Income Tax Ordinance, 2001 — Section 5: Tax on dividends

5. Tax on dividends.— (1) Subject to this Ordinance, a tax shall be imposed, at the rate specified in Division III of Part I of the First Schedule, on every person who receives a dividend from a 3[ ] company 4[or treated as dividend under clause

(19)of section 2].

(2)The tax imposed under sub-section (1) on a person who receives a dividend shall be computed by applying the relevant rate of tax to the gross amount of the dividend.

(3)This section shall not apply to a dividend that is exempt from tax under this Ordinance. 1 The words “and Seventh” substituted by the Finance Act, 2023. 2 The sub-section (5A) inserted by the Finance Act, 2023. 3 The word “resident” omitted by the Finance Act, 2003. 4 Inserted by the Finance Act, 2009. 35 Chapter II – Charge of Tax 1 [5A. Tax on undistributed profits.—(1) For tax 2[years 2017 to 2019], a tax shall be imposed at the rate of 3[five] percent of its accounting profit before tax on every public company, other than a scheduled bank or a modaraba, that derives profit for a tax year but does not distribute at least 4[twenty] percent of its after tax profits within six months of the end of the tax year through cash 5[ ]: Provided that for tax year 2017, bonus shares or cash dividends may be distributed before the due date mentioned in sub-section (2) of section 118, for filing of a return.

(2)The provisions of sub-section (1) shall not apply to

(a)a company qualifying for exemption under clause (132) of Part I of the Second Schedule; and

(b)a company in which not less than fifty percent shares are held by the Government.]