Income Tax Ordinance, 2001 — Section 113: Minimum tax on the income of certain persons

1[113. Minimum tax on the income of certain persons.- (1) This section shall apply to a resident company,2[permanent establishment of a non-resident company,] 3[, an individual (having turnover of 4[ ] 5[hundred] million rupees or above in the tax year 6[2017] or in any subsequent tax year) and an association of persons (having turnover of 7[ ] 8[hundred] million rupees or above in the tax year 9[2017] or in any subsequent tax year)] where, for any reason whatsoever allowed under this Ordinance, including any other law for the time being in force

(a)loss for the year;

(b)the setting off of a loss of an earlier year;

(c)exemption from tax;

(d)the application of credits or rebates; or

(e)the claiming of allowances or deductions (including depreciation and amortization deductions) no tax is payable or paid by the person for a tax year or the tax payable or paid by the person for a tax year is less than 10[ 11[the percentage as specified in column (3) of the Table in Division IX of Part-I of the First 1 Inserted by the Finance Act, 2009. 2 The expressions inserted through Finance Act, 2020 dated 30th June, 2020 3 Inserted by the Finance Act, 2010. 4 The word “fifty” substituted by the Finance Act, 2016. 5 The word “ten” substituted by the Finance Act, 2021. 6 The figure “2009” substituted by the Finance Act, 2016 7 The word “fifty” substituted by the Finance Act, 2016. 8 The word “ten” substituted by the Finance Act, 2021. 9 The figure “2007” substituted by the Finance Act, 2016 10 The word “one-half” substituted by the Finance Act, 2013. 11 The word “one per cent” substituted by the Finance Act, 2017. 216 Chapter IX – Minimum Tax Schedule] ] of the amount representing the person’s turnover from all sources for that year: 1[ ] 2[ 3[Explanation.-For the purpose of this sub-section, the expression “tax payable or paid” does not include

(a)tax already paid or payable in respect of deemed income which is assessed as final discharge of the tax liability under section 169 or under any other provision of this Ordinance; and

(b)tax payable or paid under section 4B 4[or 4C]. ]

(2)Where this section applies:

(a)the aggregate of the person’s turnover as defined in sub-section

(3)for the tax year shall be treated as the income of the person for the year chargeable to tax 5[. Explanation.—For the removal of doubt, it is clarified that the definition of turnover covers receipts from all business activities in line with expression “ turnover from all sources” used in sub section (1) including but not limited to receipts from sale of immoveable property where such receipt is taxable under the head Income from Business;]

(b)the person shall pay as income tax for the tax year (instead of the actual tax payable under this Ordinance), 6[minimum tax computed on the basis of rates as specified in Division IX of Part I of First Schedule]; Chapter IX – Minimum Tax

(c)where tax paid under sub-section (1) exceeds the actual tax payable under Part I,1[clause (1) of Division I, or] Division II of the First Schedule, the excess amount of tax paid shall be carried forward for adjustment against tax liability under the aforesaid Part of the subsequent tax year: 2[Provided that if tax is paid under sub-section (1) due to the fact that no tax is payable or paid for the year, the entire amount of tax paid under sub-section (1) shall be carried forward for adjustment in the manner stated aforesaid: Provided further that the amount under this clause shall be carried forward and adjusted against tax liability for 3[ ] 4[two] tax years immediately succeeding the tax year for which the amount was paid.] 5[Explanation. – For the removal of doubt it is clarified that the aforesaid Part referred to in this clause means clause (1) of Division I or Division II of Part I of the First Schedule.]

(3)“turnover” means,

(a)the 6[gross sales or] gross receipts, exclusive of Sales Tax and Federal Excise duty or any trade discounts shown on invoices, or bills, derived from the sale of goods, and also excluding any amount taken as deemed income and is assessed as final discharge of the tax liability for which tax is already paid or payable;

(b)the gross fees for the rendering of services for giving benefits including commissions; except covered by final discharge of tax liability for which tax is separately paid or payable;

(c)the gross receipts from the execution of contracts; except covered by final discharge of tax liability for which tax is separately paid or payable; and 1 Inserted by the Finance Act, 2013. 2 The proviso substituted by the Finance Act, 2021. The substituted proviso read as follows: “Provided that the amount under this clause shall be carried forward and adjusted against tax liability for 2[five] tax years immediately succeeding the tax year for which the amount was paid.” 3 The word “five” substituted by the Finance Act, 2022. 4 The word “three” substituted by the Finance Act, 2025. 5 The explanation added by the Finance Act, 2023. 6 Inserted by the Finance Act, 2011. 218 Chapter IX – Minimum Tax

(d)the company’s share of the amounts stated above of any association of persons of which the company is a member.] 1[2[ ]] 3[ ] 1 Section 113A substituted by the Finance Act, 2013. The substituted section 113A read as follows: “113A. Tax on Income of certain persons. — (1) Subject to this Ordinance, where a retailer being an individual or an association of persons has turnover upto rupees five million for any tax year, such person may opt for payment of tax as a final tax at the rates specified in Division IA of Part I of the First Schedule.

(2)For the purposes of this section,

(a)“retailer” means a person selling goods to general public for the purpose of consumption;

(b)“turnover” shall have the same meaning as assigned to it in sub-section (3) of section 113.

(3)The tax paid under this section shall be a final tax on the income arising from the turnover as specified in sub-section (1). The retailer shall not be entitled to claim any adjustment of withholding tax collected or deducted under any head during the year.” 2 Section 113A omitted by the Finance Act, 2016. The omitted section 113a reads as follows: “113A. Minimum tax on builders.— (1) Subject to this Ordinance, where a person derives income from the business of construction and sale of residential, commercial or other buildings, he shall pay minimum tax at the rates as the Federal Government may notify in the official Gazette. The Federal Government may also specify the mode, manner and time of payment of such amount of tax.

(2)The tax paid under this section shall be minimum tax on the income of the builder from the sale of such residential, commercial or other building.] 2[“(3) This section shall not have effect till the 30th June, 2018.”]” 3 Section 113B substituted by the Finance Act, 2013. The substituted section 113B read as follows: “113B. Taxation of income of certain retailers. — Subject to this Ordinance, a retailer being an individual or association of persons,

(a)whose turnover exceeds five million rupees; and

(b)who is subject to special procedure for payment of sales tax under Chapter II of the Sales Tax Special Procedures Rules, 2007, shall pay final tax at the following rates which shall form part of single stage sales tax as envisaged in the aforesaid rules; S.No. Amount of turnover Rate of tax Chapter IX – Minimum Tax 1[ ]