Taxation

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Tax on Taxable
Income
Chapter
03
TOTAL INCOME, TAXABLE INCOME & TAX ON TAXABLE INCOME
(4, 9, 10, 11)
Tax
income tax shall be imposed:
on every person havi ng taxabl e i ncome
for each tax year,
at applicable rates
Total Income
The total income of a person for a tax year shall be the sum of the
persons income under all heads of income.
Income is always calculated separately for each tax year.
Heads of
income
For tax purposes all incomes are classified under following heads;
a) Salary;
b) Income from Business;
c) Capital Gains; and
d) Income from Other Sources.
e) Income from Property (not included in total income now,
instead dealt separate)
Income under each head is derived as under;
Income = Amounts received deductions allowed
Deductions are expenses incurred to earn income, if allowed by
Income Tax Ordinance.
Loss
When total receipts < deductions allowed, the person is said to have
sustained loss for that head for the tax year.
A loss for a head of income for a tax year shall be dealt with in
accordance with Part VIII of this Chapter.
Taxable
income
Taxable income = Total income deductible allowances
Deductible allowances are;
a) Zakat
b) Workers Welfare Fund
c) Workers Participation Fund
Taxable income is never below zero i.e. deductions are allowed up to
total income only.
Income of
resident
Income of resident person under a head of income includes both;
Pakistan source &
Foreign source
Income of
Non-
resident
Income of a non resident is Pakistan source amount only.
Computation The Income Tax payable shall be computed as:
CA Module C
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of tax
payable
Tax = Taxable income x tax rates
Less: tax credits allowed for the year
Tax payable/ refundable
Priority of
tax credits
If a taxpayer is allowed more than one tax credit for a tax year, the
credits shall be applied in the following order
any foreign tax credit ;then
any tax credit allowed for
i. Charitable donations
ii. Investment in shares
iii. Contribution to an Approved Pension Fund.
iv. Profit on debt
any tax credit allowed for advance tax paid (147) and tax deducted
at source (168)
Income
excluded
from taxable
income
Incomes taxable as separate block (section 6, 7, and 8).
Income included in Final Tax regime where tax deducted at source
is final settlement of tax liability.
Tax to be
deducted at
source
Where under this Ordinance, income tax is to be deducted at source or
collected or paid in advance, required act shall be done accordingly.
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