The surcharge applies to individuals and associations of persons, while salaried individuals are specifically exempt under Section 4AB.
ISLAMABAD: Individuals and associations of persons with taxable income exceeding Rs10 million will be subject to a 10 percent surcharge on income tax for Tax Year 2027 under the Income Tax Ordinance, 2001.
The provision forms part of the legal framework governing the charge and collection of income tax and sets out an additional liability for taxpayers falling within the specified income threshold.
10% Surcharge Above Rs10 Million
Under Section 4AB of the Income Tax Ordinance, 2001, a 10 percent surcharge is payable by every individual and association of persons whose taxable income exceeds Rs10 million.
The surcharge is calculated on the income tax imposed under Division I of Part I of the First Schedule of the ordinance.
This means the surcharge is applied to the income tax liability rather than directly to the taxpayer’s taxable income.
For example, where the applicable income tax liability is Rs1 million, a 10 percent surcharge would amount to Rs100,000, subject to the provisions of the law.
Salaried Individuals Exempt
The law specifically provides an exemption from the surcharge for an individual deriving income chargeable under the head “Salary”.
Consequently, salaried individuals are excluded from the 10 percent surcharge under Section 4AB even where their taxable income exceeds Rs10 million.
The distinction means that the surcharge primarily applies to qualifying individuals with taxable income from sources other than salary, as well as associations of persons meeting the specified income threshold.
How Income Tax Is Calculated
Under the provisions governing the charge of tax, income tax is imposed for each tax year on every person having taxable income at the rates specified in the First Schedule of the Income Tax Ordinance.
The tax payable is determined by applying the applicable tax rate to taxable income and then deducting eligible tax credits.
The ordinance establishes a specific sequence for applying multiple tax credits.
A foreign tax credit under Section 103 is applied first, followed by tax credits available under Part X of Chapter III and then credits available under Sections 147 and 168.
Separate and Final Tax Regimes
Certain categories of income may be subject to separate taxation or final taxation through tax collection or deduction mechanisms provided under the ordinance.
Where the relevant provisions apply, such income is not included in the computation of taxable income for the purposes specified by the law.
The overall framework therefore distinguishes between income subject to the normal tax regime and income covered by separate or final taxation provisions.
Tax Deduction and Advance Payment Requirements
The ordinance also requires tax to be deducted at source, collected or paid in advance where applicable.
Taxpayers and withholding agents must comply with the relevant provisions governing the timing and manner of tax deduction, collection and payment.
The Section 4AB surcharge forms part of the broader income tax framework applicable for Tax Year 2027, with the specific exemption for salaried individuals clearly provided under the law.