How AOP Income Tax Is Calculated in Pakistan (2025–26)
An Association of Persons (AOP) — partnership firms, joint ventures, and any two or more people carrying on business together — is taxed as a single entity on its net income. AOPs use the same slab rates as non-salaried individuals under the Income Tax Ordinance, 2001, with a top marginal rate of 45%. Tax is charged on the AOP's profit after allowable business expenses, before distribution to members.
AOP Tax Slabs — Tax Year 2025–26
| Annual Taxable Income | Tax |
|---|---|
| Up to Rs. 600,000 | 0% |
| 600,001 – 1,200,000 | 15% of amount over 600,000 |
| 1,200,001 – 1,600,000 | Rs. 90,000 + 20% of amount over 1,200,000 |
| 1,600,001 – 3,200,000 | Rs. 170,000 + 30% of amount over 1,600,000 |
| 3,200,001 – 5,600,000 | Rs. 650,000 + 40% of amount over 3,200,000 |
| Above 5,600,000 | Rs. 1,610,000 + 45% of amount over 5,600,000 |
Worked Example
If a partnership firm earns a net profit of Rs. 4,000,000, it falls in the 3,200,001 – 5,600,000 slab: tax = Rs. 650,000 base + 40% of (4,000,000 − 3,200,000) = Rs. 650,000 + Rs. 320,000 = Rs. 970,000 for the year.
Frequently Asked Questions
Are individual partners taxed again on their share?
Generally no. Once the AOP pays tax on its income, each member's share of profit is exempt in their personal return — though it may be added back for rate purposes if a partner has other taxable income. This avoids double taxation.
Do AOP slabs differ from salaried slabs?
Yes, substantially. AOPs start at 15% above Rs. 600,000 and reach 45% above Rs. 5.6 million, whereas salaried individuals start at 1% and top out at 35%.
Does an AOP need to register separately?
Yes. An AOP gets its own NTN on the FBR IRIS portal and files its own annual return, separate from the members' personal returns.