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Taxation Managment

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Taxation Management ­ FIN 623
VU
MODULE 4
LESSON 4.12
HEADS OF INCOME (SECTION 11)
Section 43 Foreign Government Officials
Salary of an employee of foreign government exempt Provided:
a.  Employee citizen of foreign country and not a citizen of Pakistan.
b. Services performed are similar to services performed by employees of the Federal Government in
foreign countries and
c.  Foreign government also grants similar exemptions to employees of Federal Government.
Exemptions under International Agreements Section 44
44.  Exemptions under international agreements
(1) Any Pakistan-source income which Pakistan is not permitted to tax under a tax treaty
shall be exempt from tax under this Ordinance.
(2) Any salary received by an individual (not being a citizen of Pakistan) shall be exempt
from tax under this Ordinance to the extent provided for in an Aid Agreement between
the Federal Government and a foreign government or public international
organization, where:
(a) the individual is either not a resident individual or a resident individual solely
by reason of the performance of services under the Aid Agreement;
(b) if the Aid Agreement is with a foreign country, the individual is a citizen of
that country; and
(c) The salary is paid by the foreign government or public international
organization out of funds or grants released as aid to Pakistan in pursuance of
such Agreement.
(3)  Any income received by a person (not being a citizen of Pakistan) engaged as a
contractor, consultant, or expert on a project in Pakistan shall be exempt from tax
under this Ordinance to the extent provided for in a bilateral or multilateral technical
assistance agreement between the Federal Government and a foreign government or
public international organization, where:
(a) the project is financed out of grant funds in accordance with the agreement;
(b) the person is either a non-resident person or a resident person solely by reason of
the performance of services under the agreement; and
(c) the income is paid out of the funds of the grant in pursuance of the agreement.
Exemptions under Tax Treaty
Any salary received by an individual (not being a citizen of Pakistan) shall be exempt from
Tax to the extent provided for in an Aid Agreement.
Section 45 President's Honour
(1) Any allowance attached to any Honour, Award, or Medal awarded to a person by the President
of Pakistan shall be exempt from tax under this Ordinance.
(2) Any monetary award granted to a person by the President of Pakistan shall be exempt from tax
under this Ordinance.
Section 46 Profit on Debt
Any profit received by a non ­ resident person on a security issued by a resident person shall be exempt
from tax Provided:
Persons not associates
Security widely issued by resident person outside Pakistan
Profit on security was paid outside Pakistan
Security approved by Central Board of Revenue (CBR)
Section 47 Scholarships
Any scholarship granted to a person to meet the cost of person's education shall be exempt from tax.
Section 48 Support Payments under an Agreement to Live Apart
Any income received by a spouse as support payment under an agreement to live apart shall be exempt
from tax under this Ordinance.
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Taxation Management ­ FIN 623
VU
Section 49 Federal & Provincial Govt. and Local Authority Income
 Income of Federal Government exempt from tax
 Income of Provincial Government or a Local Authority in Pakistan shall be exempt under all heads
of income other than income from Business, derived outside its jurisdictional area, that shall be
taxable.
 Federal Government, a Provincial Government or a Local Authority shall not be liable to any
collection or deduction of advance tax.
Section 50 Foreign-Source Income of Short-Term Resident Individuals
1. Subject to sub-section-2, the foreign-source income of an individual shall be exempt:
a.  Who is a resident individual solely by reason of the individual's employment; and
b. Who is present in Pakistan for a period or periods not exceeding three years,
2. This section shall not apply to
a.  Any income derived from a business of the person established in Pakistan; or
b. Any foreign-source income brought into or received in Pakistan by the person.
Section 51 Foreign-Source Income of Returning Expatriates
1. Any foreign-source income derived by a citizen of Pakistan in a tax year who was not a resident
individual in any of the four tax years preceding the tax year in which the individual became a
resident shall be exempt from tax under this Ordinance in the tax year in which the individual
became a resident individual and in the following tax year.
2. Where a citizen of Pakistan leaves Pakistan during a tax year and remains abroad during that tax
year, any income chargeable under the head :Salary" earned by him outside Pakistan during that
year shall be exempt from tax under the Ordinance.
Exemptions and tax Concessions in second Schedule Section 53
Income is exempt from income tax derived from voluntary contributions, to charitable or religious
institutions. The exemption is conditional to:
a.  must be solely applied for the purposes of the objects of the institution
b. No benefit for private religious trust which do not ensure for public benefit.
Certain receipts of charitable institution [Clause (60), Part I of the Second Schedule]
Donation to certain institution [Clause (61), Part I of the Second Schedule]
"[Any] amount paid as donation to the following institution, foundations, societies, boards, trusts and
funds, namely:
i)  Any Sports Board or Institution recognized by the Federal Government for the purposes of
promoting, controlling or regulating any sport or game;
ii) Fund for Promotion of Science and Technology in Pakistan
iii) Fund for Retarded and Handicapped Children; Proviso, Individual 30,Co.15p.c
Donation to the President's Relief Fund for Earthquake Victims 2005 [Clause (63A),]
"Any amount paid as donation to the President's Relief Fund for Earthquake Victims 2005."
Foreign Currency Accounts [Clause (80), Part I of the Second Schedule]
"Any income derived from a private foreign currency account held with an authorized bank in Pakistan, [or
certificates of investment issued by Investment Banks,] in accordance with the Foreign Currency Accounts
Scheme introduced by the State Bank of Pakistan, by a resident individual who is a citizen of Pakistan.
Provided that the exemption under this clause shall not be available in respect of any incremental deposits
made in the said accounts on the after the 16th day of December, 1999, or in respect of any accounts
opened under the said scheme on or after the said date."
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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