AOP income tax on the non-salaried slab card, plus surcharge above 10M.
Total tax
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Income tax
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Surcharge
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Net income
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Your breakdown
Updates live as you type| Income band (PKR) | Rate | Tax on the slice |
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How a partnership is taxed as a single person
An Association of Persons is the tax label Pakistan puts on a partnership firm, a joint venture, or any group of people who pool effort and capital without forming a company. The key idea, and the one that surprises new partners, is that the AOP is taxed as one taxpayer in its own right. The firm computes its taxable income, runs it through the non-salaried slab card, and pays the resulting tax. The individual partners are then generally not taxed again on the share they take out, because the tax has already been settled at the AOP level. That single-layer treatment is what this calculator models, and the structure has held steady even though the slab figures inside it are reset each year by the Finance Act.
The tool is written for partners, their accountants and anyone weighing whether to operate as an AOP rather than a sole proprietorship or a company. You enter the firm's taxable income, the amount left after deductible business expenses, and it returns the income tax, any high-income surcharge, and what the partners are left with collectively.
The slab card and the surcharge that sits on top
An AOP uses the same non-salaried slab card as sole proprietors and freelancers, which runs steeper than the salaried card. The rates this calculator applies start at zero on the first PKR 600,000, then climb through 15, 20, 30 and 40 percent before reaching the top rate of 45 percent on income above PKR 5,600,000. Each rate applies only to the slice of income inside its band, so the firm never pays the top rate on its whole income, only on the part that pokes above the highest threshold. On top of the slab tax, a surcharge applies once taxable income crosses PKR 10 million; the rate this calculator uses for that surcharge is 9 percent of the tax payable. Below that threshold there is no surcharge at all. Because rates and thresholds shift annually, confirm both the slab figures and the surcharge trigger with the FBR for your tax year.
A firm earning PKR 4 million, slab by slab
Consider a two-partner consultancy that, after expenses, has PKR 4,000,000 of taxable income for the year. It sits below the PKR 10 million surcharge line, so only the slab card applies. Using the rates this calculator applies, the tax builds up across the bands as shown below and totals PKR 970,000. That is an effective rate of roughly 24.3 percent on the firm's income, well under the 40 percent top band touched by the final slice, which is the whole point of a progressive card. The remaining PKR 3,030,000 is what the partners share, split according to their profit-sharing ratio.
AOP, company or sole trader: where the choice bites
The single-layer treatment is the AOP's headline attraction, but it is not always the cheapest structure. A company pays corporate tax and then the owners may face a further charge when profit is distributed as a dividend, yet a company also caps its rate where the AOP slab card keeps climbing to 45 percent. For modest firm profits the AOP usually wins on simplicity and total tax. As profits grow into the high slabs and surcharge territory, the company comparison gets closer and sometimes flips. The practical tip is to model both at your real expected profit rather than assuming the AOP is always lighter, and to remember that the right answer changes as your numbers grow.
Do partners pay tax again on the profit they withdraw?
Generally no. Once the AOP has paid tax on its income, a partner's share of that already-taxed profit is normally not taxed a second time in the partner's own hands. The share does, however, get factored into the partner's total income for rate purposes on any other income they earn, which can nudge their personal marginal rate. The exact interaction has technical edges, so a partner with significant other income should confirm the treatment with the FBR or an adviser.
What income figure should I actually enter?
Enter the AOP's taxable income, not its gross receipts. That means revenue after subtracting allowable business expenses such as salaries, rent, utilities and depreciation, and after any adjustments the law permits. Feeding in turnover by mistake will badly overstate the tax. If you are unsure which expenses qualify, the deductibility rules sit in the Income Tax Ordinance and are worth checking with the FBR or your accountant before you finalise the figure.