Introduction and Geographical Source of Income Chapter- 05
Section Rule TOPICS COVERED
What is income tax?
Taxability in Pakistan
2(52), 82, 83, 84 14 Resident person and determination of residential status
Total income
Tax regimes
Income tax return
101 Determination of geographical source of income
50, 51, 102 and 103 Special cases for taxation of foreign source of income
Multiple Choice questions with solutions
ICMAP and CA Mod C past papers theoretical questions(FOR CAF- 6 AND ICMAP STUDENTS)
Introduction:
This chapter deals with the basic concepts of Income Tax Ordinance, 2001. Being as direct tax it is levied
on the income of tax payers and the Federal Board of Revenue is responsible to monitor its levy, collection
and other procedural issues.
What is income tax?
Income tax is a direct tax which a person is liable to pay on his income earned during the tax year.
Taxability in Pakistan
Persons are divided into two categories for the purpose of taxability:
- Resident: Resident person is taxable for both Pakistan Source Income and Foreign Source Income
(excluding foreign source salary income if foreign tax paid or foreign salary is not taxable over there
or when there is double taxation treaty agreement). - Non Resident: Non-resident person is taxable for Pakistan Source Income only.
“Resident person” [U/s 2(52)]
A person shall be a resident person for a tax year if the person is-
(a) a resident individual, resident company or resident AOP for the year; or
(b) the Federal Government.
Determination of residential status
Residential Status of an individual [Section 82]
Residential status for tax purpose has nothing to do with the nationality or domicile for an individual
because the residential status is based on number of days of physically presence in Pakistan during a tax
year. Therefore, a foreigner may be a resident person and a Pakistani national may be a non-resident for
tax purposes. A person may be resident in a tax year and non resident in next tax year and vice versa.
INTRODUCTION AND GEOGRAPHICAL
SOURCE OF INCOME
5
Chapter