Introduction and Geographical Source of Income Chapter- 05
Tax on Rs. 6,045,000 [1, 33 0,000 + 35 % x (6,045,000 - 6 , 0 00,000)] 1, 34 5, 750
THREE CONSIDERATIONS FOR FOREIGN SOURCE OF INCOME
(a) Foreign source salary income shall be subject to fulfillment of payment and exempt source of income.
(b) Where incomes other than foreign source salary income are added in the foreign tax credit is allowed
after considering double taxation treaty agreements.
Example: Differentiate between Pakistan Source Income and Foreign Source Income.
(a) Salary paid by Provincial Govt. of Pakistan to an employee working abroad.
(b) Business income received by a non-resident not through his permanent establishment.
(c) Dividend income received by a non-resident from a resident company.
(d) Miss Amna is a resident person sold shares of a non-resident company at profit.
(e) Pension paid by a non-resident person to a resident person.
Solution: Pakistan source income: a, b, c Foreign source income: d, e,
Example:
Following is the details of income of Mr. Bhatti during the year 20 23 are as under.
Rs.
Interest on Foreign Bonds issued outside Pakistan (one-third is received in Pakistan). 150,000
Agricultural income from Bangladesh, received there but later on remitted to Pakistan 70,000
Property income from UK received outside Pakistan 500,000
Dividend paid by a resident company but received outside Pakistan 100,000
Remittance (not in the nature of income) brought to Pakistan 120,000
Profits from a business in Karachi and managed from outside Pakistan 70,000
Profit on sale of an asset in Pakistan but received in USA 250,000
Pension from Pakistan Government but received in USA 70,000
What is the gross total income of Mr. Bhatti, if he is:
(i) resident in Pakistan and
(ii) non-resident in Pakistan?
Solution:
RESIDENT
IN
PAKISTANNON-
RESIDENT
- Interest on Foreign Bonds issued outside Pakistan
(one-third is taxable on receipt basis) 50,000 -
(two-third is taxable on accrual basis) 100,000 -
- Agriculture income in Bangladesh income accrued and received outside
Pakistan 70,000 - - Income from property in UK received outside Pakistan:
Income accruing and arising outside Pakistan 500,000 -
- Dividend paid by a resident company but received outside Pakistan
income declared to be Pakistan source [Section 101(6)] 100,000 100,000
- Remittance (not in the nature of income) brought to Pakistan
- Profits from a business in Karachi and managed from outside Pakistan 70,000 70,000
- Profit on sale of an asset in Pakistan but received in London:
Income declared to be Pakistan source [Section 12(5)] 250,000 250,000
- Pension from Pakistan Government but received in London: