Why is there income tax in my car's token tax, and can I claim it in my return?

The income tax figure on your car token receipt is federal advance income tax under section 234 of the Income Tax Ordinance, 2001. It is collected alongside the provincial motor vehicle tax but belongs to a different law. Because it is adjustable, it counts towards your income tax for the year. This page follows the Ordinance as amended to 30 June 2026, so the amounts apply in tax year 2027 (1 July 2026 to 30 June 2027).

What does the law say?

Section 234(1) says any person “at the time of” collecting motor vehicle tax “shall also collect advance tax at the rates specified in Division III of Part IV of the First Schedule.” The duty follows the act of collecting motor vehicle tax. The section does not name a particular department.

Section 234(2) says that if the motor vehicle tax is collected in instalments or lump sum, the advance tax may also be collected in instalments or lump sum “in like manner”. That is why the income tax appears on both a yearly token and a lump-sum token.

Section 234(5) says “Advance tax collected under this section shall be adjustable.” Before the Finance Act, 2013 this sub-section made the tax final for owners of goods transport vehicles. The current text makes it adjustable without that limit.

Section 234(6) says that for sub-sections (1) and (2), “motor vehicle” shall include the vehicles listed in section 231B(7). Section 231B(7) lists car, caravan automobiles, jeep, limousine, pickup, sports utility vehicle, trucks, vans, wagon and any other automobile. It then excludes public transport, goods carriage and agricultural machinery vehicles, rickshaws and motorcycle rickshaws, and vehicles up to 200cc. Section 234(6) uses the word “include”, and Division III separately sets rates for goods transport and passenger transport vehicles, so those vehicles remain within section 234 through Division III itself. The Ordinance does not say whether the exclusions in section 231B(7) carry across into section 234.

Section 168 gives the credit. Tax collected under Chapter XII, where section 234 sits, is treated as tax paid by the person from whom it was collected. Section 168(2) allows that person a credit against the tax due for the tax year in which it was collected. Sub-section (5) of section 234 used to appear in section 168(3), the list of final taxes with no credit, but that entry was omitted by the Finance Act, 2013.

How does it work in practice?

For a car, clause (3) of Division III sets a yearly amount by engine capacity, and clause (4) sets the amount where the motor vehicle tax is collected as a lump sum. For example, a car of 1300cc to 1499cc carries Rs. 2,500 a year, or Rs. 30,000 where the motor vehicle tax is collected in lump sum. The full rate table, and the higher amount for owners not on the active taxpayers’ list, is on the linked rates page.

The credit belongs to the person from whom the tax was collected, which in practice is the registered owner paying the token. Keep the token receipt, since it is the record of the amount collected.

Worked example (illustrative figures)

Hina is a school administrator in Lahore who also earns rent from a small shop. She is on the active taxpayers’ list and owns a 1300cc car. In August 2026 she pays the yearly token.

1. Division III, clause (3), row 1300cc to 1499cc: Rs. 2,500.
2. Section 234 advance tax on the token receipt: Rs. 2,500.
3. Suppose her total income tax for tax year 2027 works out to Rs. 95,000, and Rs. 80,000 of other adjustable tax has already been collected or deducted from her during the year.
4. Balance before the token credit: Rs. 95,000 - Rs. 80,000 = Rs. 15,000.
5. Section 168 credit for the token tax: Rs. 2,500.
6. Balance payable with her return: Rs. 15,000 - Rs. 2,500 = Rs. 12,500.

What if I pay several years of token at once?

Section 234(2) allows the advance tax to follow the motor vehicle tax into instalments or lump sum. Section 168(2) ties the credit to the tax year in which the tax was collected, so the whole amount collected on the payment date is credited in that year’s return. The Ordinance does not provide for spreading it across the years the token covers.

Common mistakes

• Treating the whole receipt as income tax. Only the section 234 amount is federal income tax. The motor vehicle tax itself is provincial and is not credited in the income tax return.
• Thinking the token income tax is final. Section 234(5) makes it adjustable, and the old final-tax entry in section 168(3) has been omitted.
• Assuming a small car pays nothing. Clause (3) of Division III has a row for cars up to 1000cc at Rs. 800 a year.

What to check in the official text

Read section 234 in full, section 231B(7), section 168(1), (2) and (3), and clauses (3) and (4) of Division III of Part IV of the First Schedule. Provincial motor vehicle tax rates, and how each province prints the token receipt, are outside this corpus.