Types of Income Tax and Their Details in Pakistan

Income Tax Isn't One-Size-Fits-All

FBR taxes different income types differently, and knowing which category your income falls into is the first step to filing correctly and staying ATL-listed.

1. Income Tax on Salary

Applied to salaried individuals based on income slabs, with tax deducted at source by the employer before the salary is even paid out.

2. Business Income Tax

Applies to sole proprietors and Associations of Persons (AOPs). Rates range from 7.5% to 35% depending on annual income.

3. Corporate Income Tax

Paid by private limited companies registered with SECP. The standard rate is 29%.

4. Capital Gains Tax (CGT)

Charged on profits from selling property or shares. The rate depends on the asset type and how long you held it before selling.

5. Property Income Tax

Applies to rental income, with tax either deducted by tenants at source or paid annually by the property owner based on the applicable slab.

6. Income Tax on Freelancers and Consultants

Applies to self-employed individuals earning through digital or foreign-remittance income. FBR expects full disclosure of foreign remittances and bank deposits tied to freelance work.

Conclusion

Misclassifying your income type is one of the more common filing mistakes — a freelancer filing under salary rules, or a business owner missing the CGT implications of a property sale, both end up with an inaccurate return. Identifying which category (or categories) your income actually falls under is worth getting right before you file, not after.