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020701

Government of Pakistan Revenue Division Central Board of Revenue
Islamabad July 1, 2002
NOTIFICATION
Income Tax

S. R. O. 428(I)/2002. – In exercise of powers conferred by section 237 of the Income Tax Ordinance, 2001 (XLIV of 2001), the Central Board of Revenue is pleased to make the following rules, namely:-

“Income Tax Rules, 2002
CHAPTER-I

1. Short title and commencement. - (1) These rules may be called the Income Tax Rules, 2002.
(2) They extend to the whole of Pakistan.
(3) They shall come into force on the first day of July, 2002; except rules 3 to 9 which shall be applicable in respect of income earned on or after first day of July, 2002, and other rules covered by the rule on “Saving”.

2. Definitions. - (1) In these rules, unless there is anything repugnant in the subject or context, -
(a) "Central Board of Revenue" means the Central Board of Revenue, established under the Central Board of Revenue Act, 1924 (IV of 1924);

Note:   Notification No. SRO.1102(I)/91 (Oct 5, 1991) – the reference “Board” wherever appearing in the Rules includes a reference to “Regional Commissioners of Tax” and “Commissioner of Tax”, as the case may be.

(b) “electronic transmission" means a  facsimile or electronic-mail transmission;

(c) “Ordinance” means Income Tax Ordinance, 2001 (XLIX of  2001), where however, context so provides, Income Tax Ordinance, 1979 (XXXI of 1979) till its relevance in a particular context; and

(d) “section” means section of the Ordinance.

(2) All other expressions used but not defined in these rules shall have the meaning assigned to them under the Income Tax Ordinance, 2001.

[1] Chapter II substituted by SRO 609(I)/2002 dated 10-09-2002. The original Chapter II read as under:

“CHAPTER II
DETERMINATION OF INCOME – HEADS OF INCOME
PART-1:  SALARY

3. Valuation of perquisites and benefits. - For the purposes of computing the income chargeable to tax under the head "Salary", the value of perquisites and benefits includable in the said income shall be taken as determined under these rules.

4. For the purpose of these rule:-
(a) “Basic salary” means any pay, wages or other remuneration provided to an employee, excluding leave pay, payment in lieu of leave, overtime payment, bonus, commission, fees, gratuity, work condition supplements or any other allowances and perquisites referred to in sub-clauses (b) to (f) of sub-section (2) of section 12, sub-section (3) of section 12 and section 14.

(b) “Salary” means “Salary” as defined in sub-section (2) of section 12 excluding the exempt value of allowances, perquisites or benefits determined/ computed under rules 5 and 9.

(c) “Unfurnished accommodation or housing” includes electric fans, built in cupboards, cooking range and water heater.

“Furnished accommodation or housing” includes basic furniture and furnishing, appliances for cooking, refrigeration and heating and cooling appliances in addition to the items available in respect of ‘unfurnished accommodation or housing’.

5. House rent receivable in cash.- Where no accommodation or housing is provided by the employer to an employee, whose salary is less than Rs. 600,000 in a year, the house rent allowance receivable in cash exceeding 45% of the minimum of the time scale of the basic salary shall be added to the income.

6. Valuation of perquisites. - (1) The value of motor vehicle for the purposes of sub-section (3) of section 13 shall be determined as under:
(a) Where the motor vehicle is provided by an employer wholly for private use of the employee ten percent of the cost to employer for acquiring the motor vehicle or, if the motor vehicle is taken on lease by the employer, ten percent of the fair market value of the motor vehicle at the commencement of the lease. The value as determined at the time of commencement of lease shall be adopted for the purpose of this rule on the transfer of the motor vehicle at any time under the lease agreement.

(b) Where the motor vehicle is provided by an employer partly for private use of the employee:

(c) (i) Where motor vehicle is hired by the employer for private use by the employee, the amount of hire charges paid by the employer shall be added as income of the employee.

(ii) Where, however, salary is less than Rs. 600,000/-, addition shall be restricted to 50% of the hire charges borne by the employer or 5% of the basic salary whichever is higher.

7. Value of accommodation and housing.- (I) The value of accommodation or housing for the purposes of sub-section (12) of section 13 shall be determined as under:-
(I) Where annual salary does not exceed Rs. 600,000/-,

(ii) Where rent free furnished accommodation is provided, in addition to amount  determined under sub-clause (1), if any, an amount equal to 15% of the basic salary shall be added to the taxable income.

(a) Where the annual salary exceeds Rs. 600,000/-.

DETERMINATION OF INCOME – HEADS OF INCOME
PART-1: SALARY

3. Valuation of perquisites, allowances benefits.- For the purposes of computing the income chargeable to tax under the head “salary”, the value of perquisites, allowances and benefits includable in the said income shall be determined in accordance with the rule 4 to 9.

4. For the purpose of determining the value of perquisites, allowances and benefits under rule 3,-
(a) “annual value” of an accommodation means the sum for which the accommodation might reasonably be expected to let from year to year; 
(b) “basic salary” means the pay and allowances payable monthly or otherwise, but does not include-

(iii) For rent free unfurnished accommodation or housing

(iv) Where rent free furnished accommodation is provided, in addition to amount determined under sub-clause (1), if any, an amount equal to 15% of the basic salary shall be added to the taxable income.

(c) Where the accommodation or housing is provided by the employer at a concessional rate the value as determined under clause (a) or (b), as the case may be, as reduced by the payment made by the employee for the accommodation or housing.

(3) For the purpose of this rule and rule 5, where time scale of the basic salary is not provided in the terms of employment, the basic salary would be taken instead of minimum in time scale of the basic salary.

8. Free or concessional passage for travel abroad or within Pakistan.-Where free or concessional passage for travel abroad or within Pakistan by an employer to an employee (including members of his household and dependants), or where the expenditure incurred by the employee on such travel by the employee is reimbursed by the employer, or where any allowance is granted by the employer to the employee for in respect of such travel, there shall be included in the taxable income of the employee.

9. Minor perquisites. - The provision by an employer to an employee of tea, coffee and other similar refreshments at the employer’s business premises during the course of work shall not be treated as salary of the employee.

(i) dearness allowance or dearness pay unless it enters into the computation of superannuation or retirement benefits of the employee concerned;
(ii) employer’s contribution to a recognised provident fund or a fund to which the Provident Funds Act, 1925 (XIX of 1925), applies and the interest credited on the accumulated balance of an employee in such fund;
(iii) allowances which are exempt from the payment of tax under any provision of this Ordinance;
(iv) allowances and perquisites referred to in sub-clauses (b) to (f) of sub-section (2) of section 12, sub-section (3) of section 12, section 14; and
(v) allowances, perquisites, annuities and benefits referred to in rules 5 to 9;

(c) “salary” means remuneration or compensation for services rendered, paid or to be paid at regular intervals and includes overseas, dearness or cost of living allowance by whatever name it may be described, and bonus or commission which is payable to an employee in accordance with the terms of his employment as remuneration or compensation for services including any amount received by an employee from any employment, whether of a revenue or capital nature, including the amounts referred to in sub-section (2) of section 12,  but does not include the employer’s contribution to a recognized provident or superannuation fund or gratuity fund or any other sum which does not enter into the computation for pension or retirement benefits;

(d) “employee” includes a director of a company working whole-time for one company

(e) "unfurnished accommodation or housing" includes electric fans, built in cupboards, cooking range and water heater; and

(f) "furnished accommodation or housing" includes basic furniture and furnishing, appliances for cooking, refrigeration and heating and cooling appliances in addition to the items available in respect of "unfurnished accommodation or housing".

5. House rent allowances receivable in cash.-  Where the house rent allowance is receivable by the employee in cash, the amount, if any, by which the house rent allowance so receivable exceeds forty-five per cent of the minimum of the time scale of the basic salary or the basic salary where there is no time scale, shall be included in his income.

5A. Rent-free unfurnished accommodation.- Where rent-free accommodation is provided to an employee, there shall be included, in the total income of such employee, an amount calculated as under:-

5B. Rent free furnished accommodation.-  Where rent free furnished accommodation is provided to the employee, an amount equal to ten percent of his salary over and above the amount determined for inclusion under rule 5A shall be added to his income.

5C. Accommodation hired by the employee with rent payable by the employer.- Where the accommodation is hired by the employee in his own name but the rent is payable by the employer, the amount includable in the salary shall be determined under rule 5A or 5B, as the case may be as reduced by any payment made by the employee for such accommodation.

5D. Accommodation provided at a concessional rate.- Where the accommodation is provided to the employee, other than a person in the civil or military employment of the Government, at a concessional rate, the difference  between the rent actually paid by him and the amount determined to be includible in an employee’s salary under rule 5A or 5B shall be added to his income.

5E. House rent allowance receivable in addition to accommodation, etc.- Where any house rent allowance is receivable by the employee in addition to the benefits referred to in rules 5A, 5B, 5C or 5D, the whole amount of the allowance shall be added in his income in addition to the amount computed under any of the said rules.

6. Conveyance allowance receivable in cash with no conveyance facility.-  Where neither any conveyance is provided by the employer nor any conveyance owned or maintained by the employee is used by him in the performance of the duties of office held by him and conveyance allowance is receivable by him in cash, the amount of such allowance exceeding Rs. 3600 or the actual expenditure incurred by the employee, which ever is less, shall be included in his income.

6A. Motor vehicle provided exclusively for personal or private use.- Where a motor vehicle is provided by the employer for the use of the employee exclusively for personal or private purposes, there shall be included in the employee’s income an amount equal to-
(a) the sum actually expended by the employer on running and maintenance of the motor vehicle (including normal depreciation, where the motor vehicle is owned or the amount of rental where the motor vehicle is hired by the employer) if the motor vehicle is used by one employee; and

(b) the sum arrived at by dividing the amount as computed under sub-rule (a) by the number of persons entitled to use the motor vehicle if the motor vehicle is used by more than one employee.

6B. Additional conveyance allowance.-  Where any conveyance allowance is receivable by an employee in addition to the perquisite mentioned in rule 6A, the whole amount of such allowance plus the amount determined under the rule 6A shall be included in his income.

6C. Motor vehicle used partly for personal and partly for business purposes.-  Where the motor vehicle is used by the employee partly for his personal and partly for business purposes, there shall be included in his income,-

(a) where the motor vehicle is owned or hired by the employer and its running (including hire and maintenance) costs are also borne by the employer and the motor vehicle is used exclusively by one person, 50 per cent of the sum actually expended on the running of the motor vehicle (including maintenance and normal depreciation where the motor vehicle is owned or the amount of rental where it is hired by the employer) or Rs.3600, whichever is the less;

(b) where the motor vehicle is owned or hired by the employer and its running (including hire and maintenance) costs are also borne by the employer and the motor vehicle is used by more than one person, the sum arrived at by dividing the amount representing 50 per cent of the sum actually expended by the employer on the running of the motor vehicle (including maintenance and normal depreciation where the motor vehicle is owned or the amount of rental where it is hired by the employer) by the number of such persons or Rs.2400, whichever is the less;

(c) where the motor vehicle is owned or hired by the employer and its running cost is borne by the employee, the amount, if any, by which the conveyance allowance paid by the employer exceeds Rs.2400 or 7.5 per cent of the basic salary, whichever of these two sums  is the higher;

(d) where the motor vehicle is owned by the employee and its running (including hire and maintenance) costs are also borne by him the amount by which the conveyance allowance paid by the employer exceed Rs.3600 or 10 per cent of the basic salary, whichever of these two sums  is the higher; and

(e) where the motor vehicle is owned by the employee and its running (including hire and maintenance) costs are borne by the employer, the amount, if any, by which the conveyance allowance paid by the employer exceeds Rs.1200 or 2.5 per cent of the basic salary, whichever of these two sums  is the higher.

6D. Motor vehicle used exclusively for business purposes.-  Where the motor vehicle is used by the employee exclusively for business purposes, there shall be included in his income,-
(a) where the motor vehicle is owned or hired by the employer  and its running (including hire and maintenance) costs are also borne by him, the whole amount of the conveyance allowance, if any, receivable by the employee;
(b) where the motor vehicle is owned or hired by the employer and its running (including hire and maintenance) costs are borne by the employee, the amount, if any, by which the conveyance allowance paid by the employer exceeds the actual expenditure incurred by the employee on the running (including maintenance) of the motor vehicle;
(c) where the motor vehicle is owned or hired by the employee and its running (including maintenance) costs are borne by him, the amount, if any, by which the conveyance allowance paid by the employer exceeds Rs.4800 or 10 per cent of the basic salary, whichever of these two sums  is the higher; and
(d) where the motor vehicle is owned by the employee and its running (including maintenance) costs are borne by the employer, the amount, if any,  by which the conveyance allowance paid by the employer exceeds Rs.2400 or 7.5 per cent of the basic salary, whichever of these two sums  is the higher.

7. Provision of passage for travel.- (1) Where free or concessional passage for travel abroad or within Pakistan is provided by the employer to an employee (including the members of his household and dependants), there shall be included in the income of the employee-
(i) where the passage is provided in accordance with the terms of employment, an amount equal to the sum by which the cash payment, if any, made by the employer exceeds the actual expenditure on fare incurred by  the employee; or
(ii) where the passage is not in accordance with the terms of employment, the whole of the amount paid in cash, if any, or if no cash payment is made, the amount which would have been expended by the employee had the free or concessional passage, as the cash may be, not been provided by the employer:

Provided that where free or concessional passage for travel abroad is availed of by the employee more than once in two years and more than once in three years for the members of his household and dependants, the whole of the amount paid to him in cash, if any, for such additional passage or if no cash payment is made the amount which would have been expended by him, had the additional passage not been provided by the employer shall be included in his income.

(2) Where the transport is provided free of cost, or at the concessional rate, by an undertaking engaged in the transport of passengers or the carriage of goods to any employee of the undertaking (including the members of the household and dependants) in any conveyance owned or chartered by the undertakings for the purpose of the transport of the passengers or carriage of goods, nothing shall be added in his income.

8. Minor Perquisites.- The provision by an employer to an employee of tea, coffee and other similar refreshment at the employer’s business premises during the course of work shall not be treated as salary of employee.

9. Valuation of perquisites, allowances, benefits where salary is Rs.600,000 or more.- (1)  Where income chargeable under the head “Salary” of an employee including the value of perquisites as determined under rule 4 to 8 is six hundred thousand rupees or more for any tax year, the value of allowances perquisites and benefits shall be determined in accordance with sub rule (2 to 5) of this rule.

(2) Where any perquisite is receivable in cash the whole  amount shall be included in employee’s salary

(3) Where any perquisite is receivable otherwise, than in cash, the amount chargeable to the employee under the head “salary” for that year shall include the fair market value of the perquisite, determined at time it is provided, except provision of housing or accommodation, and provision of motor vehicle, as reduced by any amount paid by the employee for the perquisite.

(4) The value of accommodation or housing for the purposes of sub-section (12) of section 13 shall be determined as under:
(a) Where free unfurnished accommodation or housing is provided to the employee, the value for addition to the income shall be made on the following basis:

PART- 2
INCOME FROM BUSINESS

10. Entertainment expenditure. - (1) For the purpose of clause (d) of section 21, which provides for a limitation on the deduction of entertainment expenditure, and subject to sub-rule (2), a deduction for entertainment expenditure shall be limited to expenditure incurred by a person that satisfies the conditions laid down in sub-section (1) of section 20 and which is -

(a) expenditure incurred outside Pakistan on entertainment in connection with business transactions or where such expenditure is allocated as head office expenditure;
(b) expenditure incurred in Pakistan on entertainment of foreign customers and suppliers;
(c) expenditure incurred on entertainment of customers and clients at the person’s business premises;
(d) expenditure incurred on entertainment at a meeting of shareholders, agents, directors or employees; or
(e) expenditure incurred on entertainment at the opening of branches.
(f) any other entertainment expenditure incurred on refreshment to employees as per rule 9.

(2) A person shall be allowed a deduction under sub-rule (1) only for expenditure incurred on the entertainment of persons related directly to the person’s business.

(3) In this rule, “entertainment” means the provision of meals, refreshments, and reasonable leisure facilities in accordance with the tradition of business and subject to overall norms and customs of business in Pakistan.

11. Agricultural produce as raw materials. - (1) This rule applies to a person who is a cultivator or receiver of agricultural produce as rent-in-kind and who uses agricultural produce raised or received as raw materials in a business the income from which is chargeable to tax under the head “Income from Business”.

(2) In determining the amount of income of a person to whom this section applies, the market value of any agricultural produce raised or received as rent-in-kind by the person and used as raw materials in the person’s business shall be allowed as a deduction.

(3) For the purposes of sub-rule (2), the market value of agricultural produce shall be-
(a) where the agricultural produce is ordinarily sold in the market in its raw state or after application of any process ordinarily employed by a cultivator or receiver of agricultural produce as rent-in-kind to render it fit to be taken to market, the market price for the produce at the time it is used as raw materials in the person’s business; or

(b) in any other case, the sum of the following amounts, namely:-
(i) the expenses of cultivation; and
(ii) the land revenue rent paid for the area in which the produce is grown.

(4) No deduction shall be allowed for any expenditure incurred by a person as cultivator or receiver of agricultural produce as rent-in-kind, other than as specified in sub-rule (2).

12. Particulars required to be furnished for claiming depreciation deduction or initial allowance amortisation deduction. - (1) The following particulars shall be furnished by a taxpayer at the time of furnishing a return of income for any tax year in order to claim a depreciation deduction under section 22, an initial allowance under section 23 or an amortisation deduction under section 24 read with the Third Schedule to the Ordinance, namely: -

(a) a description of each depreciable asset and intangible in respect of which a deduction is claimed;
(b) where a depreciable asset or intangible is used in the tax year only partly in deriving income from business chargeable to tax, the extent of such part use;
(c) Prior months for which in assets as in (b) are put to use in deriving business income;
(d) if the depreciable asset or intangible was acquired in the tax year, the date of acquisition;
(e) the written down value of each depreciable asset at the beginning of the tax year computed in accordance with sub-section (5) of section 22 and the cost of each intangible as determined under sub-section (11) of section 24;
(f) the amount of capital expenditure incurred in the tax year on additions, alterations, improvements or extensions in relation to any depreciable asset or intangible and where the depreciable or amortisable amount of such expenditure is limited under the Ordinance, the lower amount shall also be stated;
(g) the total value of each depreciable asset for which a depreciation deduction is allowable for the tax year (this is the sum of the amounts specified in clauses (e) and (f), less any initial allowance allowed for the asset in that year;
(h) the prescribed rate of depreciation and initial allowance (if any) for each depreciable asset or class of asset for the tax year, and the normal useful life  for each intangible;
(i) the amount of depreciation deduction and initial allowance (if any) for each depreciable asset for the year and the amount of amortisation deduction for each intangible for the year;
(j) the total depreciation deduction, initial allowance and amortisation deduction allowed for the tax year; and
(k) the written down value of each depreciable asset and the cost of intangible at the end of the tax year, and the remaining normal useful life.

Explanation: Addition to intangible to be separately shown.
(2) The following particulars shall be furnished by a taxpayer at the time of furnishing a return of income for any tax year in which a depreciable asset or intangible is disposed of in the year, namely:-
(a) the consideration received for the asset or intangible;
(b) the written down value of the asset or intangible disposed of at the beginning of the tax year; and
(c) the excess or deficit of the consideration received in relation to the written down value (i.e., clause (b) less clause (a) or clause (a) less clause (b), as the case may be).

13. Apportionment of expenditures.- (1) This rule applies for the purposes of section 67, which provides for apportionment of expenditure incurred for more than one purposes.
(2) Any expenditure that is incurred for a particular class or classes of income shall be allocated to that class or classes, as the case may be.

(3) (a) Any common expenditure including financial expenses, excluding relatable or attributable to the non-business advances or loans and amount at (2); relatable to business including presumptive and exempt income, shall be allocated to each class of income according to the following formula, namely:-

A x B/C

where –
A is the amount of the expenditure incurred;
B is the total amount gross receipts (without deduction of expenditures) for the tax year for the class of income; and
C is the total amount gross receipts (without deduction of expenses) and net gains for the tax year of all classes of income;

(b) where, however, there is net gain, brokerage, commission and other income is to be taken and turnover of such transactions is taken at these figures, such income is to be compared with gross profit from business for adopting figures for component “B” and “C” of the formula at (a) above.

(4) Where expenditures are to be allocated among different classes of income under sub-rule (3), consideration shall be given to the nature and source of each class of income, on reasonable basis to earn each class of income (particularly, in allocating selling expenses).

(5) Where the allocation of expenditures is made in accordance with sub-rule  (3) a certificate by the Chartered Accountants or Cost and Management Accountant stating the basis of allocation shall be accepted unless significant variations are found; and where books are not required to be audited, the reasonable basis based on the sub-rule (3) and (4) may be adopted which would be accepted by Commissioner, unless variation is found.  Significant variations would be beyond the limits of 10 + in collection as in sub-rule (3) under any head of account.

(8) In this rule.-
“class of income” means -
(a) Pakistan-source income chargeable under the head “Salary”;
(b) foreign-source income chargeable under the head “Salary”
(c) Pakistan-source income chargeable under the head “Income from Property”;
(d) foreign-source income chargeable under the head “Income from Property”;
(e) Pakistan-source income chargeable under the head “Income from Business” (other than income subject to section 19);
(f) foreign-source income chargeable under the head “Income from Business” (other than income subject to section 19);
(g) Pakistan-source income from a speculation business chargeable under the head “Income from Business”;
(h) foreign-source income from a speculation business chargeable under the head “Income from Business”;
(i) Pakistan-source income chargeable under the head “Capital Gains”;
(j) foreign-source income chargeable under the head “Capital Gains;
(k) Pakistan-source income chargeable under the head “Income from Other Sources”
(l) foreign-source income chargeable under the head “Income from Other Sources”
(m) income exempt from tax;
(n) chargeable to tax under section 5, 6 or 7; and
(o) amounts to which section 169 applies except proceed realised from experts from which separate provision is made as sub-rule (8); and

“common expenditure” means expenditure that is not clearly allocable to any particular class or classes of income, such as general administrative and other such allocable expenditures

CHAPTER – III
PERSONS

14. Resident individual.- (1) This rule applies for the purposes of section 82, which provides for the determination of persons as resident individuals.

(2) The following rules apply for the purposes of clauses (a) and (b) of section 82 in computing the number of days an individual is present in Pakistan in a tax year, namely:-

(a) subject to clause (c), a part of a day that an individual is present in Pakistan (including the day of arrival in, and the day of departure from, Pakistan) counts as a whole day of such presence;

(b) the following days in which an individual is wholly or partly present in Pakistan count as a whole day of such presence, namely:-
(i) a public holiday;
(ii) a day of leave, including sick leave;
(iii) a day that the individual’s activity in Pakistan is interrupted because of a strike, lock-out or delay in receipt of supplies; or
(iv) a holiday spent by the individual in Pakistan before, during or after any activity in Pakistan; and

(c) a day or part of a day where an individual is in Pakistan solely by reason of being in transit between two different places outside Pakistan does not count as a day present in Pakistan.

CHAPTER – IV
TAXATION OF FOREIGN-SOURCE INCOME OF RESIDENTS

15. Foreign income tax.- (1) This rule applies for the purposes of sections 102 and 103, which provide resident persons with relief from international double taxation.

(2) A foreign levy is a foreign income tax if the following conditions are satisfied, namely:-
(a) the levy is a tax; and
(b) the tax is substantially equivalent to the income tax imposed by the Ordinance.

(3) Subject to sub-rules (4) and (5), a foreign levy is a tax if it requires a compulsory payment pursuant to the authority of the foreign country to levy taxes.

(4) A penalty, fine, interest or similar obligation is not a tax for the purposes of this Chapter.

(5) A foreign levy is not a tax to the extent that a person subject to the levy receives or is entitled to receive, directly or indirectly, a specific economic benefit from the foreign country in exchange for the payment pursuant to the levy.

(6) Subject to sub-rule (7), a foreign tax is substantially equivalent to the income tax imposed under the Ordinance if the following conditions are satisfied, namely:-
(a) the tax is imposed in respect of events that would result in the derivation of income, gains or profits under the Ordinance; and
(b) the taxable amount is computed under the foreign tax by subtracting from gross receipts any significant expenses and the depreciation or amortization of capital costs attributable to such receipts, or, where the tax is imposed under the foreign law or any other basis;
(c) Dividend or interest income earned from foreign source, on being so taken by the CBR, may be treated to have same character for the resident person, as it has under the Ordinance.

(7) The following foreign taxes are substantially equivalent to the income tax imposed under the Ordinance, namely:-
(a) a withholding tax imposed on dividends, gross receipts payable to non-resident persons as final tax; or
(b) tax on wages by withholding imposed as a final tax on salary.

(8) In this rule,
(a) “economic benefit” includes –
(i) any property;
(ii) any service;
(iii) any fee or other payment;
(iv) any right to use, acquire or extract natural resources, patents, or other property owned or controlled by the foreign country; or
(v) any reduction or discharge or a contractual obligation; and

(b) “specific economic benefit” means an economic benefit that is not available on substantially the same terms –
(i) all persons subject to the income tax generally imposed by the foreign country; or
(ii) if there is no generally imposed income tax, the population of the country in general.

16. Foreign tax credit.- (1) This rule applies for the purposes of section 103, which provides for the foreign tax credit.
(2) A resident taxpayer claiming a foreign tax credit for a tax year shall submit an application for the credit with the taxpayer ‘s return of income for that year.
(3) an application for a foreign tax credit shall be in the form as specified in Part I of the First Schedule to these rules.

(4) Subject to sub-rule (5), an application for a foreign tax credit shall be accompanied by the following documentation, namely:-
(a) where the tax has been deducted at source, a declaration by the payer of the income that tax has been deducted and a certified copy of the receipt that the payer has received from the foreign tax authority for the deducted tax; or
(b) in any other case, the original or a certified copy of the receipt that the taxpayer has received from the foreign tax authority for the tax paid.

(5) Where a resident taxpayer cannot obtain evidence of the deduction of tax from the payer of income as required under clause (a) of sub-rule (4), the Commissioner may accept such secondary evidence of the deduction as is determined by him.

CHAPTER - V
TAXATION OF NON-RESIDENTS

17. Application of Chapter.- The rules in this Chapter apply for the purposes of sub-clause (ii) of clause (a) of sub-section (2) of section 237, which provides for the making of rules concerning the manner in, and procedure by, which the income, profits and gains chargeable to tax, and the tax payable thereon, under the Ordinance shall be determined in the case of non-resident persons.

18. Income from royalties.- The income of a non-resident person by way of royalty received from a resident person or a permanent establishment in Pakistan of a non-resident person shall be -
(a) in the case a royalty received in pursuance of an agreement made before the 8th day of March, 1980, or an agreement made on or after the said date the proposal in respect of which was approved by the Government before the said date, the gross amount of the royalty less the deductions allowed under section 40; or

(b) in any other case, to which sub-section (2) of section 6 does not apply, the gross amount of the royalty less then the following expenditure.
(i) any expenditure incurred in Pakistan to earn such royalty, wherever paid;
(ii) any expenditure incurred outside Pakistan in pursuance of such agreement not exceeding ten percent of gross amount of royalty.

Provided that a non-resident may opt for taxation under sub-section (2) of section 6 of Income Tax Ordinance, 2001, by filing a written declaration/ option within 15 days of the commencement of contract. Such option shall remain operative till completion of the said contract.

(c) in the case of royalty received in pursuance to any other agreement, the gross amount of the royalty less the following expenditures only, namely:–
(i) any expenditure incurred in Pakistan in earning such income;
(ii) any expenditure incurred in Pakistan in respect of any work done in pursuance of such agreement; and
(iii) any expenditure incurred outside Pakistan in respect of any work done in pursuance of such agreement not exceeding ten per cent of the gross amount of such royalty.

(d) The provisions of sub-rule (b) and (c) would not apply where, royalty is covered by section 169.

19. Fees for technical services.- (1) The income of a non-resident person by way of fees for technical services received from a resident person or a permanent establishment in Pakistan of a non-resident person shall be –

(a) in the case of fees received in pursuance of an agreement made before the 8th day of March, 1980, or an agreement made on or after the said date the proposal in respect of which was approved by the Government before the said date only in such cases, the gross amount of the fees less the deductions allowed under section 40;

(b) in the case of fees received in pursuance of an agreement made on or after 8th day of March, 1980 but before the 4th day of May, 1981, the gross amount of the fees less the deductions allowed under section 40 with a maximum total deduction equal to twenty per cent of the gross amount of such fees; or

(c) in any other case to which sub-section (2) of Section 5 of the Income Tax Ordinance, 2001 does not apply, the gross amount of royalty less the following perquisites.
(i) Any expenditure incurred in Pakistan to earn such royalty, wherever paid.
(ii) any expenditure incurred outside Pakistan in pursuance of such agreement not exceeding ten percent of gross amount of royalty.

Provided that a non-resident may opt for taxation under section 6 of Income Tax Ordinance, 2001, by filing a written declaration/ option within 15 days of the commencement of contract. Such option shall remain operative till completion of the said contract.

(d) Sub-rule (c) would not apply where the fee for technical service is covered by the provisions of section 169.

CHAPTER – VI
TRANSFER PRICING

20. Application of this Chapter.- This chapter applies for the purposes of section 108 mainly , which provide the Commissioner with the power to distribute, apportion or allocate income, expenditures or tax credits between associates in respect of transactions not made in accordance with the arm’s length principle.

21. Interpretation.- (1) In this Chapter,
(a) “comparable uncontrolled transaction”, in relation to a controlled transaction, means an uncontrolled transaction that satisfies one of the following conditions, namely:-
(i) the differences (if any) between the two transactions or between persons undertaking the transactions do not materially affect the price in the open market, the resale price margin or the cost plus mark up, as the case may be; or

(ii) if the differences referred to in sub-clause (i) do materially affect the price in the open market, the resale price margin or the cost plus mark up, as the case may be, then reasonably accurate adjustments can be made to eliminate the material effects of such differences;
(b) “controlled transaction” means a transaction between associates;
(c) “transaction” means any sale, assignment, lease, license, loan, contribution, right to use property or performance of services;
(d) “uncontrolled persons” means persons who are not associates; and
(e) “uncontrolled transaction” means a transaction between uncontrolled persons.

22. Subject to the other rules in this Chapter, the Commissioner, in applying this Chapter shall also be guided by international standards, case law and guidelines issued by the various tax-related internationally recognized organizations.

23. Arm’s length standard.- (1) In determining the income of a person from a transaction with an associate, the standard to be applied by the Commissioner shall be that of a person dealing at arm’s length with a person who is not an associate (referred to as the “arm’s length standard”).

(2) A controlled transactions shall meet the arm’s length standard if the result of the transaction is consistent with the result (referred to as the arm’s length result”) that would have been realized if uncontrolled persons had engaged in the same transaction under the same conditions.

(3) Subject to sub-rule (6), the following methods shall apply for the purposes of determining an arm’s length result, namely:-
(a) the comparable uncontrolled price method;
(b) the resale price method;
(c) the cost plus method; or
(d) the profit split method.

(4) The method in clause (d) shall apply only where the methods in clauses (a), (b) and (c) cannot be reliably applied.

(5) As between clauses (a), (b) and (c), the method that, having regard to all the facts and circumstances, provides the most reliable measure of the arm’s length result as in the opinion of Commissioner shall be applied.

(6) Where the arm’s length result cannot be reliably determined under one of the methods in sub-rule (3), the Commissioner may use any method provided it is consistent with the arm’s length standard.

24. Comparable uncontrolled price method.- The comparable uncontrolled price method determines whether the amount charged in a controlled transaction gives rise to an arm’s length result by reference to the amount charged in a comparable uncontrolled transaction.

25. Resale price method.- (1) The resale price method determines whether the amount charged in a controlled transaction gives rise to an arm’s length result by reference to the resale gross margin realized in a comparable uncontrolled transaction.

(2) The following steps shall apply in determining the arm’s length result under the resale price method, namely:-
(a) determine the price that a product purchased from an associate has been sold to a person who is not an associate (referred to as the “resale price”); and
(b) from the resale price is subtracted a gross margin (referred to as the “resale gross margin”) representing the amount that covers the person’s selling and other operating expenses and, in light of the functions performed (taking into account assets used and risks assumed), make an appropriate profit;
(c) from that amount is subtracted any other costs associated with the purchase of the product, such as customs duty; and
(d) the amount remaining is the arm’s length result.

(3) The resale price margin of a person in a controlled transaction may be determined by reference to:-
(a) the resale price margin that the person earns on products purchased and sold in a comparable uncontrolled transaction; or
(b) the resale price margin that an independent person earns in comparable uncontrolled transaction.

26. Cost plus method.- (1) The cost plus method determines whether the amount charged in a controlled transaction gives rise to an arm’s length result by reference to the cost plus mark up realised in a comparable uncontrolled transaction.

(2) The following steps shall apply in determining the arm’s length result under the cost plus method, namely:-
(a) determine the costs incurred by the person in a controlled transaction; and
(b) to this amount is added a mark up (referred to as the “cost plus mark up”) to make an appropriate profit in light of the functions performed and market conditions; and
(c) the sum of the amounts referred to in clauses (a) and (b) is the arm’s length result.

(3) The cost plus mark up of a person in a controlled transaction may be determined by reference to:-
(a) the cost plus mark up that the person earns in a comparable uncontrolled transaction; or
(b) the cost plus mark up that an independent person earns in comparable uncontrolled transaction.

27. Profit split method.- (1) The profit split method may be applied where transactions are so interrelated that the arm’s length result cannot be determined on a separate basis.
(2) The profit split method determines the arm’s length result on the basis that the associates form a firm and agree to divide profits in the manner that independent persons would have agreed on the basis that they are dealing with each other at arm’s length.

(3) The Commissioner may determine the division of profits on the basis of a contribution analysis, a residual analysis or on any other basis as appropriate having regard to the facts and circumstances.

(4) Under contribution analysis, the total profits from controlled transactions shall be divided on the basis of the relative value of the functions performed by each person participating in the controlled transactions.

(5) Under residual analysis, the total profits from controlled transactions shall be divided as follows:-
(a) each person shall be allocated sufficient profit to provide the person with a basic return appropriate for the type of transactions in which the person is engaged; and

(b) any residual profit remaining after the allocation in clause (a) shall be allocated on the basis of division between independent persons determined having regard to all the facts and circumstances.

(6) For the purposes of clause (a) of sub-rule (5), the basic return shall be determined by reference to market returns achieved for similar types of transactions by independent persons.

Chapter – VII
Records and Books of Accounts
Part-I Preliminary

28. Application of Chapter. – (1) The rules in this Chapter apply for the purposes of section 174.
(2) The purpose of this Chapter is to prescribe the minimum level of books of accounts, documents and records to be maintained by taxpayers.
(3) Nothing in this Chapter shall preclude a taxpayer accounting for income chargeable under the head “Income from Business” from
(a) maintaining any books of account, documents or records in addition to those prescribed in these rules;
(b) adding such further columns or particulars in the forms prescribed in these rules for the taxpayer’s own requirement; or
(c) maintaining the books of account, documents or records in the manner prescribed keeping in view the nature of the taxpayer’s business.

Interpretation. – In this Chapter –
(a) “legal practitioner” includes an advocate, pleader, tax practitioner and advisor or consultant on income tax, sales tax, customs, central excise or salt tax laws.

(b) “medical practitioner” includes a doctor, surgeon, physician, dentist, psychiatrist, physiotherapist, tabib, homeopath, vaid, veterinarian and any person practicing medicine under any other name.

Part-II Books of Account Prescribed

29. Books of account, documents and records to be maintained. – (1) Every taxpayer deriving income chargeable under the head “Income from business” shall maintain proper books of account, documents and records with respect to-
(a) all sums of money received and expended by the taxpayer and the matters in respect of which the receipt and expenditure takes place;
(b) all sales and purchases of goods and all services provided and obtained by the taxpayer;
(c) all assets of the taxpayer;
(d) all liabilities of the taxpayer; and
(e) in case of a taxpayer engaged in assembly, production, processing, manufacturing, mining or like activities, all items of cost relating to the utilization of materials, labour and other inputs.

(2) If a taxpayer uses fiscal electronic cash register or computerized accounting software, it may issue cash-memo/invoice/receipt generated by the electronic cash register or computer.

(3) Duplicate copies and electronic or computer records of the cash-memo / invoice / receipt / patient-slip to be issued under this chapter, shall be retained by the taxpayer and form part of the records to be maintained under this chapter.

(4) The books of account, documents and records to be maintained under this chapter shall be maintained for five years after the end of the tax year to which they relate.

30. In particular, and without prejudice to the generality of the provisions of Rule 29, every taxpayer, other than companies, deriving income chargeable under the head “Income from business” shall issue and maintain the following minimum books of account, documents and records: - (1) Taxpayers with business income upto Rs. 200,000 and new taxpayers deriving income from business (excluding taxpayers to whom sub-rules (2), (3) or (4) apply):

(a) Serially numbered and dated cash-memo / invoice / receipt for each transaction of sale or receipt containing the following: -
(i) taxpayer’s name or the name of his business, address, national tax number and sales tax registration number, if any; and
(ii) the description, quantity and value of goods sold or services rendered;

Provided that where each transaction does not exceed Rs. 100, one or more cash-memos per day for all such transactions may be maintained;

(b) Daily record of receipts, sales, payments, purchases and expenses; a single entry in respect of daily receipts, sales, purchases and different heads of expenses will suffice; and

(c) Vouchers of purchases and expenses.

(2) Taxpayers with business income exceeding Rs. 200,000 (excluding taxpayers to whom sub-rules (1), (3) or (4) apply) and wholesalers, distributors, dealers and commission agents:
(a) Serially numbered and dated cash-memo / invoice / receipt for each transaction of sale or receipt containing the following: -
(i) taxpayer’s name or the name of his business, address, national tax number and sales tax registration number, if any;
(ii) the description, quantity and value of goods sold or services rendered; and
(iii) in case of a wholesaler, distributor, dealer and commission agent, where a single transaction exceeds Rs. 10,000, the name and address of the customer;

Provided that where each transaction does not exceed Rs. 100, one or more cash-memos per day for all such transactions may be maintained;

(b) Cash book and/or bank book or daily record of receipts, sales, payments, purchases and expenses; a single entry in respect of daily receipts, sales, purchases and different heads of expenses will suffice;
(c) General ledger or annual summary of receipts, sales, payments, purchases and expenses under distinctive heads;
(d) Vouchers of purchases and expenses and where a single transaction exceeds Rs. 10,000 with the name and address of the payee; and
(e) Where the taxpayer deals in purchase and sale of goods, quarterly inventory of stock-in-trade showing description, quantity and value.

(3) Professionals (like medical practitioners, legal practitioners, accountants, auditors, architects, engineers etc.): –
(a) Serially numbered and dated patient-slip / invoice / receipt for each transaction of sale or receipt containing the following: -
(i) taxpayer’s name or the name of his business or profession, address, national tax number and sales tax registration number, if any;
(ii) the description, quantity and value of medicines supplied or details of treatment/ case/ services rendered (confidential details are not required) and amount charged; and
(iii) the name and address of the patient / client;

Provided that the condition of recording address of the patient on the patient slip under this clause shall not apply to general medical practitioners;

(b) Daily appointment and engagement diary in respect of clients and patients:

Provided that this clause shall not apply to general medical practitioners;

(c) Daily record of receipts, sales, payments, purchases and expenses; a single entry in respect of daily receipts, sales, purchases and different heads of expenses will suffice; and

(d) Vouchers of purchases and expenses.

(4) Manufacturers (with turnover exceeding Rs. 2.5 million):
(a) Serially numbered and dated cash-memo / invoice / receipt for each transaction of sale or receipt containing the following: -
(i) taxpayer’s name or the name of his business, address, national tax number and sales tax registration number, if any;
(ii) the description, quantity and, value of goods sold;
(iii) where a single transaction exceeds Rs. 10,000 with the name and address of the customer;

(b) Cash book and/or bank book;

(c) Sales day book and sales ledger (where applicable);

(d) Purchases day book and purchase ledger (where applicable);

(e) General ledger;

(f) Vouchers of purchases and expenses and where a single transaction exceeds Rs. 10,000 with the name and address of the payee; and

(g) Stock register of stock-in-trade (major raw materials and finished goods) supported by gate in-ward and outward records and quarterly inventory of all items of stock-in-trade including work-in-process showing description, quantity and value.

31. Every taxpayer deriving income chargeable under the head income from salary, property, capital gains or other sources shall issue and maintain the following minimum documents and records: -
(1) Taxpayers deriving income from Salary:
Salary certificate indicating the amount of salary and tax deducted there from.

(2) Taxpayers deriving income from property:
(a) Tenancy agreement, if executed;
(b) Tenancy termination agreement, if executed;
(c) Receipt for amount of rent received; and
(d) Evidence of deductions claimed in respect of premium paid to insure the building, local rate, tax, charge or cess, ground rent, profit/interest or share in rent on money borrowed, expenditure on collecting the rent, legal services and unpaid rent.

(3) Taxpayers deriving income from capital gains:
(a) Evidence of cost of acquiring the capital asset;
(b) Evidence of deduction for any other costs claimed; and
(c) Evidence in respect of consideration received on disposal of the capital asset.

(4) Taxpayers deriving income from other sources:

(i) Dividends:
Dividend warrants.

(ii) Royalty:
Royalty agreement.

(iii) Profit on debt:
(i) Evidence and detail of profit yielding debt;
(ii) Evidence of profit on debt and tax deducted thereon, like certificate in the prescribed form or bank account statement; and
(iii) Evidence of Zakat deducted, if any.

(iv) Ground rent, rent from the sub-lease of land or building, income from the lease of any building together with plant or machinery and consideration for vacating the possession of a building or part thereof:
(i) Lease agreement; and
(ii) Lease termination agreement.

(v) Annuity or Pension:
Evidence of amount received.

(vi) Prize money on bond, winning from a raffle, lottery or cross word puzzle:
Evidence of income and tax deducted thereon, like certificate in the prescribed form.

(vii) Provision, use or exploitation of property:
Agreement.

(viii) Loan, advance, deposit or gift:
Evidence of mode of receipt of a loan, advance, deposit or gift i.e., by a crossed cheque or through a banking channel.

(ix) General:
Evidence of deduction for any other expenditure claimed.

Part-III
General instructions about maintaining books of accounts, documents and records

32. General form of books of accounts, documents and records.- (1) The books of accounts, records and other documents required to be maintained by a taxpayer in accordance with this Chapter may be kept on electronic media, provided sufficient steps have been taken to ensure the sanctity and safe keeping of such accounts, documents and records.

(2) The books of accounts, documents and records required to be maintained by a company in accordance with this Chapter shall be maintained in accordance with international accounting standards and as required under the Companies Ordinance, 1984.

33  Books of account, documents and records to be kept at the specified place. – (1) The books of accounts, documents and records required to be maintained by a taxpayer in accordance with this Chapter shall be kept at the place where the taxpayer is carrying on the business or, where the business is carried on in more places than one, at the principal place of business or at each of such places if separate books of accounts are maintained in respect of each place.

(2) Where a person derives income from sources other than from business, the books of accounts, documents and records shall be kept at the person’s place of residence or such other place as may be so declared by such person.

(3) The place or places where the books of accounts, documents and records are kept shall be clearly stated on the tax return form in the column requiring the details of the records maintained.

CHAPTER – VIII
RETURNS, EMPLOYER’S CERTIFICATE, WEALTH STATEMENT AND STATEMENT TO BE FILED BY CERTAIN PERSONS

34 Return of income.- (1) This rule and the rule numbers 35 and 36 shall apply for the purposes of returns of income, certificate and wealth statement to be filed.
(2) A return of income as required to be furnished by a person under section 114 shall be in the form specified in Part I (for companies), II (for association of persons), III (for individuals), and IV (salary certificate) of the Second Schedule to these rules.

(3) A return of income shall be verified in the manner specified in the form.

(4) A return of income shall be accompanied by such documents, statements and certificates as specified in the form, and in the Ordinance and these rules

35 Employer’s certificate in lieu of return of income.- (1) This rule shall apply to provide for the furnishing of an employer’s statement instead of furnishing a return of income.
(2) An employer’s certificate that may be furnished by an employee instead of a return of income shall be –
(a) in the form specified in Part IV of the Second Schedule;
(b) verified in the manner specified in the form; and
(c) accompanied by such documents, statements and certificates as specified in the form, and in the Ordinance and these rules.

(3) A portion relating to certification of remuneration by employer shall be signed by employer or his designated officer, and portion relating to the calculation of tax and any other income shall be signed by the employee, as well. This certificate shall be filed signed both by employer or employee, on the specified portion as stated. Where employee has any other source of income, other than profit on debt, a return of income as prescribed under Part III of the First Schedule shall be filed and salary income shall be supported by the certificate.

36 Wealth statement.- (1) This rule shall provide for the furnishing of a wealth statement.
(2) A wealth statement shall be –
(a) in the form specified in Part V of the Second Schedule to these rules;
(b) verified in the manner specified in the form; and
(c) accompanied by such documents, statements and certificates as specified in the form, and in the Ordinance, these rules and circulars issued under the Ordinance.

37 Return to be furnished by a non-resident ship owner or charterer.- (1) This rule shall apply for the purposes of sections 143, which provides for the furnishing of returns by non-resident ship owners or charterers.
(2) A return required to be furnished under section 143 shall be in the following form, namely:-

 Authorised/Representative
Signature_____________
Name________________
Designation___________
Seal_________________
Date   _______________

(3) A return required to be furnished under section 143 shall be accompanied by such documents, statements and certificates as specified in the form, and in the Ordinance, these rules and circulars issued under the Ordinance.

(4) A return required to be furnished under section 143 may be furnished by any of the methods specified in rules 73 and 74.

38  Return to be furnished by a non-resident aircraft owner or charterer.- (1) This rule shall apply for the purposes of sections 144, which provides for the furnishing of quarterly returns by non-resident aircraft owners or charterers.

(2) A return required to be furnished under section 144 shall be in the following form, namely:- 

Authorised/Representative
Signature_____________
Name________________
Designation___________
Seal_________________
Date   _______________

(3) A return required to be furnished under section 144 shall be accompanied by such documents, statements and certificates as specified in the form, and in the Ordinance, these rules and circulars issued under the Ordinance.
(4) A return required to be furnished under section 144 may be furnished in any of the methods specified in rules 73 and 74.

39 Statement in lieu of Return of income.- (1) Where in lieu of Return of income statement is required to be filed namely incomes covered by sections 5,6 and 7 or where tax deduction is to be taken as a final discharge of tax liability u/s 169 a statement in the prescribed form shall be filed as prescribed in Part VI of the Second Schedule to the Rules.

(2) Where a taxpayer has income from a source which does not form part of total income and also income under any head of income given in section 11 (except salary), Return is specifically required to be filed on a prescribed statement as well as shall be filed.

CHAPTER – IX
CERTIFICATES, STATEMENTS AND PROCEDURE FOR PAYMENT OF ADVANCE TAX
PART I – SECTION 159 CERTIFICATE

40. Exemption or lower rate certificate u/s 159.- (1) An application for a certificate under sub-section (1) of section 159 shall be made in the form specified in Part-VII of the First Schedule to these rules.

(2) A certificate issued by the Commissioner under sub-section (1) of section 159 shall be in the form specified in Part VIII of the First Schedule to these rules.

PART II – SALARY
Division I – Deduction of Tax

41 Tax deducted from salary. (1) Subject to sub-rule (2), every employer shall deduct tax from a payment of salary at the rate specified in section 149 read with in the First Schedule to the Income Tax Ordinance, 2001.

(2) The Commissioner may, upon application in writing by an employer (other than the Government) and notwithstanding anything contained in these rules, permit an employer to pay tax deducted from salary paid to employees in a lump sum for each employee every month based on the average amount of tax deductible every month from such income and to furnish a reconciliation statement at the end of the financial year in the prescribed form sub-rule 6.

(2) Where an employer has been granted permission under sub-rule (1), the employer shall –
(a) compute the tax due on the income chargeable under the head “Salary” for each employee and make any adjustments as necessary in the deduction from salary for the month of June; and

(b) furnish a reconciliation statement to the Commissioner in the prescribed form for each employee within fifteen days after the end of the financial year.

(4) Where an employee leaves employment before the end of the financial year, the adjustment referred to in clause (a) of sub-rule (3) shall be made, and the statement referred to in clause (b) of sub-rule (3) shall be furnished, within fifteen days after termination of the employee’s employment.

(4) Where an employer ceases to carry on business in a financial year, the adjustment referred to in clause (a) of sub-rule (3) shall be made, and the statement referred to in clause (b) of sub-rule (3) shall be furnished prior to ceasing business.

(5) The adjustments referred to in sub-rule (3) shall be made for each individual employee and any excess recovered from one employee should not be adjusted against any short recovery from another employee.

(6) A reconciliation statement shall be in the following form, namely:-

Reconciliation Statement of Tax Deducted from Salary for the year
Ended 30th June, 20______

Division II – Payment of Deducted Tax

42. Payment of tax deducted.- (1) All amounts deducted under section 149 by, or on behalf of, the Government shall be paid to the credit of the Federal Government on the day the amount was collected or deducted.

(2) Except where sub-rule (1) or (5) applies, all amounts deducted under section 149 in a month shall be paid to the credit of the Federal Government by remittance to the Government Treasury, an authorised branch of the State Bank of Pakistan or the National Bank of Pakistan within 15 days from the end of the month.

(3) Where the annual salary paid by an employer to its employees for a tax year is estimated to be less than 300,000 rupees per employee, the employer may apply to the Commissioner for permission to pay tax deducted under section 149 on a quarterly basis, provided the quarterly returns are regularly filed.

(4) An application under sub-rule (3) shall be made to the Commissioner in writing –
(a) specifying the reasons for the application;
(b) number of employees with less than 300,000 income; and
(c) total estimated tax deduction covered by such deferral of tax.

(5) Where the Commissioner grants an application under sub-rule (4), all amounts deducted under section 149 in a quarter shall be paid to the credit of the Federal Government by remittance to the Government Treasury, an authorised branch of the State Bank of Pakistan, or the National Bank of Pakistan –
(a) for the quarter ending on the 30th day of September, by the 15th day of  October;
(b) for the quarter ending on the 31st day of December, by the 15th day of January;
(c) for the quarter ending on the 31st day of March, by the 15th day of April; and
(d) for the quarter ending on the 30th day of June, by 23rd day of June.

(6) The amount paid by 23rd day of June, for the quarter ending the 30th day of June shall be based on the amount paid for the quarter ending the 31st day of March and the employer shall make an adjustment based on actual salary paid for the quarter by the 31st day of July next following.

(7) The payment of any amount to which this rule applies shall be accompanied by an income tax challan.

(8) Blank copies of income tax challans may be obtained from the Commissioner.

(9) The prescribed income tax authorities for the purposes of submission of original copies of income tax challans under this rule shall be specified by the Central Board of Revenue through open circular from time to time.

Division III – Employer’s Certificate

43 Furnishing of employer’s certificate to employees.- (1) An employer shall issue to every employee employed by the employer in a financial year an employer’s certificate in the form specified in these rules within fifteen days after the end of the year.

(2) Where an employee leaves employment before the end of the financial year, the employer shall issue to the employee an employer’s certificate for the period of employment in the year within seven days after termination of the employee’s employment.

(3) An employer who ceases to carry on business in a financial  year shall issue an employer’s certificate to each employee prior to ceasing business.

(4) An employer who fails to issue an employer’s certificate as required under sub-rules (1), (2) or (3) shall commit an offence punishable on conviction with a fine. Section 164 read with clause (c) of sub-section (1) of section 191.

(5) Where an employer’s certificate has been lost, stolen or destroyed, the recipient of the certificate may request, in writing, that the issuer of the certificate issue a duplicate certificate.

(6) Where a request has been made under sub-rule (5), the issuer of the certificate shall comply with the request and the certificate so issued shall be clearly marked “duplicate”.

(7) An employee required to furnish a return of income for a tax year shall attach to the return or statement in lieu of Return the employer’s certificate received for each employment exercised by the employee in the year.

44 Certificate of deduction from salary.- (1) The certificate of deduction of tax to be furnished under section 164 by a person paying income chargeable under the head “Salary” shall be in the following form, namely:-

CERTIFICATE OF DEDUCTION OF TAX FROM INCOME CHARGEABLE UNDER THE HEAD “SALARY” UNDER SECTION 164 OF THE INCOME TAX ORDINANCE, 2001.
FOR THE PERIOD _______200__ TO 200__

 Tax Year _____________________
National Tax Number ____________
Designation ____________________
Address _______________________

PART I
1. Salary/Wages _______________________________
2. Special pay  _______________________________
3. Pension  _______________________________
4. Grautity/Annuity _______________________________
5. Leave encashment _______________________________
6. Honorarium/ Reward _______________________________
7. Fees/ Commission _______________________________
8. Bonus _______________________________
9. Compensatory allowance _______________________________
10. Dearness allowance  _______________________________
11. House rent allowance&n