Taxpayers who have paid more income tax than their actual liability can claim a refund under Section 171 of the Income Tax Ordinance, 2001, while eligible refunds may also be processed electronically under Section 170A.
Taxpayers who have paid income tax in excess of their actual liability are entitled to claim a refund during Tax Year 2027, subject to the conditions prescribed under Pakistan’s income tax law.
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The Federal Board of Revenue (FBR) has issued the Income Tax Ordinance, 2001, updated up to June 30, 2026, for Tax Year 2027, covering the period from July 1, 2026, to June 30, 2027.
Under Section 171 of the Ordinance, a taxpayer who has paid more tax than the amount properly chargeable may apply to the Commissioner for a refund of the excess amount.
The application must be submitted in the prescribed form and verified in the required manner. It must be filed within three years of the later of the date on which the Commissioner issued the relevant assessment order or the date on which the tax was paid.
The law also provides relief where an advance or loan treated as a dividend under the relevant provisions is repaid. In such cases, the taxpayer may be entitled to a refund of tax paid as a result of that treatment.
Once satisfied that excess tax has been paid, the Commissioner must first adjust the amount against any other tax payable under the Ordinance. Any remaining balance may be applied towards outstanding liabilities for other taxes, with the remainder refunded to the taxpayer.
Under Section 171, the Commissioner must issue a written decision within 60 days of receiving the refund application, after giving the taxpayer an opportunity to be heard.
Taxpayers aggrieved by the decision, or by the failure to issue an order within the prescribed period, may file an appeal under the relevant provisions of the Ordinance.
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Separately, Section 170A authorises the FBR to process and issue refunds electronically from Tax Year 2021 onwards, without requiring a separate application, to the extent of tax credits verified through its computerised system. Approved refunds are transferred electronically to the taxpayer’s notified bank account.
The provisions provide a legal mechanism for recovering excess tax payments and facilitate the electronic processing of eligible refunds.