Section 42 of the Income Tax Ordinance, 2001 provides tax exemption on income of the diplomatic and United Nations (UN) personnel serving in Pakistan.
Issued by the Federal Board of Revenue (FBR) and updated up to June 30, 2021, this section underscores the nation’s commitment to respecting international bindings and privileges bestowed upon individuals serving in diplomatic and UN capacities.
The text of Section 42 of the Income Tax Ordinance, 2001 elucidates the tax exemptions provided:
“42. Diplomatic and United Nations exemptions. — (1) The income of an individual entitled to privileges under the Diplomatic and Consular Privileges Act, 1972 (IX of 1972) shall be exempt from tax under this Ordinance to the extent provided for in that Act.
(2) The income of an individual entitled to privileges under the United Nations (Privileges and Immunities) Act, 1948 (XX of 1948), shall be exempt from tax under this Ordinance to the extent provided for in that Act.
(3) Any pension received by a person, being a citizen of Pakistan, by virtue of the person’s former employment in the United Nations or its specialized agencies (including the International Court of Justice) provided the person’s salary from such employment was exempt under this Ordinance.”
Section 42 sets forth a clear framework for tax exemptions for individuals entitled to privileges under the Diplomatic and Consular Privileges Act, 1972, and the United Nations (Privileges and Immunities) Act, 1948. It encompasses not only the current income of individuals with these entitlements but also extends the exemption to pensions received by Pakistani citizens for their past service in UN or specialized agencies, ensuring continuity of tax relief.
The Finance Act, 2021, which introduced amendments to the Income Tax Ordinance, 2001, did not alter the fundamental provisions of Section 42. This reaffirms the stability and continuity of tax exemptions granted to diplomatic and UN personnel.
The disclaimer accompanying the text of Section 42 emphasizes the informative nature of the information and clarifies that the team is committed to providing accurate versions of the text while not assuming responsibility for errors or omissions.
Tax experts applaud Section 42 for recognizing the unique status and privileges accorded to diplomatic and UN personnel. By providing tax exemptions in line with international agreements, the legislation ensures that individuals serving in these capacities are not burdened by local income tax obligations.
Section 42 of the Income Tax Ordinance, 2001 exemplifies a commitment to honoring international obligations and recognizing the privileges granted to diplomatic and UN personnel. By providing tax exemptions on their income and pensions, the provision acknowledges the unique status of these individuals and underscores the nation’s dedication to fostering positive diplomatic relations and upholding international commitments.
