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Method of accounting
(1) Subject to this Ordinance, a person’s income chargeable to tax shall be computed in accordance with the method of accounting regularly employed by such person.
(2) Subject to sub-section (3), a company shall account for income chargeable to tax under the head Income from Business on an accrual basis, while other persons may account for such income on a cash or accrual basis.
(3) The Board may prescribe that any class of persons shall account for income chargeable to tax under the head Income from Business on a cash or accrual basis.
(4) A person may apply, in writing, for a change in the person’s method of accounting and the Commissioner may, by order in writing, approve such an application but only if satisfied that the change is necessary to clearly reflect the person’s income chargeable to tax under the head Income from Business.
(5) If a person’s method of accounting has changed, the person shall make adjustments to items of income, deduction, or credit, or to any other items affected by the change so that no item is omitted and no item is taken into account more than once.
(2) Subject to sub-section (3), a company shall account for income chargeable to tax under the head Income from Business on an accrual basis, while other persons may account for such income on a cash or accrual basis.
(3) The Board may prescribe that any class of persons shall account for income chargeable to tax under the head Income from Business on a cash or accrual basis.
(4) A person may apply, in writing, for a change in the person’s method of accounting and the Commissioner may, by order in writing, approve such an application but only if satisfied that the change is necessary to clearly reflect the person’s income chargeable to tax under the head Income from Business.
(5) If a person’s method of accounting has changed, the person shall make adjustments to items of income, deduction, or credit, or to any other items affected by the change so that no item is omitted and no item is taken into account more than once.
Amendment history (3)
- Sub-section (1) substituted by the Finance Act, 2003. The substituted sub-section (1)
- The words “Central Board of Revenue” substituted by the Finance Act, 2007.
- Substituted for the word “notice” by the Finance Act, 2003.
Amendment notes captured from the source page(s); they may include changes to neighbouring provisions.
Source FBR PDF page 85
Unofficial reference, compiled from the FBR’s consolidated Income Tax Ordinance 2001 (amended up to 30 June 2026). Provided for general information only — not an official FBR publication and not legal or tax advice. Always verify against the official FBR text before relying on it for filing or any decision.