A tax year in Pakistan is a period of twelve months for which the income of a person or entity is taken for the purpose of taxation and filing income tax returns.
The term Tax Year was introduced in Pakistan in the Income Tax Ordinance 2001. Previously, in the ordinance of 1979, the concept of the income year and assessment year was used to determine the period for which income was declared and tax was assessed/paid. The base year for which the income was to be declared was termed as Income Year and the year subsequent to the Income Year where the process of filing of return and assessment of tax was to be done was termed as Assessment Year.
The system was a bit confusing while finalizing documentation of the record and correspondence etc. which was later simplified by introducing the term Tax Year in the Income Tax Ordinance 2001.
Normal Tax Year
A normal tax year in Pakistan is a period of twelve months ending on the 30th of June. The tax year is denoted by the calendar year in which the said date falls for determination. For example, for 30th June 2022, the tax year will be taken as Tax Year 2022.
Special Tax Year
Suppose the income year of a taxpayer is different from the normal tax year, or a person has been allowed to use a period of twelve months as a tax year that is different from the normal tax year. In that case, such period is termed a special tax year and it is denoted as the calendar year in which the closing month falls.
The Commissioner of Income Tax may allow a person with a normal tax year to use a special tax year or a person with a special tax year to use a normal tax year on the request of a taxpayer with solid justification. The request of the person can be rejected if the Commissioner thinks that there is not sufficient justification for the purpose. Also, certain classes of persons can be allowed by notification in the official gazette to use a tax year other than the normal one.
Transitional Tax Year
In case when the tax year for a person or a class or persons has been changed, the period between the close of the previous year and the start of the next tax year is dealt with separately and is termed as ‘Transitional Tax Year’.