Section 142 of the Income Tax Ordinance, 2001 allows the Federal Board of Revenue to recover tax payable on a non-resident member’s share of AOP profits from the association or a resident member.
ISLAMABAD: The Federal Board of Revenue (FBR) has explained the rules governing the recovery of income tax payable by non-resident members of an Association of Persons (AOP) for tax year 2027.
According to the Income Tax Ordinance, 2001, updated up to June 30, 2026, Section 142 sets out the mechanism for recovering tax due on a non-resident member’s share of the profits of an AOP.
The provision applies to tax year 2027, which runs from July 1, 2026, to June 30, 2027.
Tax recovery from non-resident AOP members
Under Section 142(1), tax payable by a non-resident member on their share of an association’s profits may be assessed in the name of the AOP or any resident member of the association.
The outstanding tax may be recovered from the assets of the association or directly from a resident member personally. This provision establishes a recovery mechanism where the tax liability relates to a non-resident member’s share of AOP profits.
Protection for persons making tax payments
Section 142(2) provides legal protection to any person making a payment under this provision.
A person making the payment is treated as acting under the authority of the non-resident member. The law also indemnifies that person against civil or criminal proceedings and judicial or extra-judicial processes arising in connection with the payment, notwithstanding any contrary provision in written law, a contract or an agreement.
Application of tax recovery provisions
Under Section 142(3), the provisions of the Income Tax Ordinance, 2001 apply to any amount due under this section as if it were tax payable under an assessment order.
The provision therefore establishes a statutory basis for recovering the outstanding amount under the tax recovery framework of the Ordinance.
The clarification forms part of the FBR’s updated Income Tax Ordinance, 2001, which provides the applicable legal framework for income tax matters during tax year 2027.