Income Tax Ordinance, 2001 — Section 53: Exemptions and tax concessions in the Second Schedule

53. Exemptions and tax concessions in the Second Schedule.—(1) The income or classes of income, or persons or classes of persons specified in the Second Schedule shall be

(a)exempt from tax under this Ordinance, subject to any conditions and to the extent specified therein;

(b)subject to tax under this Ordinance at such rates, which are less than the rates specified in the First Schedule, as are specified therein;

(c)allowed a reduction in tax liability under this Ordinance, subject to any conditions and to the extent specified therein; or

(d)exempted from the operation of any provision of this Ordinance, subject to any conditions and to the extent specified therein. 1[ ]

(2)The 2[Federal Government or the] 3[ ] 4[ ] 5[ ] 6[Board with the approval of the Federal Minister-in-charge may, from time to time, pursuant to the approval of the Economic Coordination Committee of the Cabinet] whenever circumstances exist to take immediate action for the purposes of national security, natural disaster, national food security in emergency situations, protection of national economic interests in situations arising out of abnormal fluctuation in international commodity prices, 7[ ] 8[,] implementation of bilateral and multilateral agreements from the operation of ships and aircraft in international traffic shall be exempt from tax under this Ordinance, other than income from ships and aircraft operated principally to transport passengers, livestock, mail, or goods exclusively between places in Pakistan.

(2)Sub-section (1) shall not apply to a non-resident person where the person’s country of residence does not allow a similar exemption to a resident of Pakistan.” 1 Sub-section (1A) omitted by the Finance Act, 2012. The omitted sub-section (1A) read as follows: “(1A) Where any income which is exempt from tax under any provision of the Second Schedule, such income, as may be specified in the said Schedule and subject to such conditions as may be specified therein, shall be included in the total income, however the tax shall not be payable in respect of such income.” 2 Inserted by the Finance Act, 2022. 3 the expression “Federal Government” substituted by Finance Act, 2017. 4 Inserted by the Finance Act, 2015. 5 The expression “Board with the approval of Federal Minister-in-charge may, from time to time pursuant to the approval of the Economic Coordination Committee of Cabinet, ” substituted by the Finance Act, 2018. 6 The words “Federal Government may” substituted by the Finance Act, 2021. 7 The words “removal of anomalies in taxes, development of backward areas” omitted by Finance Act, 2019. 8 Inserted by the Finance Act, 2016. 105 Chapter III – Tax on Taxable Income 1[or granting an exemption from any tax imposed under this Ordinance including a reduction in the rate of tax imposed under this Ordinance or a reduction in tax liability under this Ordinance or an exemption from the operation of any provision of this Ordinance to any international financial institution or foreign Government owned financial institution operating under an agreement, memorandum of understanding or any other arrangement with the Government of Pakistan] ], by notification in the official Gazette, make such amendment in the Second Schedule by

(a)adding any clause or condition therein;

(b)omitting any clause or condition therein; or

(c)making any change in any clause or condition therein, as the Government may think fit, and all such amendments shall have effect in respect of any tax year beginning on any date before or after the commencement of the financial year in which the notification is issued.

(3)The Federal Government shall place before the National Assembly all amendments made by it to the Second Schedule in a financial year. Chapter III – Tax on Taxable Income

(b)a reduction in the rate of tax imposed under this Ordinance;

(c)a reduction in tax liability of any person under this Ordinance; or

(d)an exemption from the operation of any provision of this Ordinance, shall have legal effect unless also provided for in this Ordinance 1[.] Chapter III – Tax on Taxable Income PART VIII LOSSES