Section 169 of the Income Tax Ordinance, 2001, outlines the treatment of final taxes, restrictions on deductions and refunds, and adjustments for taxpayers filing returns.
The Federal Board of Revenue (FBR) has outlined rules governing tax collected or deducted as a final tax under Section 169 of the Income Tax Ordinance, 2001, for Tax Year 2027.
According to the ordinance, updated up to June 30, 2026, Tax Year 2027 covers the period from July 1, 2026, to June 30, 2027.
RED MORE: FBR requires banks to report accounts with Rs100 million in deposits or withdrawals
Section 169 applies to specified income streams on which tax collected or deducted is treated as a final tax, including certain transactions covered by sections 152, 152A, 154A, 154B, 156, 156A and 236Z.
Under the provision, income subject to final taxation is excluded from the computation of taxable income under the relevant heads. Taxpayers cannot claim deductions for expenditure incurred to earn that income, apply deductible allowances or set off losses against it. The tax deducted also cannot be reduced by tax credits available under the ordinance.
Refunds of final tax collected or deducted are generally not allowed unless the amount collected exceeds the tax liability prescribed under the ordinance.
Where tax has not been deducted or has been deducted at a lower rate than required, the shortfall may be recovered under Section 162, with the relevant recovery provisions applying accordingly.
Section 169 also addresses taxpayers whose entire income for a tax year is subject to final taxation under the specified provisions or sections 5, 6 and 7. In such cases, an assessment is treated as having been made under Section 120. The Commissioner is deemed to have assessed the income and tax payable at the amounts specified in the return, which is treated as an assessment order for the purposes of the ordinance.
The provision further clarifies the treatment of final tax where a 100 per cent higher rate has been prescribed under the Tenth Schedule for persons not appearing on the Active Taxpayers List (ATL).
In such cases, the final tax is determined at the rate prescribed in the First Schedule. The excess tax collected under the Tenth Schedule may be adjusted if the taxpayer files a return before the assessment is finalised, subject to Rule 4 of the Tenth Schedule.
These provisions establish the tax treatment of specified income streams subject to final taxation during Tax Year 2027.