Important Points Regarding Income

Geographical Source of Income >>

Taxation Management FIN 623

MODULE 5

LESSON 5.16

RESIDENTIAL STATUS & TAXATION

Scope of Total Income of a Resident Person Section 11 (5)

Resident Person Changeable to tax on:

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.

Pakistan Source Income & Foreign Source Income Sec.11 (5) whereas, non-resident person charged

only on Pakistan Source Income Sec.11 (6)

Important Points Regarding Income:

· Receipt ---- Remittance

· Cash & Kind

· Receipt & Accrual

· Actual Receipt & Constructive Receipt

Geographical Source of Income-Sec101 Pakistan-Source Income:

1) Salary shall be Pakistan-source income to the extent to which the salary-

· Is received from any employment exercised in Pakistan, wherever paid; or

· Is paid by, or on behalf of, the Federal Government, a Provincial Government, or a local authority

in Pakistan, wherever the employment is exercised

2) Business income of a resident person shall be Pakistan-source income to the extent to which the

income is derived from any business carried on in Pakistan.

3) Business income of a non- resident person shall be Pakistan- source income to the extent to which it is

directly or indirectly attributable to-

· A permanent establishment of the non-resident person in Pakistan;

· Sales in Pakistan of goods or merchandise of the same or similar kind as those sold by the person

through a permanent establishment in Pakistan

· Other business activities carried on in Pakistan of the same or similar kind as those effected by the non-

resident through a permanent establishment in Pakistan (or)

· Any business connection in Pakistan

4) Where the business of a non-resident person comprises the rendering of independent services

(including professional services and the services of entertainers and sports persons), the Pakistan-source

business income of the person shall include [in addition to any amounts treated as Pakistan-source income

under sub-section (3)] any remuneration derived by the person where the remuneration is paid by a resident

person or borne by a permanent establishment in Pakistan of a non-resident person.

5) Any gain from the disposal of any asset or property used in deriving any business income referred to in

sub-section (2), (3) or (4) shall be Pakistan-source income.

6) A dividend shall be Pakistan-source income if it is paid by a resident company.

7) Profit on debt shall be Pakistan-source income if it is-

(1) Paid by a resident person, except where the profit is payable in respect of any debt used for the

purposes of a business carried on by the resident outside Pakistan through a permanent

establishment; or

(2) Borne by a permanent establishment in Pakistan of a non-resident person.

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