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
- — (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;
- 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;
- 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. — 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