Section 80 of the Income Tax Ordinance, 2001 sets out the individuals, companies, associations, governments and legal arrangements treated as persons for income tax purposes.

ISLAMABAD: The Federal Board of Revenue (FBR) has clarified the definition of a “person” for income tax purposes for Tax Year 2027 under the Income Tax Ordinance, 2001.

According to the Income Tax Ordinance, 2001, updated up to June 30, 2026, Section 80 sets out the categories of persons recognised for income tax purposes.

The provision covers individuals, companies, associations of persons (AOPs), governments and certain other legal entities and arrangements.

Individuals, Companies and Governments

Under Section 80(1), the term “person” includes an individual, a company or association of persons incorporated, formed, organised or established in Pakistan or elsewhere.

It also includes:

• An individual;

• A company or association of persons (AOP) incorporated, formed, organised or established in Pakistan or elsewhere; and

• The Federal Government, a foreign government, a political sub-division of a foreign government, or a public international organisation.

The section further provides specific definitions for the terms used to determine which entities fall within the scope of a person for income tax purposes.

Association of Persons

Section 80(2)(a) provides that an association of persons includes a firm, Hindu undivided family, artificial juridical person, limited liability partnership and any body of persons formed under foreign law.

However, a company is excluded from the definition of an association of persons.

The provision therefore distinguishes between companies and other collective arrangements that may be treated as AOPs for tax purposes.

What Constitutes a Company

The definition of a company under the Income Tax Ordinance extends beyond entities incorporated under the Companies Act, 2017.

It includes:

• A company as defined under the Companies Act, 2017;

• A body corporate formed by or under any law in force in Pakistan;

• A modaraba;

• A body incorporated under the law of a country outside Pakistan relating to the incorporation of companies;

• A co-operative society, finance society or any other society;

• A non-profit organisation;

• A trust, entity or body of persons established or constituted under any law in force;

• A foreign association, whether incorporated or not, that the FBR has declared to be a company through a general or special order;

• A Provincial Government;

• A Local Government in Pakistan; and

• A Small Company as defined under Section 2 of the Income Tax Ordinance.

This broad definition brings various corporate, governmental, non-profit and other legal structures within the scope of the term “company” for income tax purposes.

Definition of Firm

Section 80 also defines a firm as the relationship between persons who have agreed to share the profits of a business carried on by all of them, or by any one or more of them acting for all.

The definition covers business arrangements in which two or more persons jointly participate in a business and agree to share its profits.

Trust and Unit Trust

The Ordinance defines a trust as an obligation attached to the ownership of property that arises from confidence placed in and accepted by the owner, or declared and accepted by the owner, for the benefit of another person or the owner and another person.

The definition expressly includes a unit trust.

A unit trust is defined as a trust in which beneficial interests are divided into units, with beneficiaries’ entitlement to income or capital determined according to the number of units they hold.

Scope of ‘Person’ for Tax Year 2027

Through Section 80, the Income Tax Ordinance, 2001 establishes a broad framework for identifying the individuals, businesses, organisations, governments and legal arrangements that are treated as persons for income tax purposes.

The definition is significant because determining whether an individual or entity falls within the scope of “person” is fundamental to the application of various provisions of the Income Tax Ordinance for Tax Year 2027.