Lahore 22°C
Exemptions under international agreements
(1) Any Pakistan-source income which Pakistan is not permitted to tax under a tax treaty shall be exempt from tax under this Ordinance.
(2) Any salary received by an individual (not being a citizen of Pakistan) shall be exempt from tax under this Ordinance to the extent provided for in an Aid Agreement between the Federal Government and a foreign government or public international organization, where –
(a) the individual is either not a resident individual or a resident individual solely by reason of the performance of services under the Aid Agreement;
(b) if the Aid Agreement is with a foreign country, the individual is a citizen of that country; and (c) the salary is paid by the foreign government or public international organisation out of funds or grants released as aid to Pakistan in pursuance of such Agreement.
(3) Any income received by any person engaged as a contractor, consultant, or expert on a project in Pakistan shall be exempt from tax under this Ordinance to the extent provided for in a bilateral or multilateral agreement between the Federal Government and a foreign government or public international organisation, where —
(a) the project is financed out of grant funds in accordance with the agreement;
(b) the person is either a non-resident person or a resident person solely by reason of the performance of services under the agreement; and (c) the income is paid out of the funds of the grant in pursuance of the agreement.
(4) Federal Government may, in respect of an official development assistance financed loans and grants-in-aid, subject to such conditions and limitations as it may specify, exempt income of any person on a case to case basis through a notification in the official Gazette.
(2) Any salary received by an individual (not being a citizen of Pakistan) shall be exempt from tax under this Ordinance to the extent provided for in an Aid Agreement between the Federal Government and a foreign government or public international organization, where –
(a) the individual is either not a resident individual or a resident individual solely by reason of the performance of services under the Aid Agreement;
(b) if the Aid Agreement is with a foreign country, the individual is a citizen of that country; and (c) the salary is paid by the foreign government or public international organisation out of funds or grants released as aid to Pakistan in pursuance of such Agreement.
(3) Any income received by any person engaged as a contractor, consultant, or expert on a project in Pakistan shall be exempt from tax under this Ordinance to the extent provided for in a bilateral or multilateral agreement between the Federal Government and a foreign government or public international organisation, where —
(a) the project is financed out of grant funds in accordance with the agreement;
(b) the person is either a non-resident person or a resident person solely by reason of the performance of services under the agreement; and (c) the income is paid out of the funds of the grant in pursuance of the agreement.
(4) Federal Government may, in respect of an official development assistance financed loans and grants-in-aid, subject to such conditions and limitations as it may specify, exempt income of any person on a case to case basis through a notification in the official Gazette.
Amendment history (8)
- Added by the Finance Act, 2002
- The comma and word “,and” substituted by the Finance Act, 2002
- Clause (d) omitted by the Finance Act, 2002. The omitted clause (d) read as under
- The words “a non-resident” substituted by the Finance Act, 2003.
- The expression “a person (not being a citizen of Pakistan)” substituted by the Finance Act, 2022.
- The expression “technical assistance” omitted by the Finance Act, 2022.
- Sub-section (4) inserted by the Finance Act, 2022.
- Section 44A inserted by the Finance Act, 2023.
Amendment notes captured from the source page(s); they may include changes to neighbouring provisions.
Source FBR PDF page 101
Unofficial reference, compiled from the FBR’s consolidated Income Tax Ordinance 2001 (amended up to 30 June 2026). Provided for general information only — not an official FBR publication and not legal or tax advice. Always verify against the official FBR text before relying on it for filing or any decision.