Wealth Statement, Property & Overseas Pakistanis: Frequently Asked Questions
9 questions and answers on Pakistani tax law. Use the search box to find your question.
9 questions
What is Form 116 Wealth Reconciliation and why is it mandatory?
Form 116 Wealth Statement Reconciliation is a statutory requirement under Section 116 of the Income Tax Ordinance. It matches your closing net worth against your opening net worth, declared taxable and exempt income, foreign remittances, and annual personal living expenses. An unreconciled discrepancy leads to FBR audit notices under Section 111 (unexplained income/assets) with tax penalties up to 100%.
How does Section 7E Deemed Income Tax on Immovable Property work?
Section 7E treats immovable property held by a resident person as earning a deemed rental income equal to 5% of its FBR fair market value. This deemed rental income is taxed at 20%, resulting in an effective tax of 1% on the total property value. Exemptions apply for one self-owned residential property, agricultural land, property owned by martyrs/dependents, and plots valued under PKR 25 million.
Are Overseas Pakistanis subject to Income Tax on foreign income?
No. Under Section 82 of the Income Tax Ordinance 2001, if a Non-Resident Pakistani (NRP) stays outside Pakistan for 183 days or more during a tax year, their foreign-sourced salary, business earnings, and investments are 100% exempt from tax in Pakistan. Furthermore, foreign remittances sent through official banking channels under Section 111(4) cannot be questioned by FBR.
What is the reduced tax rate for IT exporters and freelancers under Section 154A?
IT exporters, software houses, and freelancers who export computer software, IT services, or IT-enabled services (ITeS) qualify for a concessional 0.25% final withholding tax rate on foreign proceeds under Section 154A, provided they are registered with PSEB (Pakistan Software Export Board) and receive funds in foreign currency bank accounts.
How does Section 103 Foreign Tax Credit prevent double taxation on overseas income?
Section 103 allows resident taxpayers in Pakistan deriving foreign-sourced income to claim a foreign tax credit equal to the lesser of the actual foreign tax paid abroad or the average Pakistani tax rate applicable to that net foreign income.
How does Clause (9A) reduce capital gains tax for ex-servicemen and government employees?
Clause (9A) of Part III Second Schedule reduces capital gains tax on the first sale of property allotted to ex-servicemen, serving Armed Forces personnel, and civil servants by 50% for immediate sale, or by 75% if sold after 3 years from acquisition.
How are builders and developers taxed under Section 7F?
Section 7F levies a simplified fixed final tax on builders and developers based on the square footage or square yardage of residential or commercial projects. No expense deductions or loss set-offs are allowed under Section 7F(3).
Q11: Are members of an AOP required to file a Wealth Statement?
Yes. Under the Proviso to Section 116(2), every member of an AOP must submit a Wealth Statement and Wealth Reconciliation Statement along with their return of income.
Read the full guide: AOP Taxation in Pakistan: Section 88 & 92 Guide →
Q20: How is a member's interest in an AOP valued for wealth reconciliation?
Under Rule 105 / Rule 13(e) of the Income Tax Rules, 2002, a member's interest is valued as {A + B}, where {A} is capital contributed, and {B} is the member's proportional share in net assets in excess of capital.
Read the full guide: AOP Taxation in Pakistan: Section 88 & 92 Guide →
General information only, based on Pakistani tax law at the time of writing. It is not tax advice. See our disclaimer.
Speak with a tax advisor
Tell us about your matter. We will tell you what is required and what happens next.