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Income Tax MCQs Pakistan — 200+ Practice Questions

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ITO
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41
Question 41 of 52 Advance Tax – Transitional Phase
Basic
📖 Section 231B. Advance tax on private motor vehicles - ITO, 2001
Which section of the Income Tax Ordinance, 2001 deals with Advance tax on private motor vehicles ?
1 Section 235 ❌
2 Section 234 ❌
3 Section 231B ✅
4 Section 210 ❌
✅ Correct Answer!
✅
Correct Answer
📝 Explanation
Every registering authority of the Excise and Taxation Department shall collect advance tax when a motor vehicle is registered.
⚖️ Legal Reference
📖 Income Tax Ordinance, 2001 — Section 231B. Advance tax on private motor vehicles - ITO, 2001
💡 Why This Matters
Understanding this provision is essential for tax compliance and frequently tested in CA, ICMAP & ACCA Pakistan exams.
42
Question 42 of 52 Exemptions and Tax Concessions
Basic
📖 Section 43. Foreign government officials - ITO, 2001
Which section of the Income Tax Ordinance, 2001 deals with Foreign government officials ?
1 Section 41 ❌
2 Section 42 ❌
3 Section 43 ✅
4 Section 44 ❌
✅ Correct Answer!
✅
Correct Answer
📝 Explanation
Any salary received by an employee of a foreign government as remuneration for services rendered to such government shall be exempt from tax under the ITO, 2001.
⚖️ Legal Reference
📖 Income Tax Ordinance, 2001 — Section 43. Foreign government officials - ITO, 2001
💡 Why This Matters
Understanding this provision is essential for tax compliance and frequently tested in CA, ICMAP & ACCA Pakistan exams.
43
Question 43 of 52 Exempted Income
Basic
📖 Section 43. Foreign government officials - ITO, 2001
Salary received by an employee of a foreign government is exempt from tax if :
1 The employee is a Pakistani citizen ❌
2 The employee holds dual nationality ❌
3 The employee works in Pakistan ❌
4 Foreign citizen doing similar work qualifies for tax exemption under reciprocal agreement. ✅
✅ Correct Answer!
✅
Correct Answer
📝 Explanation
Salary received by an employee of a foreign government is exempt from tax if employee is a foreign citizen, performs similar services as Federal Government employees abroad, and reciprocal exemption is granted
⚖️ Legal Reference
📖 Income Tax Ordinance, 2001 — Section 43. Foreign government officials - ITO, 2001
💡 Why This Matters
Understanding this provision is essential for tax compliance and frequently tested in CA, ICMAP & ACCA Pakistan exams.
44
Question 44 of 52 Rates of Tax for Companies
Basic
📖 First Schedule – Part I, Division II – Income Tax Ordinance, 2001
What is the income tax rate applicable to a banking company for Tax Year 2026?
1 44% ❌
2 43% ✅
3 42% ❌
4 41% ❌
✅ Correct Answer!
✅
Correct Answer
📝 Explanation
A banking company, as defined in the Banking Companies Ordinance, 1962, is required to pay income tax at 43% for Tax Year 2026.
⚖️ Legal Reference
📖 Income Tax Ordinance, 2001 — First Schedule – Part I, Division II – Income Tax Ordinance, 2001
💡 Why This Matters
Understanding this provision is essential for tax compliance and frequently tested in CA, ICMAP & ACCA Pakistan exams.
45
Question 45 of 52 Rates of Tax for Companies
Basic
📖 First Schedule – Part I, Division II – Income Tax Ordinance, 2001
What is the income tax rate applicable to a banking company for Tax Year 2025?
1 41% ❌
2 42% ❌
3 43% ❌
4 44% ✅
✅ Correct Answer!
✅
Correct Answer
📝 Explanation
A banking company, as defined in the Banking Companies Ordinance, 1962, is required to pay income tax at 44% for Tax Year 2025.
⚖️ Legal Reference
📖 Income Tax Ordinance, 2001 — First Schedule – Part I, Division II – Income Tax Ordinance, 2001
💡 Why This Matters
Understanding this provision is essential for tax compliance and frequently tested in CA, ICMAP & ACCA Pakistan exams.
46
Question 46 of 52 Rates of Tax for Companies
Basic
📖 First Schedule – Part I, Division II – Income Tax Ordinance, 2001
What is the income tax rate applicable to a banking company for Tax Year 2027?
1 42% ✅
2 44% ❌
3 43% ❌
4 41% ❌
✅ Correct Answer!
✅
Correct Answer
📝 Explanation
A banking company, as defined in the Banking Companies Ordinance, 1962, is required to pay income tax at 42% for Tax Year 2027.
⚖️ Legal Reference
📖 Income Tax Ordinance, 2001 — First Schedule – Part I, Division II – Income Tax Ordinance, 2001
💡 Why This Matters
Understanding this provision is essential for tax compliance and frequently tested in CA, ICMAP & ACCA Pakistan exams.
47
Question 47 of 52 Rates of Tax for Companies
Basic
📖 Tax rate applicable : First Schedule – Part I, Division II – Income Tax Ordinance, 2001
What is the income tax rate applicable to a small company for Tax Year 2026?
1 20% ✅
2 25% ❌
3 29% ❌
4 21% ❌
✅ Correct Answer!
✅
Correct Answer
📝 Explanation
Section 2(59AB). Small Company refers to a company that is registered on or after 1st July 2005 under the Companies Act, 2017
⚖️ Legal Reference
📖 Income Tax Ordinance, 2001 — Tax rate applicable : First Schedule – Part I, Division II – Income Tax Ordinance, 2001
💡 Why This Matters
Understanding this provision is essential for tax compliance and frequently tested in CA, ICMAP & ACCA Pakistan exams.
48
Question 48 of 52 Rates of Tax for Companies
Basic
📖 First Schedule – Part I, Division II – Income Tax Ordinance, 2001
What is the income tax rate applicable to a Any Other company for Tax Year 2026?
1 29% ✅
2 20% ❌
3 25% ❌
4 30% ❌
✅ Correct Answer!
✅
Correct Answer
📝 Explanation
Any Other Company refers to a company that is not classified as a Small Company or Banking Company under the Income Tax Ordinance, 2001.
⚖️ Legal Reference
📖 Income Tax Ordinance, 2001 — First Schedule – Part I, Division II – Income Tax Ordinance, 2001
💡 Why This Matters
Understanding this provision is essential for tax compliance and frequently tested in CA, ICMAP & ACCA Pakistan exams.
49
Question 49 of 52 Company Taxation
Intermediate
📖 Section 2(59A) - ITO, 2001
The tax rate of a Small Company is prescribed under:
1 Section 9 ❌
2 Section 2(59A) ❌
3 Section 4 ❌
4 First Schedule, Part I, Division II ✅
✅ Correct Answer!
✅
Correct Answer
📝 Explanation
The applicable tax rate is provided in the First Schedule, Part I, Division II of the Income Tax Ordinance, 2001.
⚖️ Legal Reference
📖 Income Tax Ordinance, 2001 — Section 2(59A) - ITO, 2001
💡 Why This Matters
Understanding this provision is essential for tax compliance and frequently tested in CA, ICMAP & ACCA Pakistan exams.
50
Question 50 of 52 Company Taxation
Basic
📖 Section 2(59AB). Small Company - ITO, 2001
The paid-up capital plus undistributed reserves of a Small Company must not exceed:
1 Rs. 100 million ❌
2 Rs. 75 million ❌
3 Rs. 50 million ✅
4 Rs. 250 million ❌
✅ Correct Answer!
✅
Correct Answer
📝 Explanation
Under Section 2(59AB)(i), a Small Company must have paid-up capital plus undistributed reserves not exceeding Rs. 50 million.
⚖️ Legal Reference
📖 Income Tax Ordinance, 2001 — Section 2(59AB). Small Company - ITO, 2001
💡 Why This Matters
Understanding this provision is essential for tax compliance and frequently tested in CA, ICMAP & ACCA Pakistan exams.

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