Assignment # 01

Name: Muhammad Zahir

Class: BBA 8th
Roll No:21
Session:2017-21
Subject: Business Taxation
Submitted to: Sir Majid Mehmood Arif
Dept.: Business Administration
 University of Kotli
Introduction:
Business Taxation:
“ It is a subject that tells us about a person or company earning through business and specific
amount pay in form of tax to the government.”
There are many rules and regulations related to the earning amount of person and company
form of business. Such as income tax, sales tax, custom duty, federal exercise duty etc.,are
taxes. Knowledge related to tax is important for every person in respect of business.
Developed countries have 30 to 40 % tax to GDP ratio whereas developing countries have
around about 11% tax to GDP ratio.
Filer and non-filer in term of income tax. According to income tax rules if a person earned then
he/she file the income tax return is called filer and if a person earned then he/she did not file
the income tax return is called non-filer.
Tax collection Bodies:
In Pakistan, a sector which is called Federal Board of Revenue (FBR) collected the all over the
taxes within the country. Similary the tax collection body in Pakistan’s Occupied is Central
Board of Revenue (CBR). CBR has same rules and regulations that FBR adopted.
Ordinance 2001 is used for collection of taxes. Five ways through which we earn money.
These are called ' Head of income’
1. Salary
In ordinance 2001, section 12 tells about the tax year that is started from Ist July and ended on
30 June. During this year employees should pay tax. Cash or asset capital form will be salary ,for
accomplishing a task the overtime or special fee, Any benefits or perquisite given by company
to jts employee, all allowance like utility bill, health, rent, travel (but allowance given to
employee on the performance will not in the category of tax), any expense for office usage will
pay by employee, any additional benefits , company make agreement on the basis of your skill,
any changing in the agreement of employee, if company exit their employees, the amount
given on time of retirement, all previous things will be the part of salary and tax pay on it . If
wrong reduction by employer then this amount return back the amount by employee will pay
tax. Employer and employee will make an agreement according to past or future plan then
employee that amount will be included in category of tax and also monthly retirement.
If employee pays the employer tax then employer will not pay the tax. Some people hire the
tax consultant for paying tax then they pay his/her extra fee will be charged some tax on it.
In Section 13, related to value of perquisite that given by company to their employees. How
valuation of perquisite? Section 13 will be applied on section 12 all benefits but section 13 will
not applied on all allowances and any expenses that does by an employee of section 12.
Company provide a vehicle to employee then how much valuation on the vehicle will be the
part of salary and tax pay on it. There is a formula:(A×B)-C The tax on vehicle depend on its
usage- partly or wholly. Where, A= purchased price of vehicle, B= will be 15% if vehicle is
privately used or 7.5% if vehicle is partly used, C=Amount that will be paid by employee for
purchasing the vehicle. Provide a person, driver, assistant will part of employee and tax on it,
any bill of employer will pay by employee is in the category of tax and pay on it. Employee gets
loan or free interest loan then benchmark rate will be part of salary and if gives the employee
loan on lower interest rate than benchmark. The difference between them will be part of salary
and tax pay on this. If loan get for assets or property utilization and such income report that
loan is not part of salary and will not tax applied on it. Any concession gives employer to his
employee, any payment pay by employee for his employer will be salary and tax on it. If service
or property given then its market fair value will be part of salary and tax on it. Benchmark rate
is 5% and will increase 1% in every year and it is not above the 10%. Any facility given is part of
service and electricity, gas, water and telephone bills are utilized bills.
In Section 14, share scheme is given to employed for motivation and which share scheme is
taxable. If restrictions on share scheme then it will not the part of salary and no tax on it and if
no restrictions on share then fair market value is included in salary and tax on it. If restrictions
on the transfer of shares then no tax charged on it or remove this restrictions then it will be
part of salary and tax on it. If employee sale the shares then its cost will be according to pay the
cost to employer on the time of purchasing these shares. Shares issues by employer and the
payment for these shares will be added in the cost of shares and tax paid on these shares will
be added in the cost value of shares. The profit of shares is calculated with the help of following
formula i.e., A-B because we pay tax on it. Where A is price of selling a share and B is the actual
value of shares.
Section 149, employer will deduct the tax from salary of employee and if bank will deduct tax
from employees’ salaries. Then they claim to get tax from income tax because they already paid
the tax to the owner. Average rate of tax is calculated by dividing total taxable income with
12.If company conduct the meeting and pay a specific amount to the professional than 20% tax
will deduct on it. If the salary of profession will not exceed the tax then they closim to get the
deduct amount. If our salary exceed from 6 lac then we pay tax. If total cost of salary more than
50% then tax on it . Where taxable income does not exceed .