How minimum tax is worked out
Section 113(2)(a) treats the person's turnover as income chargeable to tax, and section 113(2)(b) makes the person pay, instead of the actual tax payable, the minimum tax at the Division IX rate for its type of business. The calculator multiplies turnover by that rate, then compares it with the normal tax you enter and shows the higher one.
Under the Explanation to section 113(1), "tax payable or paid" for this comparison does not include tax on deemed income assessed as a final discharge of liability, or tax under sections 4B or 4C. Where the minimum tax is more than the tax under clause (1) of Division I or Division II, section 113(2)(c) carries the excess forward for adjustment against that tax in the two tax years immediately following.
Division IX rates, edition amended to 30 June 2026
| Person | Minimum tax as % of turnover |
|---|---|
| Any other business (all other cases) | 1.25% |
| SSGC or SNGPL (turnover above Rs 1 billion), PIA, poultry industry | 0.75% |
| Oil refineries, registered motorcycle dealers, oil marketing companies | 0.5% |
| Registered petroleum agents and distributors, rice mills and dealers, integrated Tier-1 FMCG retailers, e-commerce turnover and online marketplaces, used vehicle traders, flour mills | 0.25% |
The Finance Act, 2026 omitted the 0.25% entry for distributors of pharmaceutical products, fast moving consumer goods and cigarettes, so they are no longer listed at that rate. The rates here are the table as it stands in the edition amended to 30 June 2026; earlier tax years may have had different entries.
Where the rates come from
Every rate is read from the Income Tax Ordinance, 2001 as consolidated by FBR. The rates on this page were last checked against the official text on 2026-09-26.
- Income Tax Ordinance, 2001, section 113, minimum tax on the income of certain persons (as amended to 2026-06-30) official file
- Income Tax Ordinance, 2001, First Schedule, Part I, Division IX, printed pages 529 and 530, with the table continued on page 535 (as amended to 2026-06-30) official file
Common questions
Who does minimum tax under section 113 apply to?
Section 113(1) applies to a resident company, a permanent establishment of a non-resident company, and an individual or association of persons with turnover of Rs 100,000,000 or above in tax year 2017 or any later tax year. It bites where, because of a loss, set-off of earlier losses, exemption, credits or rebates, or allowances and deductions, no tax is payable or the tax is less than the Division IX percentage of turnover.
What is the minimum tax rate on turnover?
In the Division IX table of the edition amended to 30 June 2026 the rate is 1.25% of turnover in all other cases, with lower rates of 0.75%, 0.5% and 0.25% for the businesses listed in the table, such as oil refineries, rice mills, flour mills and online marketplaces.
Is minimum tax paid on top of normal income tax?
No. Section 113(2)(b) says the person pays the minimum tax as income tax for the year instead of the actual tax payable. The person pays whichever is higher, the normal tax or the minimum tax.
Can extra minimum tax be adjusted in later years?
Section 113(2)(c) says that where tax paid under the section exceeds the actual tax payable under clause (1) of Division I or Division II of Part I of the First Schedule, the excess is carried forward for adjustment against tax liability under that Part in the following tax year. Its proviso limits this to the two tax years immediately after the year the amount was paid. Where no tax was payable at all, the whole amount is carried forward.
What counts as turnover for minimum tax?
Section 113(3) defines turnover as gross sales or gross receipts from the sale of goods, net of sales tax, federal excise duty and trade discounts on invoices; gross fees for services, including commissions; gross receipts from contracts; and a company's share of these amounts from an association of persons it is a member of. Amounts already taxed as a final discharge of liability are excluded.