This blog is written by Mr. Shahwazir Safi, Senior Associate Taxation and Corporate Services. Please read this blog and provide your comments.


Basics About Income Tax Laws

PERSON

SECTION 80

  • (1) The following shall be treated as persons for the purposes of this Ordinance, namely: —

(a)        An individual;

(b)        a company or association of persons incorporated, formed, organised or established in

Pakistan or elsewhere;

(c)        the Federal Government, a foreign government, a political sub-Division of a foreign

government, or public international organisation.

(2)        For the purposes of this Ordinance

(a)        “association of persons” includes a firm, a Hindu undivided family, any artificial juridical

person and any body of persons formed under a foreign law, but does not include a company;

Company

  • SECTION 80 (b)        “company” means

(i)         a company as defined in the Companies Ordinance, 1984 (XLVII of 1984);

(ii)        a body corporate formed by or under any law in force in Pakistan;

(iii)       a modaraba;

(iv)       a body incorporated by or under the law of a country outside Pakistan relating to

incorporation of companies;

(v)        a co-operative society, a finance society or any other society;

(va)      a non-profit organization;

(vb)      a trust, an entity or a body of persons established or constituted by or under any law for

the time being in force;

(vi)       a foreign association, whether incorporated or not, which the [Board] has, by general or

special order, declared to be a company for the purposes of this Ordinance;

(vii)      a Provincial Government;

(viii)     a Local Government in Pakistan; or

(ix)       a Small Company as defined in section 2;

Residential Status

  • Resident and non-resident persons.— (1) A person shall be a resident person for a tax year if the person is

(a)     a resident individual, resident company or resident association of persons for the year or

(b)     the Federal Government.

Resident Individual

  • Resident individual. — An individual shall be a resident individual for a tax year if the individual

(a)        is present in Pakistan for a period of, or periods amounting in aggregate to, one hundred and [eighty-three] days or more in the tax year; [or]

(b)        is an employee or official of the Federal Government or a Provincial Government posted abroad in the tax year.

  • Rule 14 of Income Tax Rules 2002:

Part of a day that an individual is present in Pakistan (including the day of arrival in, and the day of departure from, Pakistan) counts as a whole day of such presence; the following days in which an individual is wholly or partly present in Pakistan count as a whole day of such presence, namely: i. a public holiday; ii. a day of leave, including sick leave; iii. a day that the individual’s activity in Pakistan is interrupted because of a strike, lock-out or delay in receipt of supplies; or iv. a holiday spent by the individual in Pakistan before, during or after any activity in Pakistan; and

  • A day or part of a day where an individual is in Pakistan solely by reason of being in transit between two different places outside Pakistan does not count as a day present in Pakistan.

Resident Company & Resident AOP

  • Resident company.—

A company shall be a resident company for a tax year if

(a)       it is incorporated or formed by or under any law in force in Pakistan;

(b)        the control and management of the affairs of the company is situated wholly in Pakistan at any time in the year; or

(c)       it is a Provincial Government or [Local Government] in Pakistan.

  • Resident association of persons. — An association of persons shall be a resident association of persons for a tax year if the control and management of the affairs of the association is situated wholly or partly in Pakistan at any time in the year.

Taxable Income & Total Income

  • Taxable income.— The taxable income of a person for a tax year shall be the total income [under clause (a) of section 10] of the person for the year reduced (but not below zero)  by the total of any deductible allowances under Part IX of this Chapter of the person for the  year.
  • Total Income.— The total income of a person for a tax year shall be the sum of the [—]

(a)        person’s income under all heads of income for the year; and]

(b)        person’s income exempt from tax under any of the provisions of this Ordinance

 

 Shahwazir Safi