In the fast-paced and competitive world of IT industry in Pakistan today where freelancers and software houses are contributing dynamically to economy, one single step can make all the difference: PSEB Registration for Freelancers. With being the 4th biggest country in terms of freelancing online as per Oxford Internet Institute that has published Online Labor Index, Pakistan Software Export Board (PSEB) becomes a significant companion on our quest. PSEB, set up in 1995, is the government’s highest organization for promoting IT and ITeS exports. You’re a solo freelancer on Upwork or Fiverr or have your own software house PSEB registration unlocks tax incentives, exposes you to global outbound opportunities and gives you professional recognition. In this post, we will walk you through the exciting benefits and the smooth process, which is PSEB registration online as well.

Why PSEB Registration Matters in Pakistan’s Booming IT Landscape?

Pakistan’s IT exports are expected to reach $5 billion by 2025 due to more than 510k freelancers and thousands of software houses. But navigating taxes, market access and compliance can be complicated. PSEB tackles these pain points with customization. PSEB Freelancer Registration isn’t just a formality; it’s a long-term strategy that connects you to government-driven initiatives and gives you an edge in this game, called global competition.

Key Benefits of PSEB Registration for Freelancers

In the case of individual freelancers, Freelancer Registration by PSEB converts challenges into opportunities. Here’s how:

Tax Exemption for Freelancers in Pakistan: A Game-Changer

One of the highlights is reduced charging of withholding tax on export earnings.” Freelancers who are not registered will still be subject to the 1% tax on foreign remittances, which is reduced to 0.25% with online registration at PSEB. More generally too, IT and ITeS export income is fully exempt from tax till 30 June 2025, where at least 80% of the amount is repatriated via banking channels and you are PSEB-registered. This freelancer tax exemption in Pakistan can save you thousands every year, increasing your take home and room for reinvestment on either skills or tools.

Enhanced Credibility and Visibility

A PSEB certificate tells clients and platforms that you’ve been vetted by the government and are dedicated to quality. It fosters trust, and in turn makes you competitive on global bids. PSEB also advertises your profile on its Tech Destination portal, helping you get discovered by international customers.

Access to Training and Resources

PSEB provides free or discounted training in leading-edge tech such as AI, cybersecurity and cloud computing. There are initiatives like the ICT Interns that will pair you up with skilled talent for projects, while the facilitation desk works to resolve your issues on taxation, IP rights, and banking issues. Plus, get 20% off on SECP’s Single Member Company (SMC) registration and legitimize your setup.

Visa and Market Access Support

Traveling for gigs? PSEB offers visa support to its members. It also connects you with international events, delegations and export financing, facilitating market access in the US, Europe, and the Middle East.

Advantages for Software Houses and Call Centers

Software houses and call centers receive even more benefit from PSEB as they are required to be registered in some cases for legal operations. In addition to the 0.25% rate, benefits are:

Subsidized Infrastructure:25% rebates on rentals and 100% on bandwidth for one year in PSEB’s state of the art technology parks in major towns.

Government Contracts and Funding: Eligibility for government procurement contracts, R&D funds and low-interest export financing.

International Marketing: Portal Listing of investor matchmaking through PSEB and free marketing to foreign partners.

Compliance Edge: Repatriation of Profits without tax and certification of international standards which pull funds.

How to Register in PSEB as a Freelancer: A Step-by-Step Guide

Ready to dive in? Registration process for Freelancer in PSEB is easy by PSEB registration online. The one-time process is completed in 2-5 days for Rs. 1,000 (Rs. 2,000 annually for renewals) after payment fee. Here’s the breakdown:

Visit the Official Portal:

Go to portal.techdestination.com and click “Freelancer” to register. Fill in some basic info, like your email and create an account.

Fill Out the Form:

The online form asks for information about your skills, freelance platforms (like your Upwork profile links), and revenue information. Upload scanned documents:

• CNIC (both sides)

• NTN certificate

• Bank account maintenance certificate (Form-R)

• Evidence of income (such as Payoneer statements or invoices)

• LinkedIn/profile screenshots

Submit for Initial Approval:

Review for completion (missing info results in rejection). PSEB does the review and approve within days.

Payment of fee:

After approval pay Rs. 1,000 by way of Challan/ Pay Order/ Demand Draft to the PSEB through integrated gateway. Similarly, email receipts are also acceptable; you can send them toreg.payments@pseb.org.pk when required.

Obtain Your Certificate:

Download your digital certificate for post-verification. Renew annually to keep benefits active.

For software houses, the same process applies but company documents are required such as SECP certificate and higher fees (15,000 principal office). If you’re stuck, PSEB’s 24/7 help desk support (0800-01010 orsupport@pseb.org.pk) is a phone call away.

CBM Assistance for Freelancers and Software Houses:

CBM Consultants practice makes PSEB registration easy and seamless for freelancers and software houses in Pakistan by handling documents, online form submission and ensuring compliance to FBR rules. We help secure freelancers’ tax exemptions, prepare financial statements, and facilitate annual renewals. If you are an IT professional, we also guarantee both accurate registration and legal compliance to maximize your financial rewards by offering a list of great services.

Conclusion

There are no two ways about the fact that benefits of registering with PSEB for freelancers and software houses in Pakistan is immense starting from reducing taxes down to zero percent through Tax exemption for freelancers in Pakistan to opening international doors. With sky-rocketing IT exports in 2025, PSEB Registration for Freelancers isn’t a choice; now it’s a need to sustain! Don’t get held back by red tape, so take the first steps on your PSEB registration online journey today and become one of these empowered Pakistan IT pros at last.

In today’s digital era, tax management in Pakistan has become less complex because of the FBR systems. In other words, making a tax payment is not that difficult. All you need to do now is create an FBR tax payment challan (Online / Offline). This guide is going to detail your step-by-step process on how to get your FBR challan form (just like below image) via e-Payments system within the taxpayer facilitation portal. If you are searching for FBR tax payment challan online, then you are at the right place. We will discuss everything from the requirement to confirmation below.

The generation of an income tax challan or sales tax challan for FBR payment can facilitate a taxpayer to comfortably pay dues such as income tax, and sales tax without having too much inconvenience. The mechanism will use FBR’s website for hassle-free and fast transactions.

What is an FBR Tax Payment Challan?

The FBR Tax Payment Challan is produced by the FBR system and is used for depositing income tax, sales tax, or any other government dues. It is the proof of payment which is required for submitting taxes at banks or on the internet.

Earlier, taxpayers had to physically go to the bank to deposit taxes. At Present, via FBR e-Payment’s system the Taxpayers including public as well as private organizations or institutions can prepare the Challans Online and after making visits of few clicks can submit their challan.

Types of FBR Challans

• Income Tax Challan (CPR):Payment for income tax, advance tax and withholding tax by an individual, company or AOP.

• Sales Tax Payment Challan: In the case of businesses registered under sales tax due to whom monthly or quarterly sales tax liabilities are required to be deposited.

• Federal Excise Duty Challan: Applicable for parties who are manufacturers or importers of excisable goods.

Prerequisites for Generating Your FBR Tax Payment Challan

Before getting down to business, make sure you have the following key components:

• Availability of the official FBR website (e.fbr. gov.pk) via any web browser.

• A valid tax profile of the taxpayer which includes the NTN or CNIC.

• Type of Tax, such as pay income tax, sales tax payment challan or federal excise duty.

• A working email and phone number for notifications.

• Bank account or ATM to use for paying the taxes online.

These are the pre-requisites necessary for a hassle-free taxpayer experience on Fbr tax payment via Taxpayer Facilitation Portal.

Step 1: Accessing the FBR e-Payments Portal

Visit the official website of FBR e.fbr. gov.pk. You don’t have to login for this first step, just click on the ‘e-Payments’ tab above. It will show a dropdown with tax types such as pay income tax and sales tax payment challan. This is the first step in order to generate your FBR tax payment challan.

For perspective, here’s what the FBR e-Payment’s portal entrance typically looks like.

Step 2: Selecting the Payment Type

Once at e-Payments, you’ll select the type of tax on which you wish to make a payment (for example, income or sales). Choose the tax year from the drop-down box. Fill in your taxpayer details (NTN/CNIC etc.) and it will auto-populate your name for you. Correctness is important here to prevent mistakes in your FBR challan form.

Step 3: Generating the Payment Slip ID (PSID)

Next, choose “Tax Payment Nature” from the dropdown. This option identifies which type of tax you are paying (i.e., pay income tax or sales tax payment challan). Enter your payable tax amount (you can get from IRIS filings), email and mobile number for any alerts. Choose the mode of payment as “ADC e-payment” for online tax payment. Once you have double-checked all entries, click on ‘Create’ to create your PSID (Pakistan System of Integrated Declaration), a unique identifier for your FBR tax payment challan.

Step 4: Making the Online Tax Payment

Once you have your PSID, jump to paying through any of the other means:

• Internet Banking:Log in to your internet banking, go to service > fund transfer > others, select the payee ‘FBR’, then enter PSID and verify transaction details and confirm.

• ATM: Click on ‘Bill Payments’, then click on ‘FBR’ and enter PSID and make the payment.

This is how you generate FBR tax payment channels online and choose to make your payment through secure channels.

Step 5: Confirmation and Record Keeping

Then after you have made the payment, print directly from the portal or save transaction details to get your new slip. Check on the FBR website with your PSID to make sure everything has been processed. Maintain a record of your FBR challan form for future use, audit or compliance.

This guide makes it very easy to generate and make payment through an FBR tax payment challan and helps the user in ensuring that they file for a Pakistan tax on time. If you face any problems, follow the official Taxpayer Facilitation Portal or FBR helpline: Keep it legal and avoid online tax payment frustration!

Benefits of paying taxes through the FBR e-payments system

• 24/7 Accessibility: Make tax payments anytime, anywhere without visiting banks.

• Instant Confirmation: Receive your Computerized Payment Receipt (CPR) immediately after payment.

• Convenience: Fully online and paperless process through the Taxpayer Facilitation Portal.

• Secure Transactions: Payments are processed through verified, encrypted banking channels.

• Integrated Record Keeping: All payments are automatically linked to yourNTN for tracking and future reference.

• Multiple Payment Options: Pay via internet banking, mobile app, ATM, or credit/debit card.

• Timesaving: No need for manual challan submission or long bank queues.

• Improved Compliance: Ensures timely and accurate FBR tax payments for individuals and businesses.

Conclusion

Knowing how to create an FBR Tax Payment Challan is important for those who want to comply with the tax laws of Pakistan. With the launch of e-Payments and Taxpayer Facilitation Portal, FBR has ensured that paying income tax and sales tax payment challans online has never been easier without having to wait in long queues.

If you are not sure of the various types of tax or calculations, please feel free to contact a professional tax advisor or require Income Tax Return Services for smooth compliance.

Deadlines have a way of sneaking up on you, and nothing encapsulates this better than the feeling you get around tax season when it comes time to file extension for filing tax returns. Racing against the FBR clock for your Income Tax Return this year, this is a 5-minute guide that turns panic into a plan. Let’s unlock the precise steps, deadlines, and pro tips, so you never have to pay a single rupee in late fees.

Understanding Filing Tax Returns

Before we get to the extensions, let’s take a look at what filing tax returns are. Income Tax Return is a form you fill out to let the government know how much money you earned, spent and paid in taxes for any given year. It makes everything transparent, rather for FBR to calculate your taxable income properly.

Pakistan citizens, salaried people, companies and businesses must file returns on time as filed by deadline is September 30 every year (subject to FBR notification in this regard). Late filing may result in penalties and warnings of legal action or limitations to financial transactions.

When You Might Need a Filing Extension

You may request to File an Extension in Time for Filing Tax Returns if:

• You are awaiting necessary financial statements or audit reports.

• You could not generate documentation for health or travel reasons.

• Your accountant or financial adviser has asked for an extension to put your accounts together.

• Your trade got delayed or had problems due to unforeseen delays in the FBR portal.

Filing an extension for the Income Tax Return doesn’t relieve you from paying taxes, but it provides more time to properly file your ITR.

Why “File Extension in Time for Filing Tax Returns” Is Your Safety Net

The statutory date for File your Tax Returns Pakistan is up-to 30th September 2025 (e.g. including next working day). Miss it and you face:

• Per day penalty of 0.1% (Minimum fine PKR 10,000)

• Possible wealth reconciliation notices

• Blocked NTN for exports/refunds

• An 11th-hour extender buys you penalty-free time, maybe for 15 days.

Who Can Apply?

Any taxpayer required to file anIncome Tax Return can request an extension. This includes:

• Individuals (salaried or self-employed)

• Associations of Persons (AOPs)

• Companies

Valid reasons for requesting an extension include:

• Absence from Pakistan

• Illness or other personal emergencies

• Unavailability of necessary documents

• Any other reasonable cause, such as technical issues with the filing system

Remember, extensions are typically limited to 15 days for individuals and AOPs, or 30 days for companies, but the commissioner may approve longer periods in exceptional cases.

How to File Extension in Time for Filing Tax Returns

Here is a guide on How to File an Extension for Filing Tax Returns Time in Pakistan:

Visit the IRIS Portal

Sign in on your FBR’s IRIS system. This is FBR, official website of Federal Board of Revenue, for filing income tax return online in Pakistan.

Select Application for Extension

Click on the “Drafts” or “Applications” tab and select “Application for Extension in Time for Filing Tax Return.”

Mention Reason for Extension

Please provide a clear justification for the extension (e.g., audit pending, illness, or non-availability of data).

Submit the Application

After completion, you can apply for IRIS. You will get an acknowledgment after the FBR processes it.

Wait for Approval

The FBR can provide a brief extension (15-30 days typically) depending on your excuse. It will be communicated to you through the IRIS system.

Role of Professional Income Tax Returns Services

In Pakistan, professional income tax returns services can enable you to control your duty agreeably. Specialists take care of everything from getting your Income Tax Return ready to file extensions on time.

They ensure:

• Data get entered exactly and followed the FBR rules

• Timely submission of tax forms

• Advice about tax credits, deductions and refunds

• For tax year 2025 within authorized extension limits

• You don’t need to be stressed out or make any costly mistakes at the last minute.

How do CBM Consultants help with timely filing?

CBM Consultants protects clients from unnecessary penalties through the timely submission of Income Tax Returns, handling everything for you from beginning to end. Our professionals have the expertise to keep your accounts in order, provide accurate financial records, and create tax-ready receipts where all entries are compliant with FBR rules. We also ensure clients are kept informed of deadlines, file extensions when required, and utilize digital tools such as the IRIS portal to submit returns in a timely manner.

And they also find ways to apply tax credits, deductions and exemptions that could lower overall tax obligations, all within the letter of the law. Through proactive timeline management, audit representation, and FBR query resolution, the impact of penalties is averted by individuals or businesses that remain flier-strong and also financially trustworthy.

Conclusion:

Not only does filing your tax return on time keep you in good books with the FBR, but it also means that everything else fits into place properly. In fact, making sure that you file the extension in time for filing tax returns will help you manage your Income Tax Return well, like you would when getting work done by dependable Income Tax Returns Services. For File Tax Returns in Pakistan, act now whether you’re applying for an extension or finishing your filing. Compliance is not just the fulfillment of your civic responsibility, but it also adds towards Pakistan’s economy! In case you have any queries, contact CBM Consultants or check out the FBR website for updated information.

The Pakistan tax system’s complexity often leaves taxpayers unaware of hidden tax exemptions and reliefs. The Federal Board of Revenue is increasing the Finance Act 2025, making it an ideal time to explore these benefits. This blog will highlight the FBR Income Tax Exemption list, relevant tax credits, overlooked tax reductions, tax credit perspectives, and hidden withholding and income tax exemption glitches.

The Basics of Tax Exemptions

In Pakistan, tax exemption is the list of incomes, sectors, or transactions for which the FBR establishes that they are not to be charged for income tax according to the Income Tax Ordinance, 2001. They are not just random freebies but intentional measures to grow the economy, shield disempowered communities, and lure investments in areas of high priority like IT, agriculture, and renewable energy industries.

• Foreign Remittances: Remittances received annually up to PKR 5 million through official banking channels are exempt from income tax. This is an incredible waiver for overseas Pakistanis and their families, who do not need to disclose the source for amounts under this margin.
• IT and Software Exports:Export income received in foreign currency in any Account through conversion and the normal operation of Export Computer software, IT services, for integrating such services with GST qualifies for a 100% tax credit until June 30, 2025, effectively exempting it (note that 80% of your cash must come from this, so if you are a freelancer on platforms like Fiverr or Upwork, this could reduce your liability to zero).
• Special Economic Zones (SEZs):At an appointed Special Economic Zone, a firm is granted a 10-year corporate income tax exemption following the commencement of commercial activities, which can be extended to June 30, 2035. To begin, a firm capable of generating at least 75% of its sales is recommended when producing goods or exports. Companies in the following sectors cannot utilize the provisions
• Power Generation Projects:The earnings of electric power projects built by June 30, 2021, and financed under a cover letter issued by June 30, 2023, will remain unaffected. This exclusion does not apply to firms that develop integrated power projects and sell electricity as per third-party validated external financial projections.

Tax Reductions

In addition to full exemptions, the 2025-26 budget tax cuts are graduated and provide substantial relief to employed persons and smaller corporations. To offset the impact of inflation, the Finance Act 2025 made adjustments to the slabs. It was especially beneficial for salaried workers and small enterprises, and the new slabs are as follows. For salaried persons:

Income Slab (PKR)	Old Rate (2024-25)	New Rate (2025-26)	Effective Reduction
Up to 600,000	0%	0%	None (Exemption threshold unchanged)
600,001 – 1,200,000	5% of excess	1% of excess	Up to 80%
1,200,001 – 2,200,000	12.5% of excess	11% of excess	~12%
2,200,001 – 3,200,000	20% of excess	17% of excess	15%
3,200,001 – 4,100,000	25% of excess	22% of excess	12%
Above 4,100,000	Up to 35%	Up to 35% (with 3% cut for some)	Minimal (3%)

For example, employees who earn up to PKR 3.2 million end up saving several hundred thousand or more than PKR 50,000 for someone in a middling staff position. Meanwhile, non-filers are subjected to harsher punishment due to a 1 percent cash withdrawal tax, which has increased from 0.6 percent, highlighting the remarkable return on compliance.

Tax Credits and Incentives

Tax credits and incentives are equivalent to direct reductions in your tax bill, and they’re often more significant than deductions. Unlike exemptions, credits reduce liability for dollars. The FBR Income Tax Exemption section enlists the help of credits and incentives for these sectors. Pakistan’s 2025’s most standout tax credits include:

• Donations to Approved NPOs:

Donations to an approved NPO’s Tax rebates at your average rate on donations up to 30% of taxable income with your tax rate reduced by 15% for your companions.

• Educator and Researcher Rebate:

A researcher/educators’ wage reward for full-time teachers/employees in nonprofit institutions. The 25% wage tax income rebate is available as of July 1, 2022, and expires June 30, 2025.

• Home Loan Incentives:

Home loans subsidies are safe on the interest/profit you pay to build/buy a house up to 2,500 sq ft or flat up to 2,000 sq ft, reintroduced with modifications.

• Start-ups and Venture Capital:

Other offerings include the following: three-year exemptions for Pakistan Software Export Board certified start-ups and until 2025 June 30, for venture capital funds.

90% reduction in low-cost housing for businesses; bio-energy projects; and foreign tax credits for your overseas income. You may argue with them if you provide me with proof that you’ve already paid income abroad.

Navigating Withholding Tax

The upfront collection mechanism by FBR of the tax on payments, including salaries, contracts, and services, is called Withholding tax. Depending upon the type, rate, and nature of the supplier-receiver relationship: 1% for filers but higher for non-filers, 7-10% for contracts, and progressive in salary cases. Although, the FBR Income Tax Exemption list has a plethora of exemptions.

The notable tax relief for withholding tax in 2025 are:

• Exemption Certificates:

It can be obtained through IRIS for exporters, SEZ operators, or those with exempt income. Public limited firms now have a 100% exemption. Nonetheless, physical certificate/letter and their issuance at departmental level have been withdrawn.

• Sector-Specific Waivers:

No WHT is levied on government entities, diplomats, or CNIC-certified NGOs. IT exporters repatriate 80% of the proceeds free of tax.

• Real Estate Breaks:

Reduced WHT/Sales proceeds from property sales and transfers abolishing federal excise duty on construction.

Deposit the amount by the 15th of the next month through the CPR challan.

Income Tax Exemption for Special Groups

A number of specific individuals and entities are granted general income tax exemption. They include:

• NGOs and Charities:

100% credit for NGOs, charities registered under the relevant acts, and additionally with PCP certification and who have maintained funds at a level lower than 25% of their income; they require having NTN/STRN.

• Returning Citizens:

Returning Citizens are also entitled to have their foreign source income exempt for the first two years after their return.

• Widows/Senior Citizens:

Certain exemptions are granted to widows/senior citizens depending on the set thresholds with the possibility of applying for the exemption with IRIS.

• Prize Bonds and Remittances:

Prize bonds are subject to 15% WHT, while remittances for an amount not exceeding PKR 5 million are exempt.

In Guidance with CBM Consultants

CBM Consultants helps individuals and businesses locate and claim the many tax exemptions and credits they are unaware of in Pakistan. We examine your income sources, investments, and business activities to find FBR tax exemptions, reductions, and incentives for which you are eligible. Our experts help with the right tax filing, withhold taxes, and keep track of new FBR Income Tax Exemption lists. This redresses tax liability without breaking any of Pakistan’s tax authorities.

Conclusion

In the landscape of tax exemption in Pakistan has a lot to provide, starting with exciting tax credits and innovative FBR Income Tax Exemption list and ending with a budget for 2025-26 reducing tax rates for salaried class and promising to partially lift repressive withholding taxes policies. More importantly, these benefits rely on the regularity of compliance, always filing on time and keeping a record of it, referring to the IRIS portal. Missing out can make you pay in lakhs because whether it is tax credit Pakistan is implementing for money in charity or exemption certificate, your auditing should have started sooner.

In today’s business environment in South Asia, understanding the corporate tax laws is critical to the success of any company. For businesses in Pakistan, familiarity with these rules isn’t just a matter of ticking a compliance box, it represents a competitive advantage that can help keep you efficient, operational and sustainable as your company grows. In this guide, we are going to explore corporate taxation in Pakistan including everything from the basics to the latest changes. Whether you have a start-up or if you are an experienced executive; the command over Pakistan corporate tax rules will give you clear vision for making a sound decision.

 

What is Corporate Tax?

At its core, what is corporate tax? It’s a direct levy imposed by the government on the profits or income generated by companies and other business entities. Unlike personal income tax, which targets individuals, corporate tax often referred to as taxes on corporate income focuses on the net earnings of corporations after allowable deductions. In essence, it represents the government’s share of a business’s success, funding public services while incentivizing economic productivity through deductions and exemptions.

Globally, corporate taxes vary, but they universally aim to balance revenue generation with business encouragement. In Pakistan, this tax falls under the Income Tax Ordinance, 2001, administered by the Federal Board of Revenue (FBR). It’s not just about paying up strategic planning around corporate tax laws in Pakistan can significantly impact your bottom line.

 

An Overview of Corporate Tax in Pakistan

The evolution of corporate tax is reflective of the growing economy and is rooted in the post-independence fiscal setup. It is now largely governed by the Income Tax Ordinance, 2001, which details what kinds of income are taxable and the rates and methods for collection. The system applies to resident and non-resident companies, taxing residents on their worldwide income, while non-residents are taxed only on Pakistan-source income.

Key pillars include:

• Taxable Persons: Public companies, private limited companies, branches of a foreign company, and the AOP in business.
• Assessment Year: Corresponds to the financial year (July 1 to June 30), so Tax Year 2025 includes income of July 1, 2024, through June 30, 2025.
• Administration: Enforcement is administered by the FBR, which offers digital filing options such as the Iris portal.

This system ensures Pakistan corporate tax adequately contributes to national income, while providing alleviation to categories such as exports and SMEs.

Current Corporate Tax Rates in Pakistan

One of the most important factors in corporate tax laws in Pakistan is rate structure and its impact on financial planning. By 2025, the general corporate tax rate in Pakistan will have been reduced at 29%, for most businesses. But targeted incentives complicate the picture:

Company Type	Tax Rate (2025)	Key Notes
Standard Domestic Companies	29%	Applies to most resident companies.
Small and Medium Enterprises (SMEs)	20%	For turnover below PKR 250 million; reduced via Finance Act 2025 to boost small businesses.
Banking Companies	39% (including super tax)	Higher due to sector-specific super taxes.
Super Tax Threshold	0.5%–4% additional	Applies to incomes over PKR 150 million; reduced by 0.5% for incomes exceeding PKR 250 million in Finance Act 2025.

 

Taxes on Corporate Income: How It’s Calculated

Taxes on corporate income form the backbone of Corporate Tax Laws, calculated as: Taxable Income × Applicable Rate. But what constitutes taxable income?

Gross Income:

Includes business earnings, capital gains, dividends, royalties, income from rent on real property.

Deductions:

The expenses you can write off, such as salaries, rent and depreciation (Based on the rates specified by FBR) and bad debts.

Exemptions:

Exemption to export profit and income derived from specific SEZ (Special Economic Zones) for a 10-year period. Credits for dividends received from subsidiaries may be available.

For instance, a manufacturing company with PKR 500 million turnover, PKR 300 million expenditure and PKR 50 million exempt exports would have to pay income tax on profit of PKR 150 million (PKR 200 million profit less than the exemption). You’d owe 29%, or PKR 43.5 million and change, in tax before credits.

Tax 15% on dividends, 6% on services Withholding taxes are reported as an installment creditable against final tax liability.

 

Key Provisions of Corporate Tax Laws

Corporate tax laws are detailed in the Income Tax Ordinance, emphasizing fairness and transparency. Here’s a breakdown:

Deductions and Allowances

• Business Expenses: Fully deductible provided they are “wholly and exclusively” for business, including marketing and utilities.
• Depreciation: 10% (furniture) to 30% for computers; first year allowances are given on new assets.
• Carry-Forward losses: Arithmetical Business Losses can be carried out for up to six years but are not eligible for setoff against propertied income after effect of Finance Act.

Exemptions and Incentives

• Tax Holidays: 10 years for power projects and IT exports.
• Minimum Tax: 1.25% of turnover if taxable income is low, so at least something goes in regularly.
• Group Contribution: Fiscal units between parent and subsidiary companies for the purpose of direct taxation.

Transfer Pricing

Arm’s-length principle in force, and documentation required for related-party transactions to help prevent profit shifting.

Filing Returns and Ensuring Compliance

The process of adherence to the corporate tax laws is simple in Pakistan through its FBR’s Iris system. Key steps:

• Annual Return: On or before September 30 (extendible to December 31) for the Tax Year 2025.
• Retain Statements: Submit quarterly agreed upon deduction of tax.
• Audits and Penalties: After the deadline, there is a 0.1% penalty per day; but extreme cases can see a penalty of 100% on tax evasion.

Pro tip:Get a tax consultant involved early to use advance rulings and avoid conflict.

Registration and Filing Guidance by CBM Consultants

CBM Consultants can contribute a vital part in providing the companies with corporate tax filing & registration in Pakistan by following the rules and regulations of FBR completely. We help in getting a National Tax Number (NTN), FBR registration and opening accounts at IRIS e-filing system for businesses. We recommend the appropriate amount of tax provision, carry on proper registration and filing of corporate income tax returns, calculate advance tax under management and satisfy all withholding obligations. Our experts also provide professional consultation and tax planning, deductions, incentives so as to reduce legal liabilities even in compliance with the Income Tax (IT) Ordinance 2001 of the company. The collaboration with our experts to ensure compliance and avoid penalties allows businesses to concentrate on growth.

 

Conclusion

Anecdotes and insights that make sense of corporate tax laws in Pakistan.  To succeed in the immensely competitive business world, professionals need to not only understand but also excel at handling complex tax rules businesses come across. Whether you’re learning what is corporate tax or capitalizing on the SME exemptions in 2025, being proactive about your engagement with taxes on corporate income and Pakistan corporate tax laws can unlock efficiencies. Remain informed through FBR notifications, and keep in mind that today’s compliance gains tomorrow’s prosperity.

The Federal Board of Revenue (FBR) has introduced major changes to protect taxpayer data in the rapidly changing digital tax compliance environment for Pakistan. The FBR new password policy is the cause behind these changes; this requires your FBR password that IRIS portal be changed every 60 days, thereabouts. And it’s not just a cosmetic update; it’s a pro-active measure as cyber threats like phishing and unauthorized access continue to loom. If you are a taxpayer and using IRIS login for return filing, NTN (verification), online payment or similar other, this policy has a direct effect on how you work.

With each filing season, that policy becomes more important to understand. In this blog, we’ll break the password policy for IRIS login and explore the FBR password change policy, in addition to explaining how to go through FBR login online verification, FBR NTN login, and easy IRIS login. And it really doesn’t matter what type of taxpayer you are: an individual filer, business owner or consultant with a bazillion account; knowing about the changes ahead better enables you to keep up on your tax responsibilities.

What is the FBR New Password Policy?

The introduction of FBR new password policy was effective since November 2024 and is part of digital security upgradation for IRIS (Income Tax Return Information System) portal in Federal Board Revenue. This is a rule that your IRIS user password or passwords (if you have multiple) to access tax filings; refunds and compliance reminders are all due to a reset every 60 days. For example, if the date on which you changed your password is 1st Jan 2025 and its now 2nd March 2025. It should expire automatically on the next login attempt; you need to update your password compulsorily.

Why is the 60-day cycle? FBR explains that the move is due to growing cyber threats in Pakistani cyberspace. With a userbase of over 5 million active IRIS users online, the portal holds highly sensitive information i.e. income details, NTN registrations payment histories etc. public expiration on the password reduces the time window for which an attacker can potentially use their password. This is consistent with international best practices and according to the advice of experts in cyber security. But it’s been slightly adapted to take account of Pakistan’s insecurities as tax evasion probes and data leaks there are on the rise.

Why Does Your FBR Password Expire in 60 Days?

The rationale behind the FBR New Password Policy boils down to enhanced security in an era of sophisticated threats. Here’s why this 60-day expiration is a game-changer:

Mitigating Breach Risks:

To a hacker, a static password is like winning the lottery. And if a phishing email can crack an FBR alert, it might be able to provide access forever. A 60-day expiration ensures stolen credentials become stale rather fast, allowing a chance to notice the breach and recover.

Encouraging Strong Habits:

Here we use a policy to lean on our users and leverage strong IRIS passwords. FBR must have at least 8 characters including a combination of an uppercase letter, a number, and special character. Consider those noted on the mail or calendar, try something cryptic like “TaxFiler2025! PK”

Compliance with Digital Pakistan Initiative:

Like the other government’s taxes and import-export management, FBR is also working to lessen its carbon footprint by converting IRIS into a real-time notification and AI-auditing system. Secure logins are non-negotiable for features like instant FBR login online Verification, where you confirm your tax status via CNIC or NTN in seconds.

User Feedback Loop:

Early adopters find that not having to remember email with the reminders ‘SMS, unable to forget my password. It has also stirred up some controversy among accountants handling 100+ client accounts. Clearly, there is a need for efficiency!

In other words, despite the sense of an extra hassle it may give you, this policy serves to protect your financial data more than it inconveniences you.

Navigating the Password Policy

The IRIS password policy is simple, but it is necessary to pay attention. Here’s how it dovetails with daily FBR interactions:

For Salaried: Already, if you log in each year to file return the same logically is also an auto-prompted change at expiry; you do nothing preemptive about. Upgrade via the portal, and you’re good for the year.

For Businesses and Frequent Users: Use calendar reminders for 60 days from the removing of lock-in letters since monthly withholding tax returns will be filed. That being said, tools like password managers (e.g. LastPass) would have the ability to flag expirations without having to store FBR creds insecurely.

Effect on FBR NTN Login:When applied is successful, a new applicant receives the first password by email or SMS after completing the form. The initial IRIS password will start that 60-day clock right away, be sure to change it right away for security.

Pro Tip: Always add working Mobile and email during FBR login Online Verification. This Discussion Allows for 2-Factor Authentication (2FA) with OTP which is one step beyond password policy.

Step-by-Step Guide

The FBR policy stresses that passwords must be updated easily. Follow these guidelines to remain in compliance:

Visit the IRIS Portal: Navigate to iris. fbr. gov.pk (or e.fbr. gov.pk for legacy access).

Start Login: Enter your User ID (CNIC for individuals, NTN for businesses) and currentFBR password. If expired, you’ll see a “Password Expired” alert.

Choose Change/Reset Option:

• For previous proactive changes: Once successfully logged in, click “Change Password” from the top-right menu.

• For expired/forgotten: Hover over “system” at the top, and you will see where to click to reset password.

Verify Identity: Enter your registered email/mobile. FBR SMS a 15-minute life one time password (OTP).

New Password: Enter IRIS password (must meet the following requirements) Confirm New Password: Repeat new IRIS password. Don’t reuse the old one; FBR blocks this for security.

Confirm and Log In: And it should give you a message of success! Test your new creds immediately.

Time estimate: 5-10 minutes. If you encounter problems (such as outdated contact info), call the helpline at 111-772-772 or emailhelpline@fbr.gov.pk.

If you are an FBR NTN login first time user: Register with “New Registration” on the portal, enter CNIC/NTN details and receive instant credentials. Just apply the change policy directly then.

Assistance by CBM Consultants:

CBM Consultants are in a prime position to support their clients who need to comply with the FBR new password policy. We make certain all the IRIS client’s passwords are updated in the period of 60-day expiry, assist them to reset their password securely and direct them for FBR login online verification. We train taxpayers in establishing strong passwords, safeguarding their data, and how to avoid access issues. Our tax experts resolve these technical and compliance issues on behalf of individuals and businesses, to allow their uninterrupted access to their FBR login portal/NTN for timely tax filing and compliance.

Best Practices for Secure FBR Access

So, here’s what you need to do to play it according to our way:

• Enable Notifications: Subscribe for expiry alerts 7 days in advance through IRIS settings.

• Use Unique Passwords: Never use the same ones on different systems, create them using something like Bit warden.

• Regular Audits: Every quarter, audit your FBR NTN login profile to ensure it is correctly listed.

• Stay Updated: Follow FBR’s X on (Twitter) or official newsletters for mission changes. Rumors of extending to 90 days are flowing but nothing solid yet.

By embedding these habits, you’ll turn a compliance chore into a security strength.

Conclusion

The FBR new password policy might be yet another hoop to jump through, but it is an essential safeguard in Pakistan’s digital tax vision. Now you can ask for FBR new password 60 days before having a smooth IRIS login, hassle free FBR NTN login. Online verification and disturbance free NTN login. As FBR drives a completely digital infrastructure, compliance isn’t just something they must do; it’s something that has them poised for success.

Among the myriad provisions of Pakistan’s tax laws, perhaps one of the more important is Section 138 which deals with enforcement and recovery from noncompliant taxpayers. Under the Income Tax Ordinance, 2001, Section 138 gives legal backing to the tax authorities for recovery of dues through a coordinated mechanism. This article covers Section 138, tax recovery under section 138, and consequences thereupon with due reference to Section 138 of Income Tax Act penalty on dishonor. Whether you are a citizen, taxpayer, employer or a tax consultant, it’s important to have sufficient knowledge about Income Tax Ordinance’s Section 138.

What is Section 138 of the Income Tax Ordinance?

The provided text outlines the legal provisions for the recovery of tax dues by a commissioner from a taxpayer, as well as related procedures. Here’s a summary:

Notice of payment (Section 138):The Commissioner has power to serve a notice on a taxpayer in the prescribed form and requiring such person to pay within such time as is specified in the notice mentioning therein and forthwith all moneys outstanding under this Act.

Recovery Methods: In case the taxpayer could not pay within the specified or extended period, the Commissioner assesses him on the amount and can recover it in any of these ways:

Attachment and Sale: Attaching of the movable or immovable property (of the taxpayer) followed by its sale.

Receiver Appointment: Appointment of a receiver to take over and manage the taxpayer’s assets.

Arrest and Detention:The jailing of the taxpayer for six months.

Other modes:Additional recovery methods as specified under the Sales Tax Act, 1990.

Powers of Commissioner: The Commissioner shall have the like powers as are vested in a Civil Court under the Code of Civil Procedure, 1908, for the purpose of enforcing the recovery of any amount due under a decree.

Rule Making: The Board may promulgate rules governing the procedure for payment and collection of taxes.

Recovery by District Officer (Revenue) (Section 138A): –

The Commissioner may also transmit to the District Officer (Revenue) in any district where the taxpayer resides, carries on business or owns property a certificate setting forth the amount of tax due.

The amount shall be recoverable by the District Officer as if it were arrears of land revenue, with the powers of a Civil Court under the Code of Civil Procedure, 1908.

Estate in Bankruptcy (Section 138B):

A taxpayer’s tax debt becomes part of the bankruptcy estate if they become bankrupt.

The estate’s tax liability is treated as ordinary and necessary business expenses and given priority over the claims of other creditors.

This structure provides strong tax-recovery measures, such as escalating notices, property actions, and incarceration, and cooperation with revenue departments or bankrupt estates.

The Purpose of Section 138

The main objective behind this provision is to enable speedy recovery of tax arrears so as to avoid undue delays that will disturb the financial position of the Government. When tax-to-GDP ratios continue to be below targets in these tax systems, measures such as this discourage intentional non-payment and encourage willing compliance.

The CIR can serve as a notice under Section 138 in a prescribed form requiring payment within a set period often between 15 and 30 days, corresponding to the facts of each case. This notice is a formal wakeup call that taxpayers now have an available opportunity to resolve liabilities before harsh actions follow. The idea is deterrence: by setting the stages of recovery section 138 acts as a spur to do the needful and protects against arbitrary enforcement.

Secondly, the provision of Section138 is in harmony with above broader fiscal reforms including amendments made by the Finance Act, 2024 on such fiscal reform brought through the Tax Laws (Amendment) Ordinance, 2025 as well. These amendments stress quick recoverability of taxes after assessment, over-riding the interregnum of period consumed in appeal proceedings or court stay in some cases. This development emphasizes FBR’s willingness to modernize tax recovery and makes Section 138 a pivot of modern-day tax recovery by way of Section 138.

How Tax Recovery Works Through Section 138

Tax recovery through Section 138 is a multi-tiered process, empowering the CIR with civil court-like authority under the Code of Civil Procedure, 1908 (CPC). Here’s a step-by-step breakdown:

Issuance of Demand Notice:

CIR serves as a notice under sub section (1) of section 138, addressing the issue of tax amount and time limit. This is the first line of defense, often sent via registered post or email for traceability.

Non-Payment Outcome:

If unpaid within the timeframe (or extended period granted by the CIR), sub-section (2) activates recovery modes

Attachment and Sale of Property:

The movable/immovable property can be attached and sold; it is in the nature of decree execution under Order 21 CPC.

Garnishee Proceedings:

Third party debtors of the taxpayer (e.g. banks) are ordered to pay directly to the FBR.

Arrest and Detention:

In extreme cases, the taxpayer can be arrested and detained for up to six months, akin to civil imprisonment for debt recovery.

Delegation to District Officer (Revenue):

A supplementary provision under Section 138A of the Act, whereby the CIR may certify dues payable by a person (i.e., as arrears from land revenue) to be collected by the district officer who would attach agricultural land or other district level properties.

The author suggests that Section 138’s recovery process should be based on due process, with coercive means halted during appeals to the Commissioner. After 2025 amendments, taxes can be recovered on High Court or Supreme Court judgment.

Consequences of Defiance:

Though Section 138 is purely a civil one, its non-compliance can have grave consequences, i.e. Section 138 of Income Tax Act punishment. The term ‘Income Tax Act’ used therein is consistent with the Ordinance and that the `punishment’ is one of recovery and not an independent criminal penalty.

Civil Penalties:

The most direct “punishment” is asset attachment and sale, which can cripple businesses. For instance, failure to pay can result in bank account freezes or property auctions, leading to financial distress.

Imprisonment:

Under clause (2)(c), the power is given to detain the person for six months. It is not a criminal prosecution, but a statutory civil relief, for the recalcitrant defaulter. The courts have supported this, even in the one that came before the ATIR emphasizing proportionality.

Compounding and Interest:

So long as there is an overdue tax, the default surcharge under Section 205 (up to 1.2% per month) compounds the liability. Furthermore, fees for recovery procedures are an additional burden.

Though, Section 138 of the Income Tax Act penalty is a last resort. Data from the FBR shows that thousands of recovery notices are issued every year, but many are resolved by settling. An FBR notification dated 2023 read, had withdrawn premature notices which were at the stage of appeal, referring to Supreme Court precedents (such as 2018 SCMR 939), demonstrating judicial control in curbing overreach.

Integrating Section 138 into Your Tax Strategy

To avoid the pitfalls of Section 138, proactive compliance is key. Businesses should:

• File returns in time and comply with orders of assessments.

• Apply for extensions or CIR installment plans before notices become enforced.

• Maintain accurate records to challenge erroneous demands during appeals.

• Seek advice from tax consultants on maximizing exemptions or reliefs under the Ordinance.

Recent improvements, such as electronic notices through the FBR Iris portal, have made the task of keeping track much easier. If Section 138 is understood as a compliance tool and not perceived simply as a weapon, taxpayers will be able to fit it comfortably into their fiscal planning.

Conclusion

Thus, the purpose of Section 138 in IT Ordinance is very simple- to double lock tax recovery under Section 138 to know that the stream resides with Pakistan. From providing demand notices to the prospect of detention, it gives officers an arsenal of enforcement tools that are in line with procedural fairness. Section 138 of the Income Tax Act punishment is a reminder to us that we have no choice on tax, but there are plenty of places to take refuge.

 At the time that Pakistan’s tax-plunged terrains shift toward new horizons, compliance is not just submitting returns. But ensuring what is submitted is precise and real! With the filing deadline for Tax Year 2025 just around the corner on September 30, a new glitch has arisen. As per details, the PBC has reported a ‘flag error in tax credit calculation’ at the FBRs IRIS portal. It has been blocking urgent calls from the business community as well. This red flag raised by the Pakistan Business Council (PBC) demonstrates a broader picture of tax computation issues in Pakistan. It could cause filing delays and inflated liabilities for thousands. You are not the first to wrestle with a deduction of conundrum when it comes to making donations or paid contributions to your pension. Let’s break it down.

What is the IRIS Portal, and Why Does It Matter?

IRIS, The E-Portal Backbone of Pakistan’s Tax System Federal Board of Revenue (FBR) has introduced its digital backbone for taxpayers, i.e., IRIS. Introduced to simplify e-filing, it enables individual taxpayers, association of persons (AOP) and companies to file income tax return. Also, wealth statements and other documents electronically through a single portal. Debuts for Tax Year 2025 with IRIS 2.0, where new technology would allow us all to file seamlessly with simpler forms and real time verifications. As you learn every day from machines, it is always safe to trust machines but that never happens without more than a few prologue hiccups.

IRIS handles all salaried tax slabs to complicated deductions and is crucial for over three million working filers. But when it’s not perfect, they percolate through. An ostensibly simple thing turns into a nightmare. This is where the PBC flags math error on FBR’s IRIS Portal falls under legal scan, not only a technical bug.

The Core Issue

The PBC wrote to FBR Chairman Rashid Mahmood on October 8, 2025, to alert him that a serious flaw has been discovered in processing of tax credits under Sections 61 and 63 of the Income Tax Ordinance, 2001 through IRIS. For the most part, this is due to the way that IRIS calculates credits donations at Section 61 and pension fund contributions of an approved variety in section 63. These sections provide that a taxpayer is entitled to claim credits for payments equal to a percentage of the “total tax assessed” explicitly including the super tax surcharge under section 4C.

IRIS is completely unwilling to have anything to do with that surcharge when calculating its return. This discrepancy translates into filers receiving less than what is owed under law, due to above-penalty liabilities and delays in filing. The PBC notes that these hits the “highly skilled professionals, generous donors and active investors in voluntary pension funds” hardest of all, including member companies. That is not a minor oversight with the filing deadline ready to slam shut; but a barrier to compliance.

 

Tax Calculation Issues

The tax calculation mistake in IRIS has been the bane of the system and bodies like the Karachi Tax Bar Association have over the years raised alarm. Filers faced lower rates on contract receipts in 2022 pursuant to section 153 (at 7% versus 7.5%) and wrong taxes levied on gains. It is from immovable property under section 37(1A) along with an erroneous cap on Bahbood Certificate yields under the second schedule. Fast forward to 2025 and some of the same difficulties persist: IRIS does not set aside donation credits against surcharges under section 60 and 4AB, treats some amounts raised as final tax with no entitlement to adjust.

For everyone from salaried workers to businesses that pay taxes, these are bugs that lead to manual overreactions. One that may be more expensive in filing season. FBR’s response? Most of the time with no extensions even after pleading.

Unpacking the Reasons for Errors in Tax Calculation

These are some of the reasons taxes could be wrong, especially where tax is calculated by using a computerized system:

• Software Failures/Coding Errors: The portal algorithm may be making an error in new tax law changes or credit data.
• Insufficient Synchronized Data: It may be that if the taxpayer’s complete data is not synchronized, credits cannot be computed correctly.
• Updates of Law & Regulations: Pakistan’s tax laws and finance acts get updated from time to time. IRIS: Absence of regularly up-to-date information on IRIS may lead to obsolete calculations.
• User Entry Error: Taxpayers can input the data wrong or forget to populate a field, which is then processed through the system incorrectly.

These are not “bugs” as errors in tax calculation. Instead, they’re the difference between the policy intent and what gets implemented digitally. These days, fewer businesses will be able to rely on that period. “Filers lose immediately without 90-day grace periods after fixes,” as PTBA noted in 2023.

How to Mitigate the Impact:

Do not let these obstacles get in your way. Just in case you were also wondering, here is how to deal with PBC flags error in tax credit calculation on FBR’s IRIS Portal:

• Double-Check Inputs: Utilize FBR’s official salary tax calculator for a double-check of the form before applying in order to identify any discrepancies. Check the add on charges manually for Section 61/63 claims.

• Get Professional Help:Hire a tax professional who understands IRIS overrides. KTBA and PTBA members guide you on what to avoid.

• Document Everything: Ensure to screenshot the errors you are facing and maintain a record of your communications with FBR helpline (051-111-772-772). If delayed, refer to the appeals to the PBC letter.

• Monitor Changes: We will wait for advance notices from FBR as well as IRIS FAQs and changes for applying patches. The system is still operational, as of October 2025; however, maintaining vigilance is important.

• Advocate for Change: Support PBC and KTBA petitions demanding systemic changes such as live error alerts and beta testing of updates.

CBM Accounting Playing a Major Role:

CBM Consultants plays a major role in addressing and rectification of errors, FBR’s IRIS portal regarding tax credit calculations. Our professionals can:

• Detect and Confirm Mistakes: Companies can reconcile system-generated tax numbers with hand calculations to identify inconsistencies in the calculation of tax credit.

• Assist in Filing Corrections: We assist filers in completing amended returns or adjustments for the correct amount of taxes due, as well as any credits to which they are entitled.

• Offer Professional Advice: Our experts understand the provision of the Income Tax Ordinance, 2001. We assist them in interpreting various sections as well as their applications for credits.

• Liaise with FBR:Qualified accountants can approach the tax department online to inform about a bug and request an amendment.

• Educate Taxpayers: Clients can learn how to input data into IRIS correctly, which means fewer user errors that lead to tax shortfalls.

In short, CBM Consultants serve as a bridge between taxpayers and FBR. It ensures accuracy, compliance, and timely resolution of digital tax computation errors.

Conclusion:

The PBC flags an error in tax credit calculation on FBR’s IRIS Portal is more than a glitch. It reveals systemic issues in tax calculations that Pakistan. Also, it undermines trust in our digital tax system. Reasons for errors in tax calculation; the onus is upon FBR to also focus. Taxpayers should have a portal that facilitates, not hinders, compliance.

Few provisions of Pakistan’s tax laws evoke fear as much as Section 111 of the Income Tax Ordinance, 2001 (ITO). The provision of this section is the FBR’s potent mechanism to investigate any unexplained income, assets or expenditure; in sum, validation that all rupees earned and all rupees spent are related to what has been declared. Whether you are a salaried employee, business owner or an overseas Pakistani who sends money back to your country of origin, knowing what Section 111 is and how it works is not only recommended but necessary to save yourself from potentially expensive surprises.

Think about this: You filed your return for the year, reporting a modest salary and some savings. And to and behold, a notice under section 111(1) lands within the tax collection agency’s IRIS portal, asking where you bought your property or from where you got the (large bank) credit. In this post, we unravel some of Section 111 of Income Tax Ordinance, help you understand FBR notice 111(1), and discuss the horrific implications if you don’t respond with a justified response. Knowledge here is not just power; knowledge is protection.

What is Section 111 of Income Tax Ordinance?

At base, Section 111 is aimed at “unexplained income or assets.” Embedded in the Income Tax Ordinance, 2001 as Chapter VIII, this clause authorizes Commissioner Inland Revenue to deem any undisclosed or insufficiently explained financial transactions as taxable income. This isn’t about “punishing” success but preventing income from sneaking through the tax net.

This section outlines the tax treatment of unexplained income or assets under specific conditions:

Scope of Unexplained Income or Assets:

If a person has:

• Amounts credited in their books of account,
• Investments, money, or valuable articles owned,
• Expenditure incurred, or
• Concealed income (e.g., suppressed production, sales, or taxable receipts), and they fail to provide a satisfactory explanation about the nature and source of these; the amounts are taxable.

Taxation Rules:

• Unexplained amounts (e.g., credited amounts, investments, expenditures) are included in the person’s income under “Income from Other Sources” to the extent they are not adequately explained.
• Suppressed production, sales, or taxable receipts are included under “Income from Business.”
• Agricultural income explanations are accepted based on provincial agricultural income tax paid.
• For assets or expenditures in Pakistan, the amount is taxed in the year it relates to. For foreign assets or concealed income, it is taxed in the year prior to discovery by the Commissioner.
• If the declared cost of an investment or expenditure is less than the reasonable cost, the difference may be included under “Income from Other Sources.”

Exemptions and Clarifications:

• Foreign exchange remittances up to 5 million Rupees per year through normal banking channels (e.g., scheduled banks, money service bureaus) are exempt if supported by a bank certificate.
• Income subject to final tax cannot be credited beyond imputable income unless the excess is reasonably attributed to business activities, supported by audited financial statements.
• No separate notice is required if the taxpayer is already confronted with the unexplained amounts through a notice under section 122(9) of the Ordinance.

Administrative Provisions:

• The Board may establish rules for this section under section 237.
• The “year of discovery” for foreign assets or income is defined as the year the Commissioner issues a notice requiring explanation.

When Does the FBR Issue a Notice Under Section 111(1)?

FBR notice 111(1) is a formal trigger, a show-cause, demanding an explanation of what and from where the notice came from. It’s usually sent electronically through the IRIS system, although in the past it has come at some point within six years of the relevant tax year, but recent changes have narrowed timeframes.

Common triggers include:

• Bank Credits or Investments: Deposit or stock purchase in excess of income.

• Property or Vehicle Acquisition: Assets unexplained Sensitive asset values with no associated documented income.

• Expenditures: Overspending on education, travel, or gifts not covered by declared funds.

• Wealth Statement Mismatches:When your annual wealth reconciliation contradicts your account holdings.

In the case of overseas Pakistanis, remittances through normal banking channels are usually excluded under section 111(4), subject to production of bank encashment certificate. But if the amount of money is over 5 million PKR, or does not have supporting papers, then it may still be subject to questioning. The notice identifies the tax year, the sum at issue and provides a deadline, typically 30 days, to respond.

The latest circulars of FBR, particularly dated 1st December 2024, lay emphasis that a separate Notice under Section 111(1) is required to be issued before amendments by way of assessment are made in accordance with Section 122. Skipping this step? Courts, the Lahore High Court and Supreme Court have both voided these measures to safeguard the rights of the taxpayers.

What Happens If You Can’t Explain Your Source of Income?

Here’s where things get serious. If you failed to meet notice 111(1) requirement  then the amount in question will be deemed as “concealed income” by the Commissioner. The consequences come fast and hard:

1. Tax Addition at Highest Rates:The residual amount is taxed at the highest slab rate, which can go up to 45% for individuals in 2025. For example, an unmotivated investment of PKR 10 million can hike your tax liability by more than PKR 4.5 million plus surcharges.
2. Assessment Surcharge and Penalties: This is the rate of penalization on the unpaid tax at 0.1% to a maximum limit of 50 % if caused due to delayed filing. Additionally, under section 182, penalties may extend up to 100% of the tax evaded if there is willful concealment.
3. Assessment Amendments: Section 122 would allow the tax return for any entire year to be re-opened, resulting in an audit for up to the previous six years. And this goes beyond the specific item; he said everything gets re-evaluated.
4. Legal Implications: Habitual offenders could be punished under section 182, which may lead to a fine up to PKR 50,000 and imprisonment for a year. At its worst it should go straight to the Appellate Tribunal or the High Court. Reason behind this is what it does people and money wise.
5. Reputational and Practical Hits:You may be included in the Inactive Taxpayer List (ITL). It could bare you from being involved in property dealings, receiving government contracts or even making utility connections. For companies, it can result in frozen bank accounts and a shutdown of operations.

How to Respond?

Don’t freeze, respond strategically. Here’s how:

Step 1: Verify and Analyze: Sign in to IRIS and retrieve the notice. Cross-check your records. Just be sure to use the exact provisions.

Step 2: Gather Evidence: Gather bank statements, salary slips, inheritance deeds, loan agreements or sales receipts. For remittances, keep that all-important encashment certificate safe.

Step 3: Draft a Comprehensive Reply:Comment on each using your correspondence and reference specific Section 111 exclusions as appropriate. Refer to other legal interpretations, if necessary, foreign funds under 111(4).

Step 4:Submit on Time: Please post on IRIS before the deadline. Ask for an extension if there are legitimate holdups.

Step 5:Get Professional Help: Consult a tax consultant early. Income Tax services in Pakistan with add more to the watertight and safe responses prepared by tax consulting firms. It might save you from any additions.

Pro Tip: Maintain a “tax diary” year-round; log all transactions with digital trails. This turns potential headaches into non-issues.

Conclusion

Section 111 of Income Tax Ordinance is no villain. It’s an anti-evading tax protector, a promoter of fairness in the economy of Pakistan. But for a tax-paying citizen, this may seem like a raid or an FBR notice 111(1). The answer to that is transparency from the very beginning. Be factual in all reporting and keep good documentation of events to answer questions properly.

If you have received such a notice, know this: It’s not the end; it’s an opportunity to strengthen your compliance. Seek advice, avail the judiciary’s protection and turn compliance into confidence. After all, in the FBR world a rupee explained is a tax-free worry!

Proper administration of in-countries tax complicate is vital even to individual taxpayers and businesses. As the Pakistani tax legislation undergoes constant evolution, it’s getting more important to stay in conformity with the Income Tax Ordinance 2001. Another provision which escapes the attention of most taxpayers is mentioned in Section 137 of the Income Tax Ordinance. Also, pertains to due dates and default penalties in case of non-deposit of taxes. It is indeed a mental anguish to receive a 137 Notice from FBR. But if you know what Section137 of FBR and you take the right action in timely manner, you will be saved from huge penalties and surcharges.

This blog delves into Section 137 of the Income Tax Ordinance, defines it and offers some practical tips on how you can prevent being penalized. And whether you yourself are on the payroll, a small-business owner or a corporation, that clarity will empower you to follow the taxes easily.

What is Section 137 of the FBR?

What is Section 137 FBR? At its core,Section 137 of the Income Tax Ordinance outlines the timelines for paying taxes assessed under the Ordinance. This section is enforced by the Federal Board of Revenue (FBR) to impose/satisfy timely deposit of tax liabilities to generate government income. Here is a closer look at some of its biggest components:

Sub section (1): Tax on your taxable income (including minimum tax under Sections 113 or 113A) is due on the filing deadline for your annual return, typically September 30 for salaried individuals and December 31 for others.

About Sub-section (2): Where any tax is payable under an assessment order or an amended assessment order or any other order issued by the Commissioner under this Ordinance, a notice shall be served upon the taxpayer in the prescribed form specifying the amount payable and thereupon the sum so specified shall be paid within [thirty] days from the date of service of the notice.

Sub-section (4):Upon written application by a taxpayer, the Commissioner may, where good cause is shown, grant the taxpayer an extension of time for payment of tax due [under sub-section (2)] or allow the taxpayer to pay such tax in instalments of equal or varying amounts as the Commissioner may determine having regard to the circumstances of the case.

Summarizing Sub-section (6):The grant of an extension of time to pay tax due or the grant of permission to pay tax due by instalments shall not preclude the liability for 4 [default surcharge] arising under section 205 from the due date of the tax under subsection 5 [(2)].

Mistakes Leading to Penalties

Misinterpreting or ignoring Section 137 could lead to significant financial costs. So, below are the key factors that contribute to the 137 Notice from FBR. The above are the common triggers of notice for a 137 and what will be penalties on non-filing of return:

• Failure to file or pay tax: Not filing the return and your self-assessed tax becomes due instantly under sub-section (1). This is further strengthened under sub-section (2) in a follow-up analysis.
• Disputed Assessments: A post-audit translates into a Demand Notice. And if they go unpaid for 30 days, surcharges apply.
• Withholding Tax Failures: The provisions of Section 137 with reference to recovery from Companies if they did not deduct or deposit withholding taxes (section 149–155) are both prescribed as well as escalated with penalty for redundant tax deductions.
• Incomplete Records: In the absence of evidence, appealing against notices becomes a never-ending struggle only to extend its liability.

How to Avoid Penalties?

Section 137 penalties of the income tax ordinance are generally able to be avoided through disciplined procedures. Here’s how to safeguard your finances:

File Returns on Time and Accurately

• Mark this date: Salaried employees are required to file by September 30; businesses or employers can file on December 31 (or extension because of notification).

• E-file through FBR’s IRIS portal to reduce the chances of errors. Verify income, deductions and credits inequality generally results in adjusted assessments and 137 Notice from FBR.

Monitor and Respond to Notices Promptly

• Visit IRIS regularly to keep an eye on your inbox; many 137 Notices from FBR go digital before they are issued.

• Check out your last statement to make sure you received the right amount. If incorrect, collect proof (such as payment proof) and reply within the 30-day time.

Seek Extensions Judiciously

If cash flow is a problem, put in writing to the Commissioner asking for an extension or payment to be made by installments under sub-section (4). Offer good reasons, like audited financial statements demonstrating hardship.

Maintain Impeccable Records

Keep both digital and paper copies of the Returns, challans, bank statements and agreements for at least 6 years.

For companies, reconcile monthly withholding taxes and deposits with FBR-authorized banks or through the online source.

Leverage Professional Help

But if you have extensive submissions, hire a tax consultant or chartered accountant. They can head off problems like those from Section 177 audits.

Stay updated via FBR’s website or apps; circulars often clarify interpretations ofSection 137.

Conclusion

Navigating Section 137 of the Income Tax Ordinance doesn’t have to be daunting. What is Section 137 of the FBR and how to save yourself from penalties? Respond fast on an FBR 137 notice and making timely payments part of your regular business practice. You can avert penalties that cut into the hard-earned dividends of your business. It’s becoming easier than ever to comply with especially with FBR processes going digital (through IRIS and e-invoicing mandates). You just need to keep abreast of development and organized.