Is a pension I receive from abroad taxable if I live in Pakistan?

What does the law say?

Three steps in the Income Tax Ordinance, 2001 decide the answer.

Step 1: are you resident for the tax year? Section 82 treats an individual as resident for a tax year if the individual is present in Pakistan for 183 days or more in the year, is a federal or provincial government employee posted abroad, or, being a citizen of Pakistan, “is not present in any other country for more than one hundred and eighty-two days during the tax year or who is not a resident taxpayer of any other country”. A retiree who has moved home to Pakistan will usually meet the first test.

Step 2: where does the pension come from? Section 101(11) says a pension or annuity is Pakistan-source income only “if it is paid by a resident or borne by a permanent establishment in Pakistan of a non-resident person”. Section 101(16) adds that an amount is foreign-source income to the extent it is not Pakistan-source. A pension paid by a UK company scheme, a US employer plan or a Gulf government is therefore foreign-source.

Step 3: what does residence bring in? Section 11(5) says the income of a resident person is computed by taking into account both Pakistan-source and foreign-source amounts. Section 11(6) says a non-resident is taxed only on Pakistan-source income. Section 12(2)(f) places “any pension or annuity” within salary, so a foreign pension is counted under the head “Salary”.

Which exemptions can apply?

Situation	Provision	Effect
Citizen returning after at least four tax years as a non-resident	Section 51(1)	Foreign-source income exempt in the tax year of becoming resident and the following tax year
Pension from former employment with the United Nations or its specialised agencies, including the International Court of Justice	Section 42(3)	Pension exempt for a citizen of Pakistan, provided the salary from that employment was exempt under the Ordinance
Non-resident for the tax year	Section 11(6)	Foreign pension not counted at all

Worked example (illustrative figures)

Mr. Aslam worked in Manchester for 25 years and draws a pension from his former UK employer’s scheme, worth about Rs. 4,800,000 a year. He was non-resident in tax years 2022 to 2025. He moved back to Lahore in August 2025 and has stayed.

1. Tax year 2026 (1 July 2025 to 30 June 2026): he is in Pakistan well over 183 days, so he becomes resident under section 82.
2. He was not resident in any of the four preceding tax years (2022, 2023, 2024, 2025), so section 51(1) applies.
3. His foreign-source income is exempt in tax year 2026, the year he became resident, and in tax year 2027, the following year.
4. From tax year 2028, section 51 no longer applies. The pension is paid by a non-resident scheme, so it is foreign-source under section 101(11) and (16), and section 11(5) counts it in his income.

Dr. Farah retired from the World Health Organization, a UN specialised agency, and lives in Islamabad. Her WHO pension falls within section 42(3) if her WHO salary was exempt under the Ordinance. If it was, the pension is exempt whatever its size.

What rate applies to a taxable foreign pension?

The text does not answer this cleanly. Section 12(2A) and the pension table in the First Schedule apply to “pension received by an individual from a former employer”. A pension from a foreign former employer, such as Mr. Aslam’s company scheme, appears to fit those words, which would put it under the same pension table as a Pakistani employer’s pension. A state pension such as the UK State Pension or US Social Security is not paid by a former employer. The Ordinance does not say which table such a payment falls under, and this page does not resolve that.

What if tax was already deducted abroad?

Relief for foreign tax paid, and the effect of any tax treaty between Pakistan and the paying country, are outside this page. Neither changes the source rule in section 101(11) or the residence rule in section 82.

What if a Pakistani entity pays my pension abroad?

The rule runs the other way. A pension paid by a resident person is Pakistan-source under section 101(11), so section 11(6) still brings it in even for a non-resident.

Common mistakes

• Assuming money kept abroad is not income. Section 11(5) looks at residence and source, not the location of the bank account.
• Counting the section 51 exemption from the date of arrival. It runs for the tax year of becoming resident and the following tax year, which are July to June years.
• Missing the four-year condition. Section 51(1) needs non-residence in every one of the four preceding tax years. A citizen who spent long visits at home and was resident in one of those years does not qualify.
• Treating every international pension as a UN pension. Section 42(3) covers the United Nations and its specialised agencies, and only where the salary was exempt under the Ordinance.

What to check in the official text

Read sections 11(5) and (6), 82, 101(11) and (16), 51(1) and 42(3) in the official text, and the pension table in the First Schedule in the official PDF. Residents with foreign income or assets above certain thresholds also have a separate foreign income and assets statement to file with the return; that statement, foreign tax credits and tax treaties are not covered on this page.