Income Tax ordinance,1979- PakSearch.com

For business information, annual reports, laws, ordinances, regulations and articles.

CHAPTER III

CHARGE OF TAX

9. Charge of income tax.-(1) Subject to the provisions of this Ordinance, there shall be charged, levied and paid for each assessment year commencing on or after the first day of July, 1979, income tax in respect of the total income of the income year or years, as the case may be, of every person at the rate or rates specified in the First Schedule :

Provided that where, by virtue of an amendment in the First Schedule, the rate of income tax, for the purpose of assessment in respect of any assessment year, is altered, the rate of income tax existing prior to the said alteration shall continue to apply in respect of any assessment year to which the said existing rate is applicable.

(1A) Notwithstanding anything contained in section 37 of the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980 (XXXI of 1980), or any other law for the time being in force, there shall be charged, levied and paid for each assessment year commencing on or after the first day of July, 1993, income tax in respect of the total income of a modaraba at the rate specified in the First Schedule:

Provided that the total income of a modaraba shall not be chargeable to tax for the first three assessment years after commencement of its business if not less than ninety per cent of its profits in a year is distributed to the modaraba certificate holders.

(2) Where, by virtue of any provision of this Ordinance, income tax is to be deducted at source or collected or paid in advance, it shall be so deducted, collected or paid, as the case may be, accordingly.

RETURN TO MAIN

10. Charge of super tax and surcharge.- (1) In addition to the income tax charged for any year, there shall be charged, levied and paid for that year in respect of the total income, or any part thereof, of the income year or years, as the case may be, of every person, an additional duty of income tax (in this Ordinance referred to as 'super tax') and surcharge at the rate or rates specified in the First Schedule ;

Provided that where, by virtue of an amendment in the First Schedule, the rate of super tax and surcharge, for the purpose of assessment in respect of any assessment year, is altered, the rate of super tax and surcharge existing prior to the said alteration shall continue to apply in respect of any assessment year to which the said existing rate is applicable.

(2) Subject to the provisions of this Ordinance, the total income of any person shall, for the purposes of super tax and surcharge, be the total income as assessed for the purposes of income tax, and where an assessment has become final and conclusive for the purposes of income tax for any year, the assessment shall also be final and conclusive for the purposes of super tax or surcharge, as the case may be, for the same year.

(3) All the provisions of this Ordinance relating to the charge, assessment, deduction at source, collection, or payment in advance, recovery and refund of income tax shall apply, so far as may be, to the charge, assessment, deduction at source, collection, payment in advance, recovery and refund of super tax and surcharge, as the case may be.

RETURN TO MAIN

11. Scope of total income.- (1) Subject to the provisions of this Ordinance, the total income, in relation to any assessment year, person,-
(a) who is a resident, includes all income from whatever source derived, which-
(i) is received, or is deemed to be received, in Pakistan in the income year by, or on behalf of, such person; or
(ii) accrues or arises, or is deemed to accrue or arise, to him in Pakistan during such year; or
(iii) accrues or arises to him outside Pakistan during such year;

(b) who is a non-resident, includes all income from whatever source derived, which-
(i) is received, or is deemed to be received, in Pakistan in the income year by, or on behalf of, such person; or
(ii) accrues or arises, or is deemed to accrue or arise, to him in Pakistan during such year;

(2) Notwithstanding anything contained in sub-section (1), where any amount consisting of either the whole or a part of any income has been included in the total income of a person on the basis that it has accrued or arisen, or is deemed to have accrued or arisen, to him in any year, it shall not be included again in his total income on the basis that it is received, or is deemed to be received, by him in Pakistan in any other year.

RETURN TO MAIN

12. Income deemed to accrue or arise in Pakistan.- (1) Income which would be chargeable under the head "Salary" shall be deemed to accrue or arise in Pakistan, wherever paid, if it is earned in Pakistan, or if it is paid by, or on behalf of, the Government or a local authority in Pakistan to a person in the service of such Government or authority, as the case may be.

(2) Any income accruing or arising, whether directly or indirectly, through or from-
(a) any business connection in Pakistan;
(b) any asset, property or source of income in Pakistan; or
(c) transfer of a capital asset situated in Pakistan,

shall be deemed to accrue or arise in Pakistan:

Provided that, in the case of a business all the operations of which are not carried out in Pakistan, the income of the business deemed under this sub-section to accrue or arise in Pakistan shall be only such part of the income as is reasonably attributable to the operations carried out in Pakistan.

(3) Any income by way of interest payable by-
(a) a person who is a resident, except where the interest is payable in respect of any debt incurred, or moneys borrowed and used, for the purposes of a business or profession carried on by such person outside Pakistan or for the purposes of making or earning any income from any source outside Pakistan; or
(b) a person who is a non-resident, where the interest is payable in respect of any debt incurred, or moneys borrowed and used, for the purposes of a business or profession carried on by such person in Pakistan or for the purposes of making or earning any income from any source in Pakistan,

shall be deemed to accrue or arise in Pakistan.

(4) Any income by way of royalty payable by-
(a) a person who is a resident, except where the royalty is payable in respect of any right, property or information used or services utilised for the purposes of a business or profession carried on by such person outside Pakistan or for the purposes of making or earning any income from any source outside Pakistan; or
(b) a person who is a non-resident, where the royalty is payable in respect of any right, property or information used or services utilised for the purposes of a business or profession carried on by such person in Pakistan or for the purposes of making or earning any income from any source in Pakistan,

shall be deemed to accrue or arise in Pakistan.

Explanation.- For the purposes of this sub-section and sub-section (4) of section 31, "royalty" means consideration (including any lump-sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head "Capital gains") for -
(i) the transfer of all or any rights (including the granting of a licence) in respect of a patent, invention, model, design, secret process or formula, or trade mark or similar property;
(ii) the imparting of any information concerning the working of, or the use of, a patent, invention, model, design, secret process or formula, or trade mark or similar property;
(iii) the use of any patent, invention, model, design, secret process or formula, or trade mark or similar property;
(iv) the imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill;
(v) the transfer of all or any rights (including the granting of a licence) in respect of any copy-right, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting but not including consideration for the sale, distribution or exhibition of cinematograph films; or
(vi) the rendering of any services in connection with the activities referred to in clauses (i) to (v).

RETURN TO MAIN

(5) Any income by way of fees for technical services payable by-
(a) a person who is a resident, except where the fees are payable in respect of services utilised in a business or profession carried on by such person outside Pakistan or for the purposes of making or earning any income from any source outside Pakistan; or
(b) a person who is a non-resident, where the fees are payable in respect of services utilised in a business or profession carried on by such person in Pakistan or for the purposes of making or earning any income from any sources in Pakistan,

shall be deemed to accrue or arise in Pakistan.

Explanation.-For the purposes of this sub-section , clause (b) of section 24, Sub-section (2) of section 30, sub-section (3A) of section 50 and section 80AA, "fees for technical services" means any consideration (including any lump-sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of the services of technical or other personnel) but does not include consideration for any construction, assembly or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head "Salary".

(6) As used in sub-sections (3), (4) and (5), the expression "a person -who is resident" includes Government.

(7) Where an assessee has made any loan or advance to any person on which no interest has been charged or the rate at which interest has been charged is less than the rate (hereinafter referred to as the 'said rate') arrived at by adding two per cent to the bank rate notified by the State Bank of Pakistan as applicable on the date on which the loan or advance was made, the amount not charged or the amount equal to the interest computed at the said rate as reduced by the interest actually charged shall be deemed to be the income of the assessee and shall be included in his total income:

Provided that nothing contained in this sub-section shall apply to-
(a) any loan or advance made by an assessee to an employee in accordance with the terms and conditions of his employment and for such purpose or purposes; or
(b) such assessee or persons or class or classes of assessees or persons, as may be specified in this behalf by the Central Board of Revenue by notification in the official Gazette :

Provided further that nothing contained in this sub-section shall apply in respect of any assessment year beginning on or after the first day of July, 1985.

(8) Any income derived by an assessee in any income year (hereafter in this sub-section referred to as the 'said income year') from any business or profession, which has been or was, discontinued, or any other source which has ceased, as the case may be, at any time before the commencement, or during the course, of the said income year shall, if such income would have been chargeable to tax if it had been received in the income year in which it accrued or arose, be deemed to be income chargeable to tax from such business or profession or other source, which shall, for the purposes of this Ordinance, be deemed to have been carried on, or not ceased, as the case may be, before the commencement, or during the course, of the said income year.

RETURN TO MAIN

(9) Where any bonus or bonus share is declared, issued or paid by a Pakistani Company to its share-holders in any year wholly or partly out of reserves or profits of the company of that year or accumulated profits of earlier years, whether capitalised or not, or out of the share premium or other account, the amount of the bonus or the face value of the bonus share, as the case may be, shall be deemed to be income accruing to the company during that year.

(9A) Where an assessee, being a public company other than a scheduled bank or a modaraba, derives profits for any income year but does not distribute cash dividends within seven months of the end of the said income year, or distributes dividend to such an extent that its reserves, after such distribution, are in excess of fifty per cent of its paid up capital, so much of its reserves as exceed fifty per cent of its paid up capital shall be deemed to be the income having accrued to such company during the year:

Provided that in respect of assessment year commencing on the first day of July, 1999, the cash dividend distribution made within the following period shall be treated as distribution for the purposes of this sub-section:-

(i) where the income year ended on a date prior to the thirtieth day of June, 1999, and the distribution is made within a period of three months reckoned from the first day of July, 1999; or

(ii) where the income year ended on the thirtieth day of June, 1999, and the distribution is made within a period of eight months reckoned from the first day of July 1999.

Explanation.-- For the purposes of this sub-section, the expression "reserves" shall have the meaning as may be prescribed,

(10) Any dividend paid to any share-holder without Pakistan by a Pakistani company shall be deemed to be income accruing or arising in Pakistan to such share-holder.

(11) Any dividend declared or distributed by a company shall be deemed to be the income of the income year in which it is declared [ ] and shall be included in the total income of the assessee of that year :

Provided that, where any dividend is declared within six weeks of the end of the income year, it shall be deemed to be the income of the income year in which it is distributed and included in the total income of that year.

(12) Where any assets not being stock-in-trade [ ] are purchased by an assessee from any company and the Deputy Commissioner has reason to believe that the price paid by the assessee is less than the fair market value thereof, the difference between the price so paid and the fair market value shall, be deemed to be income of the assessee chargeable to tax under this Ordinance.

Provided that in the case of an asset leased by a scheduled bank, a financial institution, modaraba or a leasing company the fair market value paid by the assessee, being the first lessee, on the maturity of the lease agreement and the amount paid by way of lease rentals and other charges so however that the aggregate of such payments and the residual value is not less than the original cost of the asset.; and

(13) Where an assessee, being the owner of a building, receives from any person to whom such building or any part thereof is let out on rent any amount [ ] which is not adjustable against the rent payable by such person, such amount shall be deemed to be the income of the assessee and chargeable to tax under the head "Income from house property" in the income year in which such amount is received and the nine income years next following the said income year in equal proportion; and the amount so allocated to each income year shall be deemed to be the rent received in respect of such building or a part thereof.

(14) Where the amount mentioned in sub-section (13) is refunded by the assessee to the tenant on termination of the tenancy before expiry of ten years as aforementioned, no portion of such amount shall be allocated to the income year in which it is refunded or any income year thereafter except in a case mentioned in sub-section (15).

(15) Where, on the termination of the tenancy of one person and refund to that person of the amount mentioned in sub-section (13), the assessee lets out such building or such part thereof, as the case may be, to another person and receives from such other person any amount (hereinafter called the "succeeding amount")which is not adjustable against the rent payable by such other person, the succeeding amount as reduced by such portion of the earlier amount as was charged to tax, shall be deemed to be the income of the assessee chargeable under the head "Income from house property" and charged to tax as laid down in sub-section 13.

(16) Where an assessee receives any amount in consideration for vacating the possession of a building or a part thereof of which he is a tenant, the said amount as reduced by the amount, if any, paid by the assessee for acquiring possession of such building or part thereof shall be deemed to be the income of the assessee and chargeable to tax under the head 'Income from other sources' in the income year in which it is received and nine income years next following the said income year in equal proportion.

(17) The provisions of sub-sections (13) to (16) shall also apply to an assessee who has received the amount referred to in sub-sections (13), (15) or (16) in the income year relevant to the assessment year commencing on the first day of July, 1980, or in any earlier income year so, however, that income chargeable to tax in the manner laid down in the said sub-sections shall be charged to tax only in respect of the income year relevant to the assessment year commencing on the first day of July, 1980, or any assessment year thereafter.

(18) Where any sum claimed, or shown, to have been received as loan or advance or gift by an assessee during any income year commencing on or after the first day of July, 1998, from any person, not being a banking company, or a financial institution notified by the Central Board of Revenue for this purpose, otherwise than by a crossed cheque drawn on a bank or through a banking channel from a person holding a National Tax Number, the said sum shall be deemed to be the income of the assessee for the said income year chargeable to tax under this Ordinance: Provided that, where the said loan or advance or gift is claimed or shown by way of the explanation, referred to in sub-section (1) of section 13, in a case to which the first proviso to the said sub-section applies, the income under this sub-section shall relate to the assessment year referred to in the said proviso.

[18A ]

(19) Where an assessee, being a scheduled bank, a financial institution, or such modaraba or leasing company as is approved by the Central Board of Revenue for the purposes of the Third Schedule, has leased out, on or after the first day of July, 1985. any asset, whether owned by it or not, to another person, any amount paid or payable by the said person in connection with the lease of the said asset shall be deemed to be the income of the said assessee.

RETURN TO MAIN

13. Un-explained investments, etc., deemed to be income.- (1) Where, [ ].
(a) any sum is found to be credited in the books of an assessee maintained for any income year; or
(aa) the assessee is found to have made any investment or is found to be the owner of any money or valuable article, in any year; or
(b) the assessee is found to have made any investment in any income year which is not recorded in the books of account maintained for that income year or is not shown in the wealth statement or return of wealth furnished under section 58 in respect of that year; or
(c) the assessee is found in respect of any income year to be owner of any money or valuable article which is not recorded in. the books of account, if any, maintained by him or is not shown by him in any wealth statement or return of wealth furnished under section 58 in respect of that year; or
(d) the assessee has made investment in any income year or is found in respect of any such year to be the owner of any valuable article and the Deputy Commissioner finds that the amount expended on making such investment or in acquiring such valuable article exceeds the amount recorded in this behalf in the books of account maintained by him or shown in the wealth statement or return of wealth furnished under section 58 in respect of that year; or
(e) an assessee has, during any income year, incurred any expenditure,

and the assessee offers no explanation about the nature and source of such sum, investment, acquisition of the money or valuable article, excess amount or the money from which the expenditure was met, as the case may be, or the explanation offered by him is not, in the opinion of the Deputy Commissioner, satisfactory, the sum so credited, the value of the investment, the money or the value of the article, the excess amount or the amount of the expenditure, as the case may be, shall be deemed to be the income of the assessee of such income year chargeable to tax under this Ordinance :

Provided that, where any act referred to in clauses (a) to (e) is discovered after the assessment of income of the income year to which the said act relates has been made, the income chargeable to tax under this section shall be included in the total income of the income year relevant to the assessment year in which the said discovery is made:

Provided further that in cases referred to in clauses (aa) to (e) such income shall not be chargeable to tax unless [ ] approval of the Inspecting Additional Commissioner has been obtained,

(2) Where the value of any investment or article referred to in clause (aa), (b), (c) or (d), or the amount of expenditure referred to in clause (e) of sub-section (1) is, in the opinion of the Deputy Commissioner, too low, the Deputy Commissioner may determine, after giving a reasonable opportunity to the assessee of being heard [ ], a reasonable value or the amount thereof, as the case may be, and all the provisions of sub-section (1) shall have effect accordingly.
"(2A) The provisions of this section shall not apply in respect of any amount of foreign exchange remitted from abroad through normal banking channels and got encashed in Pakistan rupees from a scheduled bank and a certificate is produced to that effect from such bank.";
(3) The Central Board of Revenue may by rules provide for the determination of the value of any property or article for the purposes of this section.

RETURN TO MAIN

14. Exemptions.- (1) The incomes or classes of income, or persons or classes of persons specified in the Second Schedule shall be-
(a) exempt from tax under this Ordinance, subject to the conditions and to the extent specified therein; or
(b) liable to tax at such rates, which are less than the rates specified in the First Schedule, as are specified therein; or
(c) allowed a reduction in tax liability, subject to the conditions and to the extent specified therein; or
(d) exempt from the operation of any provision of this Ordinance, subject to the conditions and to the extent specified therein :

Provided that, where any income which is exempt from tax under any provision of the Second Schedule, such income, as may be specified in the said Schedule and subject to such conditions as may be specified therein, shall be included in the total income, so however that the tax shall not be payable in respect of such income.

[IA]

(2) the Federal Government may, from time to time, by notification in the official Gazette, make such amendment in the Second Schedule by-
(a) adding any clause or condition therein;
(b) omitting any clause or condition therein; and
(c) making any change in any clause or condition therein,

as it may think fit, and all such amendments shall have effect in respect of any such year beginning on any date before or after the commencement of the financial year in which the said notification is issued:

Provided that the Federal Government shall place before the National Assembly all amendments made by it in the Second Schedule during a financial year,

RETURN TO MAIN

Home | About Us | Contact | Information Resources