off against capital gains has now been allowed to be carried forward and set off against future capital gains on such securities, up to a maximum of three tax years.
  • The restriction earlier imposed on purchase of immovable property, as well as vehicles exceeding 1000cc for ‘non-filers’, has been done away with through Finance Act 2019.

Last Reviewed - 06 August 2019

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