Al-Muhasib & Co. Corporate Consultant

Al-Muhasib & Co. Corporate Consultant Al-Muhasib & Co. is a Chartered Accountants, tax and Corporate Consultant firm.

16/03/2026

What happned when you file a tax retun!

When you press the Submit button while filing your tax return, all your data is immediately sent to the FBR’s IRIS system. After this, an important step begins.

The tax officer usually does not see what information have been provided in the filed tax returns. His main responsibility is to reconcile the information declared in the tax returns and already available with the FBR.

Have you hidden any income or transactions?
What are your bank transactions?
What are your electricity bills, credit/debit card expenses?
What are your travel records and other financial information?

All this information is already present in the FBR’s system from various sources. If there is a difference between your return and the available data, the system automatically shows the discrepancy.

After this, usually:

A notice for clarification may be issued first (e.g. under Section 111)
You are given an opportunity to respond and revise the tax returns
But if the matter is serious, a notice may also be issue under Section 122(9).
After this the taxpayers cannot revise wealth statement
Therefore, as a taxpayer or advisor, we should remember to:

✅ Reconcile all information thoroughly before filing the return.
✅ Cross-check banking, utility bills and other financial records.
✅ Disclose only information that is documented and explainable.

15/03/2026

Company registration in Pakistan has now become a bit easier and many people are registering their companies with the Securities and Exchange Commission of Pakistan.

According to the report of the SECP, two to two and a half thousand companies are registered, but many of these companies are only paper companies.

In practice, they are either closed or there is no specific business there.

Many people also register their companies because foreign clients coming from abroad usually like to deal with those who have a regular registered company in Pakistan.

But companies must file annual filing with SECP and FBR (also provide audited accounts when filing tax returns)



An alternative solution is the trade licence or business registration license for these startups same like in Dubai.

The audit and other compliance requirements are also relatively low, which makes it easier for business.

The real problem is that many people are not fully informed in advance about the compliances that will be required after company registration.

Often, when clients are told that there are so many compliances to be done with the company, they hesitate to register.

That is why some people do not tell these details to clients at the time of registration, and later after some time they are told that now you have to complete all these compliances.

14/03/2026

Declaration in Foreign Remittance and Income Tax Return An Important Question
If a brother sends dirhams from UAE / Dubai to his brother’s bank account in Pakistan, and the brother in Pakistan withdraws the money and gives it to his family or relatives, then the question arises that how should the person in whose account this money has come in Pakistan declare this transaction in his income tax return?
1️⃣ Tax status of foreign remittance
Amount remitted from abroad in Pakistan is called foreign remittance. If the amount:
Remitted to Pakistan in foreign currency and
Converts into Pakistani rupees through a bank
Then generally income tax is not applicable on it.
2️⃣ Position under Section 111
According to Section 111 of the Income Tax Ordinance:
If there is foreign remittance up to Rs. 5 million per year, then generally FBR does not question it.
If the amount exceeds 5 million, the FBR may seek clarification regarding the source.
3️⃣ How will the declaration be made in the income tax return?
Since this amount is not the income of the brother in Pakistan but only a transfer, therefore:
It will not be included in the return as Income.
Instead It will be shown as ‘’ Foreign Remittance” under Inflow in the Wealth Statement / Reconciliation.
Since This amount is not used by the recipient but in fact the amount is later given to the original beneficiary's family, so the same amount will be show as ''Adjustments in Outflows''
In this way, both Inflow and Outflow will be shown in the Wealth Statement and the transaction will be completely clear and declared.
✅ Important point:
If someone else's money comes into your account from abroad, do not show it as your income, but declare it correctly in the Wealth Statement

13/03/2026

At what value should property be reported in the wealth statement?

That is, should the property be shown at its purchase cost or at its current market value, as of the date the return is being filed
For example, if the return is being filed on June 30, 2025, should the market value as of June 30, 2025 be reported or the price at which the property was originally purchased?
A big mistake is often made here, especially when the property is acquired through inheritance or gift.
Many people report such property at zero value in the wealth statement, which is completely wrong.
As per Section 79 of the Income Tax Ordinance, if a property is acquired through gift, transfer or inheritance, it will be reported at the same value at which the original owner (Transferor / Donor) acquired the property.
For example:
If a person bought a property 10 years ago for Rs 10 lakh, and today the property is inherited by his sons while its current market value is Rs 50 lakh, then only Rs 10 lakh will be reported in the wealth statement and not Rs 50 lakh.
The practical effect of this comes later when the property is sold. Because capital gain is calculated as follows:
Capital Gain = Sale Price – Cost
If cost is written as Rs 10 lakh and the property is sold for Rs 50 lakh, then the capital gain will be Rs 40 lakh, on which more tax will have to be paid at the rate of about 15%.

If a zero value is reported, the entire sale value will be considered capital gain at the time of sale later and the higher sales tax will be payable.
The best approach is to:

If the original purchase document is available, then declared the property at that value.
And if no information is available then it should be reported at the average market value when the property was purchased in the past.

13/03/2026

AOP vs Company Differences in Income Tax Rates (Pakistan)
The comparison highlights that tax liability varies significantly depending on the legal structure of the business.
Sole Proprietorship / AOP is taxed under progressive slab rates, starting from 0% up to 35.9%. This structure is beneficial at lower income levels, but as income increases, the effective tax rate rises sharply, making it costly for high-profit businesses.
A Small Company enjoys a flat concessional tax rate of 20%, which results in substantially lower tax payable at higher income levels compared to AOPs and other companies. This makes the small company structure highly tax-efficient for growing businesses, provided eligibility conditions are met.
A company other than a Small Company is taxed at a flat rate of 29%, which is higher than AOP tax at lower income levels but more predictable and sometimes more efficient at very high incomes compared to the highest AOP slabs.
Conclusion:
For low-income businesses, AOP or sole proprietorship may be more tax-friendly.
For medium to high-income businesses, a Small Company structure offers the lowest tax burden.
Once a company no longer qualifies as a small company, the 29% corporate rate still provides certainty but at a higher tax cost.

12/03/2026

Taxation Rules for Resident and Non-Resident Persons
The taxation of an individual in Pakistan depends on whether he is a resident or a non-resident person.

✅ Resident Pakistani

A person who is considered a resident of Pakistan will be subject to tax in Pakistan on both his Pakistani source income and foreign source income, meaning that tax will be applicable on income earned from all over the world.

✅ Non-Resident Pakistani

A non-resident individual will be subject to tax only on income earned from Pakistani sources.
No tax is applicable in Pakistan on income earned abroad

📌 Definition of Resident Person

A person is generally considered to be a resident if he is present in Pakistan for at least 183 days during the tax year.

✅ Tax Credit Principle on Foreign Income

If a resident person receives income from abroad:
If tax has been paid abroad on salary, then there is no need to pay tax again in Pakistan
In case of any foreign income other than salary, Foreign Tax Credit is available in Pakistan.

📌 Tax Credit Formula

The tax credit will be equal to the lesser of the following two amounts:
Tax paid abroad
Tax payable in Pakistan on the same income

11/03/2026

Correct Classification of Assets, Revenue and their Tax Implications

Many accountants sometimes get confused on this important accounting issue and are unable to pass the correct accounting entry.

The fact is that the accounting treatment of any asset depends on its purpose.
For example, if a company has purchased a vehicle, its accounting entry will depend on the purpose for which the vehicle is being used.

If the vehicle is for the company’s own administration or business use, it will be classified as a non-current asset.
But if the company’s main business is buying and selling vehicles and it has a showroom, then the same vehicle will not be a non-current asset of the company but will be considered as stock-in-trade.
In such a case, when the vehicle is sold, it will not be subject to capital gains tax but will be treated as normal business income.

Similarly, if a company purchases a building, its treatment will also vary according to the purpose. If the building is for the company's own office or business use, or is purchased as an investment to be rented out or sold later, it will be included in non-current assets.

But if the company's main business is buying and selling or renting out real estate, then such a building will not be considered a non-current asset but stock-in-trade, because it is part of the company's normal business.

However, if the same building is brought into use by the company, then it will be treated as a non-current asset.
Remember that when an item is declared as a non-current asset, it is subject to depreciation, while stock-in-trade is not.
So the basic accounting principle is that if an asset is acquired with the intention of buying and selling it in the normal course of business of the company, it will be stock-in-trade and the applicable accounting standard is IFRS 15 (Revenue from Contracts with Customers).

And if it is for the company’s own use, such as a vehicle, building or equipment, it will be considered a non-current asset and depreciation will also be charged. Standard applicable is IAS 16 (Property, Plant & Equipment.

10/03/2026

The procedure in SECP for changing the address of a company is that if you want to change the address of the company within the same province, and are not changing the province.
For example, the current address of the company is in Lahore and you want to move it to Faisalabad then in this case, you only have to file the relevant form and this process is completed easily.

But if you want to move the address of the company from one province to another, for example, from Karachi to Peshawar, i.e. from Sindh to Khyber Pakhtunkhwa, then in this case it will be necessary to first pass and file a special resolution.
Through the special resolution, the registered office of the company will change the province and at the same time the memorandum and articles will be amended.
The change of address will be possible only after all these processes are approved.

08/03/2026

Basic Accounting Concepts - In Simple Words
It is very important to know some basic reports and terms to understand accounting.

1️⃣ What is a Ledger?
A ledger has complete details of any account head.
For example, if you look at the ledger of a bank account, it clearly shows:
How much money was credited and debited
Similarly, if you look at the ledger of a vendor or customer, you can see:
When did the opening balance start
How many transactions were made in a particular period

2️⃣ What is a Trial Balance?
A trial balance is actually a list of the closing balances of all the ledger accounts.
Debit balance on left side and Credit balance on the left side
If all entries are correct, the total of both debit and credit is equal.
If there is a difference, it means that there is an error in the debit or credit somewhere.

3️⃣ Financial Statements
Three basic statements are very important for any business:
🔹 Profit & Loss Account (Profit & Loss / Income Statement)
It shows the profit or loss of the business during a specific period (month or year) by subtracting: Sales and Expenses
It shows the operational performance of the business.
🔹 Balance Sheet
The balance sheet shows the overall financial position of the business, which includes:
Assets, Liabilities and Equity
All balances on the balance sheet are carried forward to the next year.
For example, the bank balance will show the amount that remains after all the activities from the beginning of the business to that date.
The net profit of the profit and loss account becomes part of Retained Earnings in the balance sheet.
For example:
If Retained Earnings in 2024 = 10 million
And Profit in 2025 = 1 million
Then Retained Earnings in the 2025 balance sheet will be = 11 million.
🔹 Cash Flow Statement
The cash flow statement shows:
How much cash actually came in
And how much cash went out
Because many entries in the profit and loss and balance sheet are also non-cash.
For example:
If an asset was valued at 1 lakh and was sold for 1.5 lakh:
Profit = 50 thousand
But cash receipts = 1.5 lakh
This difference is evident in the cash flow statement.
📌 Summary:
Ledger → Trial Balance → Financial Statements
This is a complete accounting chain that brings out the true financial picture of any organization.

In this case, the taxpayer filed withholding tax (WHT) statements late for Tax Year 2024. Because of this delay, the tax...
08/03/2026

In this case, the taxpayer filed withholding tax (WHT) statements late for Tax Year 2024.
Because of this delay, the tax department imposed a penalty of Rs. 275,000, even though the actual tax involved was only Rs. 13,315, which had already been fully paid by the taxpayer.
The taxpayer challenged this penalty before the Appellate Tribunal Inland Revenue of Pakistan.
The Tribunal noted that although the statements were filed late, the tax was deposited, so imposing such a heavy penalty was unfair.
The Tribunal also observed that penalties should not be used as a tool to generate revenue, especially when there is no loss to the government.
The tax authorities had imposed the penalty without proper judgment, simply in a routine manner.
Order:
The Tribunal reduced the penalty from Rs. 275,000 to Rs. 5,000 only, which is the minimum penalty under the law.

In Pakistan, most businessmen consider the SECP filing of the company as an additional burden.However, the reality is qu...
07/03/2026

In Pakistan, most businessmen consider the SECP filing of the company as an additional burden.
However, the reality is quite the opposite in the long run, the company structure proves to be more secure, legal and beneficial.
A major misconception is that there are a lot of mandatory filings in SECP.
In fact, there are about 34 total forms in SECP, out of which only two forms are mandatory, all the rest are optional and are filed only when required.

Form A is mandatory to file every year
Form 9 is required after three years (in case of election/change)
Other forms are filed only when required: For example
When the company’s address changed- File form 21
On the Shares transferred- Form-3
Appointment or change of a director or officer- Form-9
The main thing to understand is why is it necessary to update legal records?
For example, if you have purchased a property and paid in full, but until that property is transferred to your name, you will not be legally considered its owner.
Similarly, if a director returns shares or separates from the company, but the SECP record is not updated, then that person will still be considered the owner or director of the company.
Unfortunately, many people in Pakistan do not register a company, considering filing fees and audit fees as a burden, while these expenses are for security, transparency and future benefits.

06/03/2026

Partnership Rules in Practice
1️⃣ If you are financially weak, do not partner with someone who is much stronger than you financially.
Because whenever a dispute arises, he can use his financial power to try to prove right as wrong and wrong as right.
2️⃣ If you are the sleeping partner and all the capital is yours, but the other partner has control over both work and money, then this model is very risky.
Either balance the control and responsibility between both parties,
or take appropriate security such as:
• Signed check
• Promissory note
• Strong written agreement
So that if a problem arises later, you can file a legal case
3️⃣ Trust in a written agreement, not verbal ones
"Dude, you are a very good friend of mine" these phrases do not work in business.
A partnership should always be in writing, with clear terms.
If there is a new amendment later, include it in writing as well.
4️⃣ Be sure to hire a lawyer
To save some money in the beginning, most people do not hire a lawyer.
But later, when:
• The signature is not complete
• The witnesses are not present
• The terms are not clear
Then the cost is many times higher.
5️⃣ Every partnership can end Keep the Termination Clause strong
History is a witness that most partnerships comes to end at some stage
Therefore, the Termination Clause should be clear, strong and practical from the beginning, so that things do not deteriorate to the point that the personal relationship also ends.
6️⃣ Partnership with relatives? Think carefully
Combining relationships and business is a very sensitive matter.
It often happens that a business dispute takes away not only capital but also relationships.

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Office # 202, 2nd Floor, Phase 2, Silkway Plaza, G. T Road
Haripur
22620

Telephone

+923365070599

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