Collection of Income Tax in Pakistan

TO:
SIR RIZWAN UL HASSAN
COLLECTION OF
INCOME TAX
IN PAKISTAN
BY:
ALISHAN MEGHANI
MALIK MANSOOR ALI
RAHIM RAFIQ SAJWANI

“In this world, nothing is certain
but death and taxes”
-Benjamin Franklin

INTRODUCTION
 The word tax is derived from the Latin word “taxo” which
means “rate”.
 It is a financial charge Upon Taxpayer. Taxpayer may be
individual or legal entity.
Types of tax:
 If tax is charged on personal or corporate income, then it is
a direct tax.
 If tax is charged on the price of a good or service, then it is
called an indirect tax.

PURPOSE OF TAXATION
 The purpose of taxation is to finance government expenditure
i.e. providing public goods and services, such as defense,
public welfare, social security etc.
 Increase level of standard.
 It influences the direction and structure of money supply,
investments, credits, production, interest rate, inflation, prices
and in general, of the national economy etc.

KINDS OF TAXATION
 INCOME TAX: It is imposed on factors market
 EXCISE DUTY: It is imposed on product market
 SALES TAX: It is imposed on buyers & seller side of the
market.
 WITHHOLDING TAX: It is imposed on assets such as motor
vehicle and property etc.

INCOME TAX
 Income tax is a type of tax which is collected by the (FBR) federal board
of revenue, It is the semi-autonomous, supreme federal agency of
Pakistan that is responsible for auditing, enforcing and collecting
revenue for the government of Pakistan.
INCOME TAX LAW:
 Law concerning taxation of income in Pakistan is stated in the
Income Tax Ordinance, 2001 (the Ordinance) and the rules framed
there under viz. Income Tax Rules, 2002 (the Rules).

 The Ordinance is a Central statute and is, therefore, applicable to the
whole of Pakistan.
 Under section 4 of the Ordinance, income tax is imposed for each
tax year at specified rates on every person who has taxable income
for the year.

HEADS OF INCOME TAX IN
PAKISTAN
Under the Ordinance, income is classified into the following
five heads:
 Salary
 Income from property
 Income from business
 Capital gains
 Income from other sources

Collection of Income Tax in Pakistan

Income from Salary
Salary includes:-
 Wages
 Any gratuity
 Any fees, commission, bonus, perquisite on profits.
 Any advance of salary
 Any earned leave
 Employers contribution (taxable) towards recognized provident
fund.

CONDITIONS TO BE SATISFIED
 The property must consist of buildings or lands
 The assesse must be the owner of such house property.
 The property should not be used by the owner thereof for the
purpose of any business or profession carried on by him, the
profits of which are chargeable to tax.
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11

BASIS OF CHARGE
The following income is chargeable to tax under the head “Profits of
business or profession”
 Profits of any business or profession;
 Any compensation or other payments due to or received by any
person specified
 Income derived by a trade, professional or similar association
from specific services performed for its members
 The value of any benefit or perquisite, whether convertible into
money or not, arising from business or the exercise of a
profession
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 Any profit on transfer of the Duty Entitlement Pass Book
Scheme.
 Any profit on the transfer of the duty free replenishment
certificate
 Export incentive available to exporters
 Any interest, salary, bonus, commission or remuneration
received by a partner from firm; Any sum received for not
carrying out any activity in relation to any business or not to
share any know-how, patent, copyright, trademark, etc.
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BASIS OF CHARGE
Capital Gain’s tax liability arises only when the following
conditions are satisfied:
 There should be a capital asset.
 The capital asset is transferred by the assesse
 Such transfer takes place during the previous year.
 Any profit or gains arises as a result of transfer.
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GENERAL
Income of every kind, which is not to be excluded from the
total income and not chargeable to tax under any other
head, shall be chargeable under the head “Income from
Other Sources”.
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SPECIFIC INCOME
 Dividends
 Lottery winnings
 Income by way of interest on securities
 Interest on bank deposits and loans
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IMPACT OF TAXES
 Types of taxes affect people differently, depending on their
income, three forms of taxes are:
Progressive Tax
Regressive Tax
Proportional Tax

Collection of Income Tax in Pakistan

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