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Income Tax
Income Tax basics (/income-tax-basics/51147/61148)
https://www.fbr.gov.pk/income-tax-basics/51147/61148 1/8
14/09/2020 Income Tax basics - Federal Board Of Revenue Government Of Pakistan
Before Registration and Filing of your Income Tax Return, it is recommended that
one should establish basic understanding regarding these processes. Knowledge of
basic concepts would not only ensure that the tasks are performed easily but also in
the prescribed manner.
TAXABLE INCOME
Taxable Income means Total Income reduced by donations qualifying straight for
TOTAL INCOME
Total Income is the aggregate of Income chargeable to Tax under each head of
Income.
HEAD OF INCOME
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14/09/2020 Income Tax basics - Federal Board Of Revenue Government Of Pakistan
Under the Income Tax Ordinance, 2001, all Income are broadly divided into
following five heads of Income:
Salary;
RESIDENT
one hundred and twenty days or more in the tax year and, in the four years
preceding the tax year, has been in Pakistan for a period of, or periods
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14/09/2020 Income Tax basics - Federal Board Of Revenue Government Of Pakistan
NON-RESIDENT
Is defined in section 101 of the Income Tax Ordinance, 2001, which caters for
Incomes under different heads and situations. Some of the common Pakistan source
Incomes are as under: -
exercised;
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14/09/2020 Income Tax basics - Federal Board Of Revenue Government Of Pakistan
PERSON
An Individual;
COMPANY
A modaraba;
An amendment has been made through Finance Act, 2013 to enlarge the scope
of definition of a Company. Now as per Income Tax Ordinance, 2001 a company
includes:
A Provincial Government;
A Small Company
ASSOCIATION OF PERSONS
Includes a firm (the relation between persons who have agreed to share the
profits of a business carried on by all or any of them acting for all), a Hindu undivided
family, any artificial juridical person and any body of persons formed under a foreign
law, but does not include a Company.
TAX YEAR
Is a period of twelve months ending on 30th day of June i.e. the financial year
and is denoted by the calendar year in which the said date falls. For example, tax
year for the period of twelve months from July 01, 2017 to June 30, 2018 shall be
denoted by calendar year 2018 and the period of twelve months from July 01, 2018 to
June 30, 2019 shall be denoted by calendar year 2019. It is called Normal Tax Year.
Means any period of twelve months and is denoted by the calendar year relevant
to the Normal Tax Year in which closing date of the Special Tax Year falls. For
example, Tax Year for the period of twelve months from January 01, 2017 to
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14/09/2020 Income Tax basics - Federal Board Of Revenue Government Of Pakistan
December 31, 2017 shall be denoted by calendar year 2018 and the period of twelve
months from October 01, 2017 to September 30, 2018 shall be denoted by calendar
year 2019.
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