Tax Book 2023

Taxation System Chapter- 01

Sr. No. TOPICS COVERED

1. History of tax laws in Pakistan


2. Introduction to different taxation laws of Pakistan


3. Basics of taxation laws


4. Objectives of tax laws

(FOR CAF-^6 ,^ MODULE F & ICMAP STUDENTS)^

1. HISTORY OF TAX LAWS IN PAKISTAN

1 .1 History of tax laws in Pakistan

In undivided India (now consisting of Pakistan, Bangladesh and India) income tax was

introduced for the first time in the year 1860. It was introduced by Income Tax Act, 1860 and

exactly the same pattern was followed that was prevailing in those days in the United Kingdom.

This Act came into force on July 31, 1860 and continued for only five (5) years upto 01- 08 - 1865

when it was completely withdrawn. A major characteristic of this Act was that the agricultural

income from land, above the rental value of RS.600 per annum, was taxable.

In Pakistan, Federal Government is empowered to levy and collect tax on the income of a

person other than the income taxable in the domain of the respective Provincial Governments.

Later on some of the provinces imposed general income tax on traders being as Income Tax

Act of 1886. This Act of 1886 was a great improvement on earlier enactments. Its basic

scheme, by and large, survives till today. It introduced the definition of “agricultural income”

which is almost the same as in the income tax ordinance 2001. This Act continued in force for

32 years till 1918.

The 1918 Act consolidated a number of wartime amendments. A graduated super tax on

income over Rs.50,000 and on the undistributed profits of the corporation and other entities was

introduced by the Super Tax Act of 1917 and continued in force through modifications by the

Super Tax Act of 1920. The Income Tax Act and the Super Tax Act were later on consolidated

in another Act i.e. the Income Tax Act of 1922.

After independence from British rule on 14- 08 - 1947, the Pakistan Government adopted the

Income tax Act, 1922, as amended upto that date. The provisions of the Act were extended to

the whole of Pakistan except the special areas. The Income tax Act 1922 continued for 57 years

till 1979. Due to a number of changes the Government has faced difficulties in its

implementation the Government introduced Income tax Ordinance, 1979.

The job of improving the law continued after the promulgation this Ordinance through National

Tax Reforms Commission in 1985. The commission suggested that Income Tax Ordinance

TAXATION SYSTEM

1

Chapter