Beruflich Dokumente
Kultur Dokumente
3.1
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Chapter I
Preliminary Section 1
Short title
The title of this book is Income Tax
Ordinance 2001
AZAD KASHMIR
NORTHERN AREAS
TRIBAL AREAS
The districts of Chitral, Dir and Swat (which includes Kalam), Malakand protected area, the Tribal Area adjoining Hazara district and the former State of Amb; and Zob district, Loralai district (excluding Bhuke Tehsil), Dalbandin Tehsil of Chagai district and Marri and Bugti Tribal territories of Sibi district.
2.2
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Executive Authority
Subject to the Constitution, the executive authority of the Federation shall extend to the Federally Administered Tribal Areas, and the executive authority of a Province shall extend to the Provincially Administered Tribal Areas therein.
2.1
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No Act of Parliament shall apply to any Federally Administered Tribal Areas, or to any part thereof, unless the President so directs, and no Act of Parliament or a Provincial Assembly shall apply to Provincially Administered Tribal Areas, or to any part thereof, unless the Governor of the Province in which the Tribal Area is situated, with the approval of the President, so directs.
3.1
3
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10
IMPORTANT CONCEPTS
RELATING TO TAX
3.4
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11
2.2
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12
TYPES OF FICTION
FICTION OF A PERSON FICTION OF INCOME FICTION OF TIME FICTION OF PLACE
3.1
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13
FICTION OF PERSON
EXAMPLE
INCOME OF A MINOR CHILD Section 91
FICTION OF INCOME
EXAMPLEEXAMPLE-I ADVANCE /PUGREE RECEIVED SECTION 39 (2)
FICTION OF TIME
Property constructed in the previous year but detected today will be treated as the income of the current year.
FICTION OF PLACE
Income paid outside Pakistan will be treated as paid in Pakistan Section 101(1)(b)
Salary paid by Government of Pakistan in other country to the staff of its embassy will be treated as Pakistan source income and the staff has to file return in Pakistan
DEFINITIONS
1
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18
EXPLANATION
HEADS OF INCOME
Salary Income from property Income from business Capital gain Income from other sources
Section 11
Sec 12 to 14 Sec 15 to 17 Sec 18 to 36 Sec 37 & 38 Sec 39 & 40
BUSINESS 2(9)
It includes any; Trade; Commerce; Manufacture; Profession; Vocation; Or any adventure in the nature of trade, commerce, or manufacture. However, it does not include an employment.
It means property of any kind (personal or business) held excluding: Stock in trade (other than stocks and shares), consumable stores, or raw material.
Any depreciable asset ( provided in the 3rd Schedule of the Income Tax Ordinance 2001).
BOARD
i.
2(11)
F.B.R
Board means Federal Board of Revenue (FBR) established under Federal Board of Revenue Act 2007.
ii. Highest tax collecting authority in Pakistan. iii. Regulates all federal taxes including direct and indirect taxes. iv. Appointed by Federal Government.
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25
INCOME
SECTION 2 (29)
Income includes; Any amount chargeable to tax; a) Salary b) Income from property c) Income from business d) Capital gain e) Income from other sources Any amount chargeable to tax; Import of goods Sec 148 Dividends Sec 150 Royalty or fee for technical services Sec 152 Payment for supply of goods and services Sec 153 Winning of prizes & lottery Sec 156
26
INCOME
--- cont
SECTION 2 (29)
Any loss of income (adjustment of loss against income) But does not include amount representing face value of bonus shares in the hands of shareholders
2.4
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28
CONCEPT OF INCOMEINCOME-
Broad Principles
3.2
3
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30
Principal Officer:
section 2(44A)
a.A a.A director, a manager, agent, accountant or any similar officer, and b.Any person with management upon b.Any whom commissioner has served a notice c.It is to ensure by the tax c.It department that notice has been served on the taxpayer.
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Taxable Income
Section 2 (64)
The taxable income of a person for the tax year shall be the total income for the year as reduced by any deductible allowances. However, the taxable income should not be below zero.
Section 2 (64)
xxx
Tax Year
Tax year means a period of 12 months ending on June 30th, which is called Normal Tax Year under the ordinance and is denoted by the calendar year in which the closing date falls.
Convenient to taxpayer
Accounting period
Accounting period
Ist Jan 10 to 31st Dec 10
Tax year
2011 (Special Tax Year)
2012
2013
Mr. Zaheer ud Ist April 09 to 31st March 10 Babar, a manufacturer of shawls Ist April 10 to 31st March 11
2012
M/S XYZ, a company Ist Oct 09 to 30th Sep 10 manufacturer of sugar Ist Oct 10 to 30tt Sep 11
2011
2012
2013
FROM
01-0701-07-2010 01-1001-10-2011 01-0701-07-2011
TO
30-06-2011 30-0630-09-2012 30-0930-09-2011 30-09-
NORMAL
2011
APPLICATION DATE = 15-01-2010 15-01REQUEST FOR CHANGE OF SPECIAL TAX YEAR TO NORMAL TAX YEAR PERIOD OF INCOME TYPE OF TAX YEAR DENOTED BY
FROM
01-0101-01-2010 01-0701-07-2011 01-0101-01-2011
TO
31-12-2010 31-1230-06-2012 30-0630-06-2011 30-06SPECIAL 2011
PERSON
43
44
COMPANY
i) A company registered under Companies Ordinance 1984 ii) Body Corporate formed Under Law iii) A Modaraba iv) Body Corporate Formed Under Foreign Law v) Trust, Co-operative Society or Any Other Society Under the Law vi) Foreign Association Declared to be a Company vii) Provincial Government viii) Local Authority in Pakistan
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45
EXPLANTION
The Companies Ordinance, 1984 has defined a company as a company which has been registered under the Companies Ordinance, 1984 or any other law regulating companies prior to the promulgation of the Companies Ordinance. According to the Modaraba Companies and Modaraba (Floatation and Control) Ordinance , 1980, modaraba means a business in which a person participates with his money and another with his efforts or skill or both and shall include unit trusts and mutual funds.
46
11
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47
ANSWERS
Company Company a banking company Hindu Undivided Family Company Association of a persons (AOP) Individual Company
49
PUBLIC COMPANY
a) 50% or more shares owned by Government
Section 2(47)
b) Foreign Company owned by a foreign Government c) Company Registered on Stock Exchange; or d) Unit Trust, if units are widely available or any other trust.
PRIVATE COMPANY
Section 2(45)
Section 2(7)
50
51
Agricultural Income is exempt from tax. There are three conditions given in the definition which are cumulative, not alternative.
DEFINITION
Derived from land, Land is situated in Pakistan, and The land is used for agricultural purposes.
52
AGRICULTURAL INCOME
(Section 41)
agricultural purposes b. Income from land in Pakistan through i) Agriculture ii) Process necessary to make the produce fit for market iii) Sale of produce iv) Building used for agricultural purpose
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54
Income arising from the forest grown and maintained by a person. Amount received from cattle owners for allowing the cattle to graze. Profit on the sale of standing crops. Income from growing flowers.
Illustration:
Mr Junaid is running a Flour Mill and using wheat having market value Rs. 2,25,000 (Cost Rs.80,000) produced from his own land. Sales during the year is Rs. 6,00,000 Cost of goods sold (excluding own produced wheat) Rs. 1,75,000 Selling and Admin expenses Rs. 1,20,000 Calculate Net Income from business and Agricultural Income.
SOLUTION
Sales Rs. 6,00,000 Cost of goods sold 2,75,000 Gross profit 3,25,000 Selling and Admin expenses 1,20,000 Net Income 2,05,000
Is it correct ?
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SOLUTION
Sales Cost of goods sold (adjusted) Gross profit Selling and Admin expenses Net Income Rs. 6,00,000 4,00,000 2,00,000 1,20,000 80,000
SOLUTION
Agricultural Income
Market value of the Ag. Raw material 1,25,000 Less Cost 80,000 Agricultural Income (exempt) 45,000
NON RESIDENTS
It is determine for one tax year. Next year the persons residential status may change. Period or periods, amounting in all 183 days or more in a tax year Or He is an employee of a Federal or a Provincial government posted abroad in the tax year
Residential status
183 days or more
=
Determination
Posted abroad by Government
63
Given under Income Tax Rules 2002 Part oh the day shall be counted as whole day , for example day of arrival or day of departure. Following days shall be counted as whole day. A public holiday
EXERCISE 1
Mr. Kamran visited Pakistan on 1st August 2009 in connection with his business. After 7 days he left for Paris. Mr. Kamran again came back to Pakistan on 16 February 2010 and stayed in Pakistan till 20th June 2010.
Solution
Accounting period 1st July 2009 to 30th June 2010
Month August 2009 February 2010 March 2010 April 2010 May 2010 June 2010 Days 7 days 13 days 31 days 30 days 31 days 20 days
TOTAL
132 days
RESIDENT OR NON-RESIDENT ?
EXERCISE - 2
Mr. Saleem is an employee of Federal Government posted at London, stayed in Pakistan from 1st September 2008 to 20th November 2008. For the rest of period pertaining to tax year 2009 and 2010, he stayed in London. Determine his residential Status for the tax year 2010.
EXERCISE - 2
Mr. Saleem is an employee of Federal Government posted at London, stayed in Pakistan from 1st September 2008 to 20th November 2008. For the rest of period pertaining to tax year 2009 and 2010, he stayed in London. Determine his residential Status for the tax year 2010.
EXERCISE - 3
Mr. Hamid came to Pakistan on April 1st 2009 for the first time and left the country on 30th September 2009. Determine his residential status for the tax year 2010.
Solution First determine the Accounting Period which is 1st July 2009 to 30th June 2010
EXERCISE - 4
Mr. Jamil came to Pakistan on 1st March 2009 to attend a marriage ceremony of his cousin. He had to return back to Colombo by 22nd March . However, due to his illness, he had to extend his stay till 30th June 2009. Determine his residential status for the tax year 2009.
Solution
First of all determine the Accounting Period which is 1st July 2009 to 30th June 2010
EXERCISE - 5
Mr. Bob Woolmer, former English test player and a famous coach, came to Pakistan to give training to Pakistan Test cricket team in Lahore . He came to Pakistan on March 14th 2004 and then left for South Africa to join his family on May 31st 2005, Determine his residential status for the tax tear 2005.
RESIDENT COMPANY
Incorporated or formed under any law in Pakistan or Control and management whole in Pakistan at any time in a tax year. or It is a Provincial Government or Local Authority in Pakistan
It refers to the management of the vital affairs and the policy making areas of the business. It is the Head and Brain of the business. For example the decisions like the appropriations of the profit, the payment of dividend, the capital budgeting decisions, the working capital, the debt- Equity ratio etc. It includes Board of Directors (BOD) and top ranking managers.
EXAMPLE
A subsidiary company has its BOD in Pakistan, whereas, the parent company is situated outside Pakistan. The major decisions are taken in Pakistan by the BOD of the subsidiary company. The subsidiary company will be the Resident company of Pakistan.
Section 11(5) & 11(6) The income of the resident person will include both Pakistan and foreign source incomes. The non- resident person will be charged to tax, only the Pakistan source income. Section 11(6)
Other business activities (e.g. consultancy) carried on in Pakistan of the same or similar kind as those sold by the person through a permanent establishment in Pakistan, or Any business connection in Pakistan.
Receipts of income is taxable while Remittance is just transfer of amount, therefore not taxable. Cash or kind Receipts and Accrual Actual Receipts or Constructive receipts (Deemed Income e.g. unexplained income ,treated as actual income).
Determine Gross total income of MR. Ahmed in the light of the following particulars for the Tax Year 2010. Mr. Ahmed employed in Pakistan, received Rs. 4,00,000 as salary. His income from other sources is given under: Dividend received in Tokyo on 20th August 2010 from a Pakistani resident company. , amounting to Rs. 10,000. Received dividend from an American company worth Rs. 70,000 in Pakistani currency. Share of profit received in Tokyo on 10th May 2010 from business situated in Kuwait but controlled through a Permanent Establishment in Pakistan, Rs.60,000. Remittances from Tokyo on March 10th 2010 out of past profit earned and received there amounting Rs.6,00,000. Profit on debt received and earned in Pakistan on 1st August 2010 Rs.50,000. Calculate his gross total income , if he is a) a resident and b) a non- resident
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TAXPAYER
2 (66)
Income chargeable to tax Representation of such person Person responsible to deduct tax & deposit with Govt. treasury. Required to file return of income Note: Filing the Return of Income and paying tax are two different aspects, a return may be a Nil Return.
d)
EXCEPTIONS TO (e)
(Section 115)
a)
Hundred percent salary income i) Widow ii) Orphan below the age of 25 years iii) Disabled person iv) Non resident person owning immovable property
b)
a) Salary b) Income from Property c) Income from Business d) Capital Gains and e) Income from other Sources
ASSOCIATES
Section 85