Business Taxation

Session X – Introduction of Taxation

Unit 1.0 Introduction to Taxation
Unit 1.1 Classification / Types of Taxes – Direct and Indirect Taxes
Unit 1.2 Total Income and Taxable Income
Unit 1.3 Heads of Income
Unit 1.4 Person
Unit 1.5 Tax Year
Unit 1.6 Status of Resident – Person (All three combined)
Unit 1.7 Status of Resident - Individual
Unit 1.8 Scope of Total Income for Resident and Non Resident
Unit 1.9 Foreign Source of Income of Resident Individuals

From the desk of Accounting and Finance Faculty – (Business Taxation Team)
 Business Taxation
Course Introduction – Business Law and Taxation
AoA, Welcome to the Online Course of “Business Law and Taxation".
This Course deals with providing basic knowledge of Business Law, Students will be
made familiar about the legal term used in ordinary business life. This course is designed to
introduce you to some basic legal concepts that are essentials for business people to
understand.
Students will also learn how to suggest on minor legal issues thus will save the
consultation cost of legal advisory in Organizations. In this course after covering, Contract Law,
other topics essential to understand, such as Company Law, Contract of Carriages, Law of
Partnership will be covered too.
In addition to some basic awareness regarding business law, students will also be able to
aware Labour related laws of Pakistan i.e. Factory Law, Worker Compensation Act and
Industrial Relationship Ordinance.
From the desk of Accounting and Finance Faculty – (Business Taxation Team)
 Business Taxation
In 2nd Portion of this Course, Taxation Law in Pakistan will be introduced.
Taxation Law i.e. Income Tax Law and Sales Tax Law along with awareness
regarding recent Modernization of FBR will be explained to students for the
core objective of interacting Small and Medium Business Organization with
FBR. Students will also be introduced with Online FBR portals of Income Tax
for e-filing purpose for Salaried as well as Business Individuals.

Next slide – Discuss LOs too

From the desk of Accounting and Finance Faculty – (Business Taxation Team)
 Business Taxation
Thus, After Studying Business Law Portion of this course, Students will be able to
• LO1: Be able to apply basic legal concepts of fundamental importance to Business.
• LO2: Describe the nature and classes of contracts. Also Identify the elements needed to create a contract.
May be able to Read, interpret contracts, and cases.
• LO3: Discuss the effect of fraud, undue influence, mistakes and misrepresentation existing in any
Contract. Identify and discuss illegal agreements.
• LO4: Be able to Identify Special Nature of contract i.e. Agency, Bailment, Guarantee etc
And Last but not the Least, studying Business Taxation Portion of this course, will make
student
• LO6: able to update themselves regarding time to time change in Taxation Law announced in Budget
every year.
• LO7: Be able to e-file Income Tax Return of Individuals (atleast of Individuals i.e. Salaried as well as Small
Business Traders)
From the desk of Accounting and Finance Faculty – (Business Taxation Team)
 Business Taxation
Classification / Types of Taxes in Pakistan
• Direct Taxes
– Income Tax

• Indirect Taxes
–General Sales Tax / Federal Excise Duty
–Import Duty

From the desk of Accounting and Finance Faculty – (Business Taxation Team)
 Business Taxation
Total Income and Taxable Income

• Total Income is the aggregate of Income chargeable to Tax under each head of Income.
– Salary;
– Income from property;
– Income from business;
– Capital gains; and
– Income from Other Sources

• Taxable Income means Total Income reduced by donations qualifying straight for ded
uctions and certain deductible allowances.

From the desk of Accounting and Finance Faculty – (Business Taxation Team)
 Business Taxation
Deductible Allowances for Taxable Income

From the desk of Accounting and Finance Faculty – (Business Taxation Team)
 Business Taxation
TAX YEAR
• Is a period of twelve months ending on 30th day of June i.e. the financial year and i
s denoted by the calendar year in which the said date falls. For example, tax year fo
r 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.
• Types of Tax Year
– Normal Tax Year
– Special Tax Year
– Transitional Tax Year

From the desk of Accounting and Finance Faculty – (Business Taxation Team)
 Business Taxation
Special 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 Dece
mber 31, 2017 shall be denoted by calendar year 2018 and the period of twelve mon
ths from October 01, 2017 to September 30, 2018 shall be denoted by calendar year
2019.
Transitional Tax Year
• While applying for change of Normal Tax Year to Special Tax year of Vice versa, the p
eriod in between those two year, is known as Transitional Tax Year.
• It can not be equal to 12 Months and appears only during transfer of Tax Year
– i.e. July 2017 to September 2017 (3 Months for transition)

From the desk of Accounting and Finance Faculty – (Business Taxation Team)
 Business Taxation
PERSON

• An Individual;
• A Company or Association of Persons incorporated, formed, organized or establish
ed in Pakistan or elsewhere;
• The Federal Government, a foreign government, a political subdivision of a foreign
government, or public international organization

From the desk of Accounting and Finance Faculty – (Business Taxation Team)
 Business Taxation
RESIDENT
Income Tax Concepts
• An individual is Resident for a Tax Year if the individual:
– Is present in Pakistan for a period of, or periods amounting in aggregate to, one hundred and [eighty-three
] days or more in the tax year;
– Is present in Pakistan for a period of, or periods amounting in aggregate to, 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, o
r periods amounting in aggregate to, three hundred and sixty-five days or more; or
– Is an employee or official of the Federal Government or a Provincial Government posted abroad in the Tax
Year.
• An Association of Persons is Resident for a Tax Year if the control and management of its affairs is situated w
holly or partly in Pakistan at any time in that year;
• A Company is Resident for a Tax Year if :
– It is incorporated or formed by or under any law in force in Pakistan;
– The control and management of its affairs is situated wholly in Pakistan at any time in the year; or
– It is a Provincial Government or a local Government in Pakistan.
From the desk of Accounting and Finance Faculty – (Business Taxation Team)
 Business Taxation
Income Tax Concepts
Residential Status of an Individual Section 82

Relevance of the residential status: Physical Stay in

Pakistan duringthe tax
Nationality or the domicile has no relevance year
Status
for the tax purpose.
It is the residential status that matter. 0-119days Non- Resident

Accordingly a Pakistani can be a non-resident More than 120days Resident

whereas a foreigner can be a resident.

From the desk of Accounting and Finance Faculty – (Business Taxation Team)
 Business Taxation
Income Tax Concepts
Residential Status of an Individual - Section 82
Prior to the Finance Act 2019, an individual was treated as a "resident
individual" for a tax year if the person was present in Pakistan for a period of 183
days (over six months) or more in a tax year. Now, this period has been reduced to
only four months which means a person will have to stay abroad for eight months
to claim tax-free status.

From the desk of Accounting and Finance Faculty – (Business Taxation Team)
 Business Taxation
Residential Status of an Individual Section 82
Exception A government employee posted abroad is a considered as a resident irrespective of the
physical stay in Pakistan
Days counting under Rule 14 of the Income TaxRules

Following is included in counting of the days stayed in Pakistan :

 A day if arrival in Pakistan
 A day of departure from Pakistan
 A public holiday
 A day of leave
 A day that the individual’s activity in Pakistan is interrupted because of a strike , lockout or delay in
receipt of supplies
 A holiday spent in Pakistan before , during or after any activity in Pakistan

In case the person is in Pakistan solely as a transit of any voyage that day does not get counted in
determining the residential status .
From the desk of Accounting and Finance Faculty – (Business Taxation Team)
 Business Taxation
Scope of Total Income based on Residential Status
Residential Status Incidence of Taxation
Resident World wide income

Non- Resident Only Pakistan Source Income

TaxTreaties
Incidence of taxation as stated above can change subject to any tax treaty also known as
agreement for the avoidance of double taxation
Tax Treaty will be considered in case of
– Foreign source income of a resident person &
– Pakistan source income of a non resident person

From the desk of Accounting and Finance Faculty – (Business Taxation Team)
1
 Business Taxation
Foreign Source Income
In case of a short term resident – Section 50
If the individual is a resident only by reason of employment Foreign Source Inc
ome is exempt
The individual is in Pakistan for not more than 3 years
And the income is not received in Pakistan
In case of a returning expatriate – Section 51
Foreign Source Inco
If the individual is Paksitani Citizen me is exempt in curr
ent year and followi
The individual is resident during the current tax year ng tax year
And was non resident in the precceding 4 tax years
In case of Foreign Source Salary of Resident Individual – Section 51(2)& 102
If the individual has paid the foreign income tax on the foreign salary Exempt

or the individual leave during the year and remain abraod during the year
From the desk of Accounting and Finance Faculty – (Business Taxation Team)
1
 Business Taxation
Foreign Source Income
In case of a short term resident – Section 50

If the individual is a resident only by reason of employment Foreign Source

of Income is
The individual is in Pakistan for not more than 3 years Exempt

And the income is not received in Pakistan

From the desk of Accounting and Finance Faculty – (Business Taxation Team)
1
 Business Taxation
Foreign Source Income
In case of a returning expatriate – Section 51 Foreign Source
Income is
If the individual is Paksitani Citizen
Exempt
The individual is resident during the current tax year
in current year
And was non resident in the precceding 4 tax years and following
Tax year

From the desk of Accounting and Finance Faculty – (Business Taxation Team)
1
 Business Taxation
Foreign Source Income
In case of Foreign Source Salary of Resident Individual –
Section 51(2)& 102
Exempt
If the individual has paid the foreign income tax on the foreign salary

or the individual leave during the year and remain abraod during the year

From the desk of Accounting and Finance Faculty – (Business Taxation Team)
1
 Business Taxation
Tax Status in Pakistan
• Checking Registration Status at FBR

• Registration for FBR Portal!

• Submitting Return for a Tax Year!

From the desk of Accounting and Finance Faculty – (Business Taxation Team)
 Business Taxation
How to Check Taxation Registration
– Visit Online Verification Portal of FBR

– Go to Online NTN/STRN Inquiry

– Enter CNIC related details

From the desk of Accounting and Finance Faculty – (Business Taxation Team)
 Business Taxation
How to Check Active Tax Payer Status
– Visit Online Verification Portal of FBR

– Go to Active Tax Payer List (Income Tax)

– Enter CNIC related details

From the desk of Accounting and Finance Faculty – (Business Taxation Team)
 Business Taxation
How to Register for IRIS FBR Portal
– Visit FBR Website

– Under Online Services go to Income Tax Iris

– Go to Registration for Unregistered Person

– Enter CNIC related details

From the desk of Accounting and Finance Faculty – (Business Taxation Team)
 Business Taxation
How to apply for
Sales Tax Registration Number
IRIS FBR Portal

From the desk of Accounting and Finance Faculty – (Business Taxation Team)
 Business Taxation

How to Submit Return for

Individual having No Income –
Case of Widow or HouseWife having
No Source of Income

From the desk of Accounting and Finance Faculty – (Business Taxation Team)
 Business Taxation

How to Create Admitted Income

Tax Challan for any
Business Individual

From the desk of Accounting and Finance Faculty – (Business Taxation Team)
 Business Taxation

How to Create Withholding Income

Tax Challan by any
Business Individual after Payments

From the desk of Accounting and Finance Faculty – (Business Taxation Team)