Tax Book 2023

Income From Business Chapter- 09

The establishment shall on or before the date prescribed for filing of returns of income or a

statement under the PWWF, 2019, pay the amount due from it as above and furnish the proof of payment to

the PRA:

The term total income is defined as under in section 2(k) of the PWWF, 2019 as under;

i. where return of income is required to be filed under the Ordinance, the profit before tax as per

accounts or the declared income as per the return of income, whichever is higher; and

ii. where return of income is not required to be filed under the Income Tax Ordinance, 2001, the

profit before taxation or provision for taxation as per accounts or four percent of the receipt as

per the statement filed under section 115 of the Income Tax Ordinance, 2001, whichever is

higher; and

Considering the above the salient features of the levy of WWF are as under:

 WWF is chargeable on every establishment whose taxable income exceeds the monetary

threshold of Rs. 500,000.

 WWF is also chargeable on the incomes liable to tax under FTR.

 Supreme Court of Pakistan has already held that the WWF is not chargeable on the exempt

income.

 WWF is not chargeable on the Government corporations and Institutions.

 Rate of WWF is 2% of total income and u/s 60A of the Ordinance the same is an admissible

deduction against the total income of the person.

Circular No 1 of 2004 dated 3 January 2004 clarifies that the WWF payable expense is also

admissible deduction allowance in the cases where accrual based accounting is employed as regular

method of accounting.

Example: Taxable income of Monika industries is Rs 800,000. Accounting profit of the company is

Rs.625,000. Compute the WWF of the company.

Rs.
Income before WWF 800,000
WWF @ 2/102 15 , 686
Taxable income 784, 314

Example: Following information is related to Abbas Industries (Pvt.) Ltd.

Sales 740,000

Cost of sales 550,000

Administrative expenses 110,000

Zakat 20,000

WWF 10,000

Notes:

1. Administrative and selling expenses include:
   (a) Accounting depreciation 10,000
   (b) Penalty for violation of law 2,500


2. Tax depreciation 15,000
   Required: Compute taxable income of the taxpayer.
   Solution:
   Abbas Industries (Pvt) Ltd
   Computation of taxable income: Rs.
   Income from business:
   Sales 740,000
   Cost of sales (550,000)
   Gross profit 190,000