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Taxation Managment

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Taxation Management ­ FIN 623
VU
MODULE 8
LESSON 8.33
INCOME FROM BUSINESS & ITS COMPUTATION
Deductions Allowed under Section 20
Deduction allowed for expenditure incurred by a person in the year wholly for the purpose of business:
Expenditure on acquiring a depreciable asset or an intangible with useful life of more than one year.
Expenditure in the course of amalgamation of companies incurred by an amalgamated company
Deductions not Allowed ­ Sec. 21
a.  Any cess, rate or tax paid or payable by a person in Pakistan or a foreign country under PTR/Final Tax
Regime.
b. Any amount of tax deducted at source.
c.  If payer/employer does not deduct tax from payments/disbursement of salary, then payments made,
salaries paid by such payer/employer shall not be allowed for deduction of these expenses.
d. Any entertainment expenditure in excess of such limits [or in violation of such conditions] as may be
prescribed;
e.  Any contribution made by the person to a fund that is not a recognized provident fund* [approved
pension fund] approved superannuation fund, or approved gratuity fund;
f.  Any contribution made by the person to any provident or other fund established for the benefit of
employees of the person, unless the person has made effective arrangements to secure that tax is
deducted under section 149 from any payments made by the fund in respect of which the recipient is
chargeable to tax under the head "Salary"
g. Any fine or penalty paid or payable by the person for the violation of any law, rule or regulation.
h. Any personal expenditures incurred by the person;
i.  Any amount carried to a reserve fund or capitalized in any way;
j.  Any profit on debt, brokerage, commission, salary or other remuneration paid by an association of
persons to a member of the association.
k. Omitted by finance act, 2006
l.  Any expenditure for a transaction, paid or payable under a single account head which, in aggregate,
exceeds fifty thousand rupees, made other than by a crosses cheque drawn on a bank or crossed bank
draft or crossed pay order or any other crossed banking instrument showing transfer of amount from
the business bank account of the taxpayer:
Provided that online transfer of payment from the business account of the payer to the business account of
payee as well as payments through credit card shall be treated as transactions through the banking channel,
subject to the condition that such transactions are verifiable from the bank statements of the respective
payer and the payee.
Provided further that this clause shall not apply in the case of-
(a) Expenditure not exceeding ten thousand rupees;
(b) Expenditures on account of:
(i)
Utility bills;
(ii)
Freight charges;
(iii)
Travel fare;
(iv)
postage; and
(v)
Payment of taxes, duties, fee, fines or any other statutory obligation;
m. Any salary paid or payable exceeding [ten] thousand rupees per month other than by a crossed
cheque or direct transfer of funds to the employee's bank account; and
n.  Except as provided in Division III of this Part, any expenditure paid or payable of a capital nature.
60
Table of Contents:
  1. AN OVERVIEW OF TAXATION
  2. What is Fiscal Policy, Canons of Taxation
  3. Type of Taxes, Taxation Management
  4. BASIC FEATURES OF INCOME TAX
  5. STATUTORY DEFINITIONS
  6. IMPORTANT DEFINITIONS
  7. DETERMINATION OF LEGAL STATUS OF A PERSON
  8. HEADS OF INCOME
  9. Rules to Prevent Double Derivation of Income and Double Deductions
  10. Agricultural Income
  11. Computation of Income, partly Agricultural,
  12. Foreign Government Officials
  13. Exemptions and Tax Concessions
  14. RESIDENTIAL STATUS & TAXATION 1
  15. RESIDENTIAL STATUS & TAXATION 2
  16. Important Points Regarding Income
  17. Geographical Source of Income
  18. Taxation of Foreign-Source Income of Residents
  19. Exercises on Determination of Income 1
  20. Exercises on Determination of Income 2
  21. SALARY AND ITS COMPUTATION
  22. Definition of Salary
  23. Significant points regarding Salary
  24. Tax credits on Charitable Donations
  25. Investment in Shares
  26. SALARY AND ITS COMPUTATION EXERCISES 1
  27. SALARY AND ITS COMPUTATION EXERCISES 2
  28. SALARY AND ITS COMPUTATION EXERCISES 3
  29. Tax treatment of Gratuity
  30. Gratuity Exercise
  31. PROVIDENT FUND
  32. Exemptions on Business income, Treatment of Speculation Business
  33. Deductions Allowed & Not Allowed
  34. Deductions: Special Provisions, Depreciation
  35. Methods of Accounting
  36. Taxation of Resident Company
  37. Taxation of Companies: Exercises
  38. Computation of Capital Gain
  39. Disposals Not Chargeable To Tax
  40. TAX RETURNS & ASSESSMENT OF INCOME UNIVERSAL SELF ASSESSMENT SCHEME
  41. Normal Assessment, USAS, Provisional Assessment, Best Judgment Assessment
  42. ADVANCE TAX COLLECTION & RECOVERY OF TAX PENALTIES & PROSECUTION
  43. What is Value Added Tax (VAT)?
  44. SALES TAX
  45. SALES TAX RETURNS