Understanding Pension Tax in Pakistan

This article delves in the taxability of pension income;

• Taxable Situations:Double Dipping:?Pensions are taxable if you receive them from two places while still being employed (government or private) in either of those places. This applies even if the companies are associated.Multiple High-Value Pensions: If you receive more than one pensions, only the higher pension is exempt from tax. The remaining pension(s) will be taxable.

Exemptions:

• Age:?Individuals above 60 years old are exempt from the double-dipping and multiple pension tax rules.
• Circular 28 of 1991:?This circular clarifies that pensions are not taxable unless they fall under the double-dipping or multiple pension scenarios mentioned above.

Example:

• Mr. Khan retired from a government job at 62 years old and receives a pension of Rs. 1.5 million annually. He is not employed anywhere else. Mr. Khan's pension is not taxable due to his age exemption.
• Ms. Ali retired from a private company at 58 years old and receives a pension of Rs. 1 million annually. She then starts working part-time at a the associated company of past employer. Ms. Ali's pension will be taxable since she's under 60 and still employed.

Important Note:

• Tax laws and regulations can change. It's advisable to consult us for the latest information and specific advice regarding your situation.
• Remember, this article provides a general overview. Always seek professional advice for your specific circumstances.This article was published at When Pension Income becomes Taxable?