Pkrevenue.com

Tag: Income Tax Ordinance 2001

  • Notices for filing income tax returns of past 10 years may be issued

    Notices for filing income tax returns of past 10 years may be issued

    ISLAMABAD: Tax officials have been empowered to issue notices to taxpayers for filing income tax returns of past 10 years.

    Sources in Federal Board of Revenue (FBR) said that there are many cases had been identified where persons had accumulated assets and making huge amount transactions but not filing their income tax returns and wealth statements.

    The sources said that the tax authorities may invoke Section 114(5) of the Income Tax Ordinance, 2001 for the purpose to compel such persons to file their returns of past 10 years.

    The Section 114(5) of the Ordinance stated: “A notice under sub-section (4) may be issued in respect of one or more of the last five completed tax years or assessment years.

    “Provided that in case of a person who has not filed return for any of the last five completed tax years, notice under sub-section (4) may be issued in respect of one or more of the last ten completed tax years.”

    Sub-Section (4) of Section 114 of the Ordinance stated that subject to sub-section (5), the Commissioner may, by notice in writing, require any person who, in the Commissioner’s opinion, is required to file a return of income under this section for a tax year or assessment year but who has failed to do so to furnish a return of income for that year within thirty days from the date of service of such notice or such longer or shorter period as may be specified in such notice or as the Commissioner may allow.

  • Method of accounting for computing income tax

    Method of accounting for computing income tax

    KARACHI: Federal Board of Revenue (FBR) has said that a person’s income chargeable to tax shall be computed in accordance with the method of accounting regularly employed by such person.

    The FBR issued Income Tax Ordinance, 2001 updated till June 30, 2019 incorporating amendments made through Finance Act, 2019. The FBR explained method of accounting in Section 32 of the Ordinance.

    Section 32: Method of accounting

    Sub-Section (1): Subject to this Ordinance, a person’s income chargeable to tax shall be computed in accordance with the method of accounting regularly employed by such person.

    Sub-Section (2): Subject to sub-section (3), a company shall account for income chargeable to tax under the head “Income from Business” on an accrual basis, while other persons may account for such income on a cash or accrual basis.

    Sub-Section (3): The Board may prescribe that any class of persons shall account for income chargeable to tax under the head “Income from Business” on a cash or accrual basis.

    Sub-Section (4): A person may apply, in writing, for a change in the person’s method of accounting and the Commissioner may, by order in writing, approve such an application but only if satisfied that the change is necessary to clearly reflect the person’s income chargeable to tax under the head “Income from Business”.

    Sub-Section (5): If a person’s method of accounting has changed, the person shall make adjustments to items of income, deduction, or credit, or to any other items affected by the change so that no item is omitted and no item is taken into account more than once.

    Section 33: Cash-basis accounting

    A person accounting for income chargeable to tax under the head “Income from Business” on a cash basis shall derive income when it is received and shall incur expenditure when it is paid.

    Section 34: Accrual-basis accounting

    Sub-Section (1): A person accounting for income chargeable to tax under the head “Income from Business” on an accrual basis shall derive income when it is due to the person and shall incur expenditure when it is payable by the person.

    Sub-Section (2): Subject to this Ordinance, an amount shall be due to a person when the person becomes entitled to receive it even if the time for discharge of the entitlement is postponed or the amount is payable by instalments.

    Sub-Section (3): Subject to this Ordinance, an amount shall be payable by a person when all the events that determine liability have occurred and the amount of the liability can be determined with reasonable accuracy.

    Sub-Section (5): Where a person has been allowed a deduction for any expenditure incurred in deriving income chargeable to tax under the head “Income from Business” and the person has not paid the liability or a part of the liability to which the deduction relates within three years of the end of the tax year in which the deduction was allowed, the unpaid amount of the liability shall be chargeable to tax under the head “Income from Business” in the first tax year following the end of the three years.

    Sub-Section (5A): Where a person has been allowed a deduction in respect of a trading liability and such person has derived any benefit in respect of such trading liability, the value of such benefit shall be chargeable to tax under the head “Income from Business” for the tax year in which such benefit is received.

    Sub-Section (6): Where an unpaid liability is chargeable to tax as a result of the application of sub-section (5) and the person subsequently pays the liability or a part of the liability, the person shall be allowed a deduction for the amount paid in the tax year in which the payment is made.

  • FBR explains chargeability of tax on income from property

    FBR explains chargeability of tax on income from property

    KARACHI: The rent received or receivable by a person during a tax year is chargeable to tax under head of income from property.

    The FBR issued Income Tax Ordinance, 2001 updated June 30, 2019 and explained the taxability on income from property under Section 15.

    Section 15: Income from property

    Sub-Section (1): The rent received or receivable by a person for a tax year, other than rent exempt from tax under this Ordinance, shall be chargeable to tax in that year under the head “Income from Property”.

    Sub-Section (2): Subject to sub-section (3), “rent” means any amount received or receivable by the owner of land or a building as consideration for the use or occupation of, or the right to use or occupy, the land or building, and includes any forfeited deposit paid under a contract for the sale of land or a building.

    Sub-Section (3): This section shall not apply to any rent received or receivable by any person in respect of the lease of a building together with plant and machinery and such rent shall be chargeable to tax under the head “Income from Other Sources”.

    Sub-Section (3A): Where any amount is included in rent received or receivable by any person for the provision of amenities, utilities or any other service connected with the renting of the building, such amount shall be chargeable to tax under the head “Income from Other Sources”.

    Sub-Section (4): Subject to sub-section (5), where the rent received or receivable by a person is less than the fair market rent for the property, the person shall be treated as having derived the fair market rent for the period the property is let on rent in the tax year.

    Sub-Section (5): Sub-section (4) shall not apply where the fair market rent is included in the income of the lessee chargeable to tax under the head “Salary”.

    Sub-Section (6): Income under this section derived by an individual or an association of persons shall be liable to tax at the rate specified in Division VIA of Part I of the First Schedule.

    Sub-Section (7): The provisions of sub-section (1), shall not apply in respect of an individual or association of persons who derive income chargeable to tax under this section not exceeding two hundred thousand rupees in a tax year and does not derive taxable income under any other head.

    Section 15A: Deductions in computing income chargeable under the head “Income from Property”

    Sub-Section (1): In computing the income of a company chargeable to tax under the head “Income from Property” for a tax year, a deduction shall be allowed for the following expenditures or allowances, namely:-

    (a) In respect of repairs to a building, an allowance equal to one-fifth of the rent chargeable to tax in respect of the building for the year, computed before any deduction allowed under this section;

    (b) any premium paid or payable by the company in the year to insure the building against the risk of damage or destruction;

    (c) any local rate, tax, charge or cess in respect of the property or the rent from the property paid or payable by the company to any local authority or government in the year, not being any tax payable under this Ordinance;

    (d) any ground rent paid or payable by the company in the year in respect of the property;

    (e) any profit paid or payable by the company in the year on any money borrowed including by way of mortgage, to acquire, construct, renovate, extend or reconstruct the property;

    (f) where the property has been acquired, constructed, renovated, extended, or reconstructed by the company with capital contributed by the House Building Finance Corporation or a scheduled bank under a scheme of investment in property on the basis of sharing the rent made by the Corporation or bank, the share in rent and share towards appreciation in the value of property (excluding the return of capital, if any) from the property paid or payable by the company to the said Corporation or the bank in the year under that scheme;

    (g) where the property is subject to mortgage or other capital charge, the amount of profit or interest paid on such mortgage or charge;

    (h) any expenditure, not exceeding six per cent of the rent chargeable to tax in respect of the property for the year computed before any deduction allowed under this section, paid or payable by the company in the year wholly and exclusively for the purpose of deriving rent chargeable to tax under the head, “Income from Property” including administration and collection charges;”

    (i) any expenditure paid or payable by the company in the tax year for legal services acquired to defend the company’s title to the property or any suit connected with the property in a court; and

    (j) where there are reasonable grounds for believing that any unpaid rent in respect of the property is irrecoverable, an allowance equal to the unpaid rent where—

    (i) the tenancy was bona fide, the defaulting tenant has vacated the property or steps have been taken to compel the tenant to vacate the property and the defaulting tenant is not in occupation of any other property of the company;

    (ii) the company has taken all reasonable steps to institute legal proceedings for the recovery of the unpaid rent or has reasonable grounds to believe that legal proceedings would be useless; and

    (iii) the unpaid rent has been included in the income of the company chargeable to tax under the head “Income from Property” for the tax year in which the rent was due and tax has been duly paid on such income.

    Sub-Section (2): Where any unpaid rent allowed as a deduction under clause (j) of sub-section (1) is wholly or partly recovered, the amount recovered shall be chargeable to tax in the tax year in which it is recovered.

    Sub-Section (3): Where a person has been allowed a deduction for any expenditure incurred in deriving rent chargeable to tax under the head “Income from Property” and the person has not paid the liability or a part of the liability to which the deduction relates within three years of the end of the tax year in which the deduction was allowed, the unpaid amount of the liability shall be chargeable to tax under the head “Income from Property” in the first tax year following the end of the three years.

    Sub-Section (4): Where an unpaid liability is chargeable to tax as a result of the application of sub-section (3) and the person subsequently pays the liability or a part of the liability, the person shall be allowed a deduction for the amount paid in the tax year in which the payment is made.

    Sub-Section (5): Any expenditure allowed to a person under this section as a deduction shall not be allowed as a deduction in computing the income of the person chargeable to tax under any other head of income.

    Sub-Section (6): The provisions of section 21 shall apply in determining the deductions allowed to a person under this section in the same manner as they apply in determining the deductions allowed in computing the income of a person chargeable to tax under the head “Income from Business”.

    Sub-Section (7): Notwithstanding sub-section (6) of section 15, the provisions of this section shall apply to an individual or an association of persons deriving income exceeding Rs. 4 million under section 15, who opts to pay tax at the rate specified in Division I of Part I of the First Schedule.

  • FBR acquires information of motor vehicle purchasers

    FBR acquires information of motor vehicle purchasers

    KARACHI: Federal Board of Revenue (FBR) has asked motor vehicle registration authorities and car manufacturers to provide information of persons, who are registration or purchasing motor vehicles.

    The FBR has advised motor vehicle registration authorities and manufacturers of motor vehicles to provide details of persons whose withholding tax was deducted under Section 231B at the time of motor vehicle registration or purchase of motor vehicles.

    The tax authorities also advised the withholding agents to comply with the changes brought through Finance Act, 2019 under which the submission of withholding statement had been made mandatory twice in a year.

    The FBR asked the motor vehicle registration authority and car manufacturers to provide information in case of both categories i.e. compliant taxpayers or persons not on the Active Taxpayers List (ATL).

    From Tax Year 2020 (July 01, 2019 to June 30, 2020) the persons not appearing on ATL will liable to pay 100 percent higher withholding tax.

    The FBR is acquiring information for broadening of tax base purpose. The tax authorities believed that number of individuals were purchasing cars or registering motor vehicles, who were not on the tax roll or in other case compliant but those were concealing true income.

    Under Section 165 of the Income Tax Ordinance, 2001 the FBR empowered to obtain information from withholding agents.

    While withholding agents are required to provide information of persons making transactions, included:

    (a) the name, Computerized National Identity Card Number, National Tax Number and address of each person from whom tax has been collected under Division II of this Part or Chapter XII or the Tenth Schedule or to whom payments have been made from which tax has been deducted under Division III of this Part or Chapter XII or the Tenth Schedule in each half-year

    (b) the total amount of payments made to a person from which tax has been deducted under Division III of this Part or Chapter XII or the Tenth Schedule in each half-year

    (c) the total amount of tax collected from a person under Division II of this Part 1or Chapter XII or the Tenth Schedule or deducted from payments made to a person under Division III of this Part or Chapter XII or the Tenth Schedule in each half-year; and

    (d) such other particulars as may be prescribed

    Provided that every person as provided in sub-section (1) shall be required to file withholding statement even where no withholding tax is collected or deducted during the period.

    Every prescribed person collecting tax under Division II of this Part or Chapter Xll or the Tenth Schedule or deducting tax under Division III of this Part of Chapter Xll or the Tenth Schedule shall furnish statements under sub-section (l) as per the following schedule, namely:-

    (a) in respect of the half-year ending on the 30th June, on or before the 31st day of July; and

    (b) in respect of the half-year ending on the 31st December, on or before the 31st day of January.

  • Account holders with Rs10 million deposits on FBR’s radar

    Account holders with Rs10 million deposits on FBR’s radar

    KARACHI: Bank account holders making aggregate deposits of Rs10 million in a month are on radar of Federal Board of Revenue (FBR) for the purpose of broadening of tax base and identifying concealed incomes.

    Federal Board of Revenue (FBR) has said that banks are required to provide details of account holders having aggregate deposits of Rs10 million in a month.

    The FBR issued Income Tax Ordinance, 2001 updated till June 30, 2019 incorporating changes brought through Finance Act, 2019.

    Several changes have been introduced through Section 165A related to furnishing of information by banks of cash withdrawals and deposits.

    Section 165A: Furnishing of information by banks

    Sub-Section (1): Notwithstanding anything contained in any law for the time being in force including but not limited to the Banking Companies Ordinance, 1962 (LVII of 1962), the Protection of Economic Reforms Act, 1992 (XII of 1992), the Foreign Exchange Regulation Act, 1947 (VII of 1947) and the regulations made under the State Bank of Pakistan Act, 1956 (XXXIII of 1956), if any, on the subject every banking company shall make arrangements to provide to the Board in the prescribed form and manner,—

    (a) a list of persons containing particulars of cash withdrawals exceeding fifty thousand Rupees in a day and tax deductions thereon 4[ ], aggregating to Rupees one million or more during each preceding calendar month.;

    (b) a list containing particulars of deposits aggregating rupees ten million or more made during the preceding calendar month;

    (c) a list of payments made by any person against bills raised in respect of a credit card issued to that person, aggregating to rupees two hundred thousand or more during the preceding calendar month;

    (d) a list of persons receiving profit on debt exceeding five hundred thousand rupees and tax deductions thereon during preceding financial year.

    Sub-Section (2): Each banking company shall also make arrangements to nominate a senior officer at the head office to coordinate with the Board for provision of any information and documents in addition to those listed in sub-section (1), as may be required by the Board.

    Sub-Section (3): The banking companies and their officers shall not be liable to any civil, criminal or disciplinary proceedings against them for furnishing information required under this Ordinance.

    Sub-Section (5): Subject to section 216, all information received under this section shall be used only for tax purposes and kept confidential.

  • Tax rate on interest income for Tax Year 2020

    Tax rate on interest income for Tax Year 2020

    KARACHI: Federal Board of Revenue (FBR) issued tax rate to be imposed on interest income during Tax Year 2020.

    The FBR issued Income Tax Ordinance, 2001 updated up to June 30, 2019 incorporating changes brought through Finance Act, 2019.

    The Section 7B of the Income Tax Ordinance, 2001 explained the application of income tax on profit on debt derived by a person during a tax year.

    Section 7B: Tax on profit on debt

    Sub-Section (1): Subject to this Ordinance, a tax shall be imposed, at the rate specified in Division IIIA of Part I of the First Schedule, on every person, other than a company, who receives a profit on debt from any person mentioned in clauses (a) to (d) of sub-section (1)of section 151.

    Sub-Section (2): The tax imposed under sub-section (1) on a person, other than a company, who receives a profit on debt shall be computed by applying the relevant rate of tax to the gross amount of the profit on debt.

    Sub-Section (3): This section shall not apply to a profit on debt that –

    (a) is exempt from tax under this Ordinance; or

    (b) exceeds thirty six million Rupees.

    Division IIIA of Part I of the First Schedule for the rate of tax for profit on debt imposed under section 7B shall be—

    1. Where profit on debt does not exceed Rs.5,000,000: the tax rate shall be 15 percent

    2. Where profit on debt exceeds Rs.5,000,000 but does not exceed Rs.25,000,000: the tax rate shall be 17.5 percent

    3. Where profit on debt exceeds Rs.25,000,000 but does not exceed Rs. 36,000,000: the tax rate shall be 20 percent

    Section 151 explains persons receiving profit on debt


    Section 151: Profit on debt:

    Sub-Section (1) Where –

    (a) a person pays yield on an account, deposit or a certificate under the National Savings Scheme or Post Office Savings Account;

    (b) a banking company or financial institution pays any profit on a debt, being an account or deposit maintained with the company or institution;

    (c) the Federal Government, a Provincial Government or a Local Government pays to any person profit on any security other than that referred to in clause (a) issued by such Government or authority; or

    (d) a banking company, a financial institution, a company referred

    to in sub-clauses (i) and (ii) of clause (b) of sub-section (2) of section 80, or a finance society pays any profit on any bond, certificate, debenture, security or instrument of any kind (other than a loan agreement between a borrower and a banking company or a development finance institution) to any person other than financial institution.

  • No income tax on employee share schemes

    No income tax on employee share schemes

    KARACHI: Federal Board of Revenue (FBR) has said that the value of a right or option to acquire shares under an employee share scheme granted to an employee shall not be chargeable to tax.

    The FBR issued Income Tax Ordinance, 2001 up to June 30, 2019 under which it explained the taxability on employee share scheme through Section 14 of the Ordinance.

    Section 14: Employee share schemes

    Sub-Section (1): The value of a right or option to acquire shares under an employee share scheme granted to an employee shall not be chargeable to tax.

    Sub-Section (2): Subject to sub-section (3), where, in a tax year, an employee is issued with shares under an employee share scheme including as a result of the exercise of an option or right to acquire the shares, the amount chargeable to tax to the employee under the head “Salary” for that year shall include the fair market value of the shares determined at the date of issue, as reduced by any consideration given by the employee for the shares including any amount given as consideration for the grant of a right or option to acquire the shares.

    Sub-Section (3): Where shares issued to an employee under an employee share scheme are subject to a restriction on the transfer of the shares —

    (a) no amount shall be chargeable to tax to the employee under the head “Salary” until the earlier of —

    (i) the time the employee has a free right to transfer the shares; or

    (ii) the time the employee disposes of the shares; and

    (b) the amount chargeable to tax to the employee shall be the fair market value of the shares at the time the employee has a free right to transfer the shares or disposes of the shares, as the case may be, as reduced by any consideration given by the employee for the shares including any amount given as consideration for the grant of a right or option to acquire the shares.

    Sub-Section (4): For purposes of this Ordinance, where sub-section (2) or (3) applies, the cost of the shares to the employee shall be the sum of —

    (a) the consideration, if any, given by the employee for the shares;

    (b) the consideration, if any, given by the employee for the grant of any right or option to acquire the shares; and

    (c) the amount chargeable to tax under the head “Salary” under those sub-sections.

    Sub-Section (5): Where, in a tax year, an employee disposes of a right or option to acquire shares under an employee share scheme, the amount chargeable to tax to the employee under the head “Salary” for that year shall include the amount of any gain made on the disposal computed in accordance with the following formula, namely:—

    A—B

    where —

    A is the consideration received for the disposal of the right or option; and

    B is the employee’s cost in respect of the right or option.

    Sub-Section (6): In this sub-section, “employee share scheme” means any agreement or arrangement under which a company may issue shares in the company to —

    (a) an employee of the company or an employee of an associated company; or

    (b) the trustee of a trust and under the trust deed the trustee may transfer the shares to an employee of the company or an employee of an associated company.

  • FBR explains salary tax to be chargeable for Tax Year 2020

    FBR explains salary tax to be chargeable for Tax Year 2020

    KARACHI: Federal Board of Revenue (FBR) has explained the treatment of salary tax to be applicable during Tax Year 2020.

    The FBR issued Income Tax Ordinance, 2001 updated till June 30, 2019 and explained the taxability on salary received by an employee.

    Under Section 12 of the Income Tax Ordinance, 2001 the salary chargeable to tax as:

    Section 12: Salary

    Sub-Section (1): Any salary received by an employee in a tax year, other than salary that is exempt from tax under this Ordinance, shall be chargeable to tax in that year under the head “Salary”.

    Sub-Section (2): Salary means any amount received by an employee from any employment, whether of a revenue or capital nature, including —

    (a) any pay, wages or other remuneration provided to an employee, including leave pay, payment in lieu of leave, overtime payment, bonus, commission, fees, gratuity or work condition supplements (such as for unpleasant or dangerous working conditions);

    (b) any perquisite, whether convertible to money or not;

    (c) the amount of any allowance provided by an employer to an employee including a cost of living, subsistence, rent, utilities, education, entertainment or travel allowance, but shall not include any allowance solely expended in the performance of the employee’s duties of employment;

    (d) the amount of any expenditure incurred by an employee that is paid or reimbursed by the employer, other than expenditure incurred on behalf of the employer in the performance of the employee’s duties of employment;

    (e) the amount of any profits in lieu of, or in addition to, salary or wages, including any amount received —

    (i) as consideration for a person’s agreement to enter into an employment relationship;

    (ii) as consideration for an employee’s agreement to any conditions of employment or any changes to the employee’s conditions of employment;

    (iii) on termination of employment, whether paid voluntarily or under an agreement, including any compensation for redundancy or loss of employment and golden handshake payments;

    (iv) from a provident or other fund, to the extent to which the amount is not a repayment of contributions made by the employee to the fund in respect of which the employee was not entitled to a deduction; and

    (v) as consideration for an employee’s agreement to a restrictive covenant in respect of any past, present or prospective employment;

    (f) any pension or annuity, or any supplement to a pension or annuity; and

    (g) any amount chargeable to tax as “Salary” under section 14.

    Sub-Section (3): Where an employer agrees to pay the tax chargeable on an employee’s salary, the amount of the employee’s income chargeable under the head “Salary” shall be grossed up by the amount of tax payable by the employer.

    Sub-Section (4): No deduction shall be allowed for any expenditure incurred by an employee in deriving amounts chargeable to tax under the head “Salary”.

    Sub-Section (5): For the purposes of this Ordinance, an amount or perquisite shall be treated as received by an employee from any employment regardless of whether the amount or perquisite is paid or provided —

    (a) by the employee’s employer, an associate of the employer, or by a third party under an arrangement with the employer or an associate of the employer;

    (b) by a past employer or a prospective employer; or

    (c) to the employee or to an associate of the employee or to a third party under an agreement with the employee or an associate of the employee.

    Sub-Section (6): An employee who has received an amount referred to in sub-clause (iii) of clause (e) of sub-section (2) in a tax year may, by notice in writing to the Commissioner, elect for the amount to be taxed at the rate computed in accordance with the following formula, namely: —

    A/B%

    where —

    A is the total tax paid or payable by the employee on the employee’s total taxable income for the three preceding tax years; and

    B is the employee’s total taxable income for the three preceding tax years.

    Sub-Section (7): Where —

    (a) any amount chargeable under the head “Salary” is paid to an employee in arrears; and

    (b) as a result the employee is chargeable at higher rates of tax than would have been applicable if the amount had been paid to the employee in the tax year in which the services were rendered, the employee may, by notice in writing to the Commissioner, elect for the amount to be taxed at the rates of tax that would have been applicable if the salary had been paid to the employee in the tax year in which the services were rendered.

    Sub –Section (8) An election under sub-section (6) or (7) shall be made by the due date for furnishing the employee’s return of income or employer certificate, as the case may be, for the tax year in which the amount was received or by such later date as the Commissioner may allow.

  • FBR issues computation of taxable income for tax year 2020

    FBR issues computation of taxable income for tax year 2020

    KARACHI: Federal Board of Revenue (FBR) has issued computation of taxable income for the tax year 2020 (July 01, 2019 to June 30, 2020).

    The FBR issued Income Tax Ordinance, 2001 updated till June 30, 2019 under which the computation of taxable income for tax year 2020 has also been updated.

    According to Section 09 of the Ordinance, the taxable income of a person for a tax year shall be the total income under clause (a) of section 10 of the person for the year reduced (but not below zero) by the total of any deductible allowances under Part IX of this Chapter of the person for the year.

    Section 10: Total Income

    The total income of a person for a tax year shall be the sum of the –

    (a) person’s income under all heads of income for the year; and

    (b) person’s income exempt from tax under any of the provisions of this Ordinance.

    Section 11: Heads of income

    (1) For the purposes of the imposition of tax and the computation of total income, all income shall be classified under the following heads, namely: —

    (a) Salary;

    (b) Income from Property;

    (c) Income from Business;

    (d) Capital Gains; and

    (e) Income from Other Sources.

    (2) Subject to this Ordinance, the income of a person under a head of income for a tax year shall be the total of the amounts derived by the person in that year that are chargeable to tax under the head as reduced by the total deductions, if any, allowed under this Ordinance to the person for the year under that head.

    (3) Subject to this Ordinance, where the total deductions allowed under this Ordinance to a person for a tax year under a head of income exceed the total of the amounts derived by the person in that year that are chargeable to tax under that head, the person shall be treated as sustaining a loss for that head for that year of an amount equal to the excess.

    (4) A loss for a head of income for a tax year shall be dealt with in accordance with Part VIII of this Chapter.

    (5) The income of a resident person under a head of income shall be computed by taking into account amounts that are Pakistan-source income and amounts that are foreign-source income.

    (6) The income of a non-resident person under a head of income shall be computed by taking into account only amounts that are Pakistan-source income.

  • Resident having foreign income above $10,000 required to file return, wealth statement

    Resident having foreign income above $10,000 required to file return, wealth statement

    KARACHI: A resident person having foreign income of above $10,000 is required to income tax return and wealth statement from tax year 2019 and onwards.

    According to officials of Federal Board of Revenue (FBR) the income tax return and wealth statement filing had been made mandatory for a Pakistani individual having foreign income above $10,000 or having foreign assets above $100,000.

    The officials said that the law was introduced through Finance Act, 2018 and from tax year 2019 such persons are required to file their income tax returns.

    Through Finance Act, 2018, Section 116A was inserted to Income Tax Ordinance, 2001, which stated:

    Section 116A: Foreign income and assets statement.

    (1) Every resident taxpayer being an individual having foreign income of not less than ten thousand United States dollars or having foreign assets with a value of not less than one hundred thousand United States dollars shall furnish a statement, hereinafter referred to as the foreign income and assets statement, in the prescribed form and verified in the prescribed manner giving particulars of—

    (a) the person’s total foreign assets and liabilities as on the last day of the tax year;

    (b) any foreign assets transferred by the person to any other person during the tax year and the consideration for the said transfer; and

    (c) complete particulars of foreign income, the expenditure derived during the tax year and the expenditure wholly and necessarily for the purposes of deriving the said income.

    (2) The Commissioner may by a notice in writing require any person being an individual who, in the opinion of the Commissioner on the basis of reasons to be recorded in writing, was required to furnish a foreign income and assets statement under sub-section (1) but who has failed to do so to furnish the foreign income and assets statement on the date specified in the notice.

    Related Stories

    FBR launches simplified wizard for income tax return filing