The following are the constituents of income tax law in Pakistan:

1) The Legislative Law, i.e. The Income Tax Ordinance, 2001.

2) The Procedural Law, i.e. The Income Tax rules, 2002.
3) The notifications, circulars etc. issued by the FBR.
4) The case law
5) Finance Acts or Ordinances.
1) Income Tax Ordinance, 2001:
Income Tax Ordinance, 2001 is the basic component of income tax law in Pakistan. All the
income tax law revolves around the Income Tax Ordinance, 2001. All matters of taxation
regarding computation of taxable income, computation of tax liability, payment of tax,
recovery of tax, appeals, refund, penalties and prosecution etc. have been discussed in the
Ordinance. The Income Tax Ordinance, 2001 has 240 sections which have been discussed
in 13 chapters. Each chapter deals with a particular subject and has been divided into parts.
Many parts have been further subdivided into divisions. There are also Seven Schedules of
the Income Tax Ordinance, 2001. Each Schedule deals with a particular subject and has
been divided into parts. Some parts are further subdivided into divisions. Schedules are also
treated as part of the Ordinance.
2) Income Tax Rules:
The FBR being the regulatory body and the highest income tax executive authority in
Pakistan is empowered to make rules regarding the procedural matters connected with the
implementation of the concerned laws like the Income Tax Ordinance, 2001. These rules are
made for the guidance of its officials as well as the tax payers. The FBR under the authority
of section 237 of the Income Tax Ordinance, 2001 made the Income Tax Rules, 2002. These
rules were published on July1, 2002 in Extraordinary Gazette of Pakistan at pages 1819 to
1966. Income tax rules have the same force as the sections in the Income Tax Ordinance
and such are implemented in the same manner.
3) Notifications, Instructions, Orders, SROs etc.:
Notifications, instructions, orders, SROs etc. are issued by the FBR u/s 206 of the Income
Tax Ordinance, 2001 for the guidance of its officials. Similarly, the Federal Government is
also empowered u/s 53 of the Income Tax Ordinance, 2001 to exempt certain types of
Income or specific persons from income tax and to prescribe special reduced rates for
certain persons or allow a reduction in tax liability by making amendments to the Second
Schedule to the Ordinance. Such amendments are usually made by way of statutory
Regulatory Orders (SROs) issued by the Federal Government by notification in the official
gazette. However, all such amendments during a particular financial year have to be placed
before the national Assembly at the end of that year.
4) Income Tax Case Law:
Different disputes arises in respect of rendering the income tax under the taxable limits,
assessment of persons, payment and recovery of tax, refunds etc. brought about before the
competent authorities for decision in respect of above-mentioned disputes. When such
disputes are decided, these decisions are not only help in setting the present disputes but
also for future decisions and reference to such decisions is subsequently made in order to
get necessary guidance.
5) Finance Acts or Ordinances:
In order to fulfill the budgetary requirements and other social and economic needs of the
country, some important amendments are made in the prevailing income tax ordinance every
year. Such changes should be approved by the assembly, if Assembly is not in existence,
President of Pakistan shall approve these changes. If such annual changes are approved by
the National Assembly, are called Finance Act and if these are approved by President, are
called Finance Ordinance. Finance Act or Ordinance is presented for the guidance regarding
procedure of the computation, assessment and administration etc. for the coming tax year.
For example, Finance Act, 2008 was used to compute taxable income, tax liability etc. of tax
year 2009.