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Taxation Managment

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Taxation Management ­ FIN 623
VU
MODULE 1
LESSON 1.3
AN OVERVIEW OF TAXATION
Type of Taxes:
Different types of taxes are explained below:
Direct taxes
Direct taxes are the taxes where incidence of taxation is on the person on whom levied. For
example income tax
Indirect Taxes
Indirect taxes are the taxes where incidence of tax can be shifted by the person on whom levied to
other persons. For example sale tax
Proportional Taxes
These taxes are levied with the same percentage. For example, sales tax is levied at the rate of 15%.
Progressive Taxes
This is based on the "capacity to pay" principle of taxation. In this type, the rate of tax increase as
the income increase.
Regressive taxes
It is based on the benefits received principle
Value Added Taxes.
This type of tax is levied at each stage of value addition. For example sales tax
Taxation Structure of Pakistan:
Federal Taxes:
Federal taxes are the taxes which can be levied by the federal government and include among others the
followings:
Income tax
Corporate tax
Customs duties/Tariffs
Sales tax
Provincial Taxes:
Stamps Duty
Registration Tax
Motor vehicle tax
Taxation Management--Explained
Taxation management is a strategy where by a person manages its business and other transactions/
activities in such a way so as to make maximum use of tax holidays, exemption, concession, rebates, tax
credits, deductible allowances available under law and as a result is able to derive the benefit of
minimizing his tax liability. To achieve this objective, clear understanding of respective laws and
professional expertise of their application is of at most importance. Scope of taxation management is
multi-dimension, while making choices among different opportunities available to a person, the tax
factor among others also plays an important role. Taxation management covers a decision regarding
available choice between an employment and self- employment or available choice of a business as sole
proprietorship, partnership, private company or public company. It is professional strategy to plan tax
affairs of a person. It is of significant importance in business management decision.
Person includes a living person (natural) or artificial person (corporate person).
Scope of Taxation Management ranges from incorporation of a business to mergers, amalgamation,
winding up, liquidation, dissolution etc of business
Essentials of Taxation Management
Understanding and application of updated laws particularly tax laws, rules and procedures
Application/use of benefits such as Tax credits, rebates, exemptions, reductions etc available under
the law.
Maintenance of Records/Books of Accounts as per requirement of law
Disclosure of true facts (no concealment) that is i-e; there should be no concealment with regard to
furnishing of information or preparation of accounts / data.
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Taxation Management ­ FIN 623
VU
Process of Legislation
When National Assembly is in Session
When National Assembly is not in Session
Money Bill
All Other Bills
President
Ordinance
National
National
Senate
Assembly
Assembly
President
Sent for reconsideration to
Parliament
(Joint  sitting  of  National
Assembly and Senate)
Reject
Assent
Act/Law
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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