Introduction and Geographical Source of Income Chapter- 05
There are three tax regimes:
Normal tax regime (NTR):
Incomes which are chargeable to tax under NTR are added together to obtain taxable income and then tax
rate according to the slab rate is applied to determine tax liability.
Separate block of income under NTR (SBI):
Incomes which are chargeable to tax under Separate Block of Income are taxable under Normal Tax
Regime; however, income is not added in taxable income and further, fixed rates applicable for income
covered under Separate Block of Income to determine tax liability.
Minimum tax liability under NTR:
Applicable under sections 113, 148, 153 and 235.
Final tax regime (FTR):
In case of Incomes which are chargeable to tax under Final Tax Regime, tax is deductible at a fixed rate on
income and such tax deduction is treated as final discharge of tax liability.
Separate block of income (SBI) under FTR:
Incomes which are chargeable to tax under SBI are taxable under Final Tax Regime; however, income is
not added in taxable income and further, fixed rates applicable for income covered under Separate Block of
Income to determine tax liability.
Total tax liability:
Total tax liability is calculated as follows:
Tax liability under NTR xxx
Tax liability under SBI xxx
Tax liability under FTR xxx
Total tax liability xxx
Income tax return
Under Income Tax Ordinance, 2001, certain persons are required to file income tax return.
What is income tax return?
Income tax return is a declaration of total income and tax liability which a person is required to file to the
income tax department. A return of income, if complete shall be treated as assessment order.
What is assessment order?
An order in which relevant income tax authority assess the total income and tax liability of a taxpayer, is
called assessment order. In Pakistan, return of income filed by the taxpayer is treated as assessment order
subject to limitations, if return filed is complete in all respects.
Determination of geographical source of income [S 101]
Salary shall be Pakistan source income which:
(a) is received from any employment exercised (place of rendering of services) in Pakistan, wherever
paid; or
(b) is paid by, or on behalf of, the Federal Government, a Provincial Government, or a Local Government
in Pakistan, wherever the employment is exercised (place of rendering of services).
Rental income shall be Pakistan source income :
If it is derived from the lease of immovable property in Pakistan including a right to explore for, or exploit,
natural sources in Pakistan (for owner of immoveable property).
Any gain from the alienation of any property or right