A Comparative Analysis of Tax Liabilities: Salaried Individuals Versus Associations of Persons (AOPs) Under Pakistan's 2025 Tax Regime

Abstract

Pakistan’s tax regime for the fiscal year 2025-26, as amended by the Finance Act, 2025 under the Income Tax Ordinance, 2001, establishes distinct tax frameworks for salaried individuals and Associations of Persons (AOPs). Salaried individuals benefit from concessional tax slabs when salary exceeds 75% of taxable income, with progressive rates reaching up to 35% and a 9% surcharge for incomes above Rs. 10 million. Conversely, AOPs, such as partnerships, face steeper non-salaried rates up to 45%, with a 10% surcharge for high earners, reflecting their business-oriented income sources. This article provides a detailed comparison of tax computation, deductions, withholding mechanisms, compliance requirements, and legal underpinnings, highlighting how salaried taxpayers enjoy lower liabilities while AOPs bear heavier burdens. It also explores implications for economic behavior and identifies research gaps, such as the need for equitable tax policies and simplified compliance for AOPs. Drawing from statutory provisions and judicial interpretations, this analysis offers insights for law students, policymakers, and taxpayers navigating Pakistan’s tax landscape.