When Pension Income becomes Taxable?

This article clarifies the tax rules for pensions in Pakistan.

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Taxable Situations:

  • Double Dipping: Your pension is taxable if you receive a pension and continue working (including contractual work) for the same company or a subsidiary.
  • Multiple Pensions: If you receive pensions from two or more unrelated employers, the higher pension is exempt, and the rest is taxable.

Exemptions:

  • Age Exemption: Individuals above 60 years old are exempt from the double-dipping and multiple pension tax rules.
  • Circular No. 28 of 1991: This circular clarifies that pensions are not taxable unless they fall under the double-dipping or multiple pension scenarios.

Example:

  • Mr. Ali receives a pension of Rs. 2.5 million from Company A and starts consulting for them on a contract basis. In this case, Mr. Ali’s pension would be taxable because he is double-dipping.
  • Ms. Fatima receives a pension of Rs. 1.8 million from Company B and Rs. 2.2 million from Company C. Since the combined amount is less than Rs. 3 million, Ms. Fatima’s pensions are not taxable.

Conclusion:

It’s important to stay informed about tax regulations. the double-dipping and multiple pension scenarios are the only situations where pensions are taxable in Pakistan, with exemptions for senior citizens.

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8 Comments

    1. NadeeAhmed Siddiqui says:

      Iam 73 yrs and receiving pemsion from bnly one organization I am not working else where i my monthly pension is 168947 is my pension taxable

  1. Nadeem Ahmed Siddiqui says:

    Iam 73 yrs receiving pension from WAPDA only not working elsewheremy monthly pension is168947 till june 30 3024 id this prnsion tsxabl?

  2. If a person is 70 years of Age, Receives 3 pensions, one from Armed forces, one from EOBI and third from anothe rcompany.
    But total of all is approximately 1000000 in a year. my questions are:
    Is there any impact of double dipping here.
    what is max limit of pension income exemption.

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