Significant Lssues Pertaining to Wealth Tax Laws

Friday, December 27, 2013

Significant Lssues Pertaining to Wealth Tax Laws


Exemptions


1)Agricultural Land exempt upto Rs. 1000,000 (one million).
2)Self-occupied house exemption now restricted to the extent of Non-Agricultural assets.


Documentation


1)Return of net wealth to be filed along with the Return of Income Tax by every income tax now.
2)Due date of Return of net wealth to be same as of return of total income.

Penalty


1)Substantial increase in the amount of Fees for filing of an appeal;

a)before appellate commissioner Rs. 2,500 or 10% of tax levied whichever is less now;
b)before appellate Tribunal Rs. 5,000 or 10% of tax levied whichever is less now;
c)before Commissioner (Revision) Rs. 2,500 or 10% of tax levied whichever is less now.

New Regulations


1)Market value of Plots and Commercial Properties,other than rented out,to be determined according to new rules to be released by C.B.R.

Definition Of Assets

1)Assets to be classified and bifurcated into;
a)Agricultural Assets 
b)Other Assets 

2)Tools and implements to include Tractors,Tube-wells and other Farm Machinery.

Tax Rates

Wealth Tax rates revised and bifurcated into rates applicable to;
a)Agricultural Assets 
b)Other Assets

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With Holding Tax Rates

Tuesday, December 24, 2013

With Holding Tax Rates

  1)Tax rates in case of non-resident contractors increased from 3% to 4% and 7% respectively according to the categories specified

Exemptions

  1)Statutory Limit increased to Rs 42,000/- in case of working woman

2)Income of MUTUAL FUND and NIT from "REDEEMABLE CAPITAL" exempt

3)Capital gains arising from the "REDEEMABLE CAPITAL INSTRUMENT" of listed Companies exempt.

Tax Holiday

  Fruit Processing and manufacturing of soft and stuffed toys classified under Tax Holiday for a period of 5 years from the date of commencement of commercial production.

Leased Assets

  1)Depreciation on assets leased out to be deducted/adjusted against lease rentals only

2)Consideration received as the residual value of leased assets on the maturity of the lease agreement to be considered as sales proceeds 

Powers

   Discretionary Powers of federal Government and CBR for granting EXEMPTIONS and or PRESCRIBING LOWER RATES OF WITHHOLD TAX etc withdrawn..****

Reduction/Relief/Concessions

Saturday, December 21, 2013

Reduction/Relief/Concessions

      1) Wealth Tax deduction from the taxable income of an which was available in the past years has been withdrawn now

2)Rate of tax on technical services fees to non-residents reduced to 15%

3)Refineries at Dhodak and Bobi Fields etc classified under concessional provisions of Fifth schedule

4)Tax on release of Foreign Exchange for travel abroad withdrawn

5)25% of tax relief specified for senior citizens

6)Minimum tax chargeable on the income of a non-resident person other than Companies reduced to 20%

7)Rate of tax on all Companies reduced

8)Rate of intercorporate tax on business of power generation Companies reduced to 7.5%

Tax at Source

     Deduction of tax at source on specified REMITTANCES etc @ 20% levied


Appeals

   1)Payment of an amount equal to 25% of tax made compulsory in case of an appeal to be filed against disputed tax demand i.e.,STAY of disputed demand restricted to 75% now

2)Substantial increase in appeal fee;

a)at CIT (APPEALS)and (REVISIONS) stage Rs. 2,500/- present fee

b)at appellate Tribunal stage Rs. 2,500/- or 10% of tax assessed whichever is less as against Rs. 100/- present fee...** 
   

The Finance Bill , 1994

Thursday, December 19, 2013

The Finance Bill , 1994

     (Significant lssues reg.Income Tax Laws)

Documentation

1)Return of Net Wealth to be filed along with the Return of total income by Every Assessee.
2)Disclosure and Reporting made mandatory in case of;
i)Bonus shares or bonus exceeding the prescribed limits if distributed to shareholders.
ii)Interest paid on securities 
iii)Payment of fees for technical services to non-residents
iv)Deduction/Collection of tax on specified REMITTANCES
 v)Deduction of tax on realisation of export proceeds
vi)Deduction of tax at the time of collection of Motor Vehicle Tax
vii)Deduction of tax on payment of prize on prize bonds of cross word puzzles
viii)Deduction of tax from Electricity Bills
ix)Deduction of tax by AUCTIONEERS
x)Deduction of tax by Building plan approving authorities...***********
    

AMENDMENTS IN FINACNCE BILL 1990

Tuesday, December 17, 2013

   Following important amendments have been made in the Federal Budget in the Income Tax Law some of which are of far reaching importance.These are as under.


1)Self Scheme

   The amendment to section 59(1)proposes to reintroduce self for which a scheme has been issued to define the procedure and cases in which the benefit of the Scheme will be available or not.


a)The Scheme is restricted for availment by;1)Individ uals,Hindu Undivided Familities,Firms (both registered and unregistered) and association of person; (i)whose income is blew Rs. 200,000; (ii)whose last assessed income was below Rs 200,000; (iii) declaring income not liable to tax; (iv) filing return of income by due date of extended date;ad (v)Making payment of tax payable u/s 54) with the return of income, in full.


b)The Scheme is not available beneficially to ;(i)companies(ii)whose income is not liable to tax;particular of income and supporting documents prescribed are not filed in time;


c)The Scheme may cease to apply in cases; (i)where the return of the is included in 5 per cent returns , selected for audit; (ii) where evidence of concealment is available ; and (iii)where legal issues are pending.


2)Deduction not Admissible

      Section 24 (ff) proposes to disallow and expenditure excecding Rs; 25,000, for deduction from the "total Income".if the amount is not paid by a cross cheque or bank draft.


3)Donation for Charitable purposes

                 Section 47 (3) proposes the amendment to restrict the ceiling for different categories to Rs. 500,000 or 5 percent of the income,whichever is less.

4)Casual income 

     Casual non-recurring income has been totally exempt under cl.(65) of the Second Schedule .The Finance bill 1990 proposed to restrict such exemption to a limit of Rs. 24,999. Such Income of Rs . 25,000 and above,whether derived from Prize Bond,or winning on raffle,lottery or cross-word puzzel,entails responsibility ,on the payer or such amount,to deduct advance tax,at the time of proposed to be a space block of income.


5)Dividend Income (Clause(80) )

     Devidend Income from NIT,Matual Funds of ICP,listed companies Modarbas Banks PLS account ICP state ENterprise Mutual Funds Companies enjoying exemption under clause (139) for technical services outside Pakistan and open close end mutual Funds of Investment companies exempt upto Rs. 15,000 which exemption is now proposed to be restricted upto dividend income of Rs. 10,000.00..***

Who is now to pay Tax

Monday, December 16, 2013

Who is now to pay Tax

   Those individuals who,having a non-salaried annual income of less then Rs . 36,000.00 will not have to pay income tax;

  Those individuals who,having a salaried annual income of less then Rs 40,000.00 will not to pay income tax.

Who is to pay Tax

    An (individual) unregistered firm,association of individuals,Hindu undivided families,having an annual income of less than one lac rupees,will pay income tax at the rate of 10 per cent of his total income minus a tax credit of Rs. 3,000.The total income would, hawever,be commuted on the basis of gross receipts reduced by legally admissible expenses and losses (in case of firms),Zakat paid and Wealth Tax paid.

   An having a total salaried annual income of less than one lac rupees will pay income tax at the rate of 10 per cent minus tax credit of Rs 4,000.The total income in this category means the income from total salaries which means that there would be no rebate on certain allowances which were available in the previous system.

How to pay Tax 

   Having an annual income of less than one lac rupees will deposit the due tac himself into a treasury by means of a challan.


How to File Income Return


   Having an annual income of less than Rs. one lac will fill up a highly simplified form,called 11-E obtainable from income Tax offices and send this filled up from,(which will be considered theair Income Tax Return)along with treasury challan to the desgnated Income Tax  Office by registered post with ackonoledgement due.I case of reduction of zakat and Wealth Tax receipts of their payment will also be attached with the income Tax Return.

Clarification About "Total Income"

Sunday, December 15, 2013

Clarification About "Total Income"

        In order to remove all ambiguities and doubts about the term"Total Income"it is clarified that by "total income"in this context,is meant "total income as chargeable to tax"This is clarified as under;


1)All income which is tax exempt per se e.q pension,return received under various types public companies,amount paid as zakat for wealth tax,profits received from PLS accounts upto Rs 15,000 in a year,do not form part of the total income chargeable to tax and therefore do not have to be included in the "total income"while coputing tax liability.

2)However , tax relief on account of specified investments e.g.in defence saving certificates,life insurance premia,donations to charitable institutions,purchase of books etc.Which used to be admissible previously as investment allowance,will no longer be admissible.


Example


The Following example will help in understanding the above provisions.There is an individual whose income from various sources for the current year 1988-89 was as follows;


From Salary                                                             Rs. 50,000.00
From Property                                                         Rs. 40,000.00
From pension                                                           Rs.30,000.00 
From Investment (National Saving Schemes)            Rs. 30,000.00
From Dividend (Public Cos)                                     Rs. 30,000.00
From PLS account                                                   Rs. 10,000.00
                       
                                                                                Rs. 190,000.00

LATEST AMENDMENTS IN RULES

Saturday, December 14, 2013

LATEST AMENDMENTS IN RULES


Old Rules To Continue For Upper Slab.

       Salaried persons whose "total income chargeable to tax" exceeds Rs. 100,000 will not be governed by the Simplified Procedure of Assessment,announced in the Budget .They will continue to be governed by the old rules, file the return of Income on the existing forms and also pay the tax at the old rates under the slab system.Thus, while the tax liability of a salaried person covered by the simplifed procedure could be a maximum of rs. 6,000 (Rs 10,000 minus Rs. 4,000 exemptions)The liability in cases covered by the simplifed procedure will be Rs. 17,500 plus 35 per cent of the amount exceding Rs. 100,000 subject to such rebate as may be admissible under the Rules.

              Standerd Allowance in such cases (of total income exceeding Rs. 100,000) will also continue to remain unchanged at Rs. 24,000.The Investment Rebate and other rebates will also remain unchanged.There is no change in the income tax liability of individals (including salaried persons) URDs.Aops.
And hufs whose total income chargeable to tax exceds Rs. 100,000.however there is relief both in terms of tax amount and the procdure for in the Rs. 100,000 bracked.
   About the taxable and non-taxable salary items under the Simplified procedure,sources said,there was no change whatover,pay,bonus,Special pay etc.are taxable items;house rent, conveyance/transport allowance etx.(upto fixed limit) are example items.However, Investment Allowance stands with-drawn as this has been duty compensated by the raise in the exemption limited from Rs. 24,000 to 40,000.The simplifed procedure come into force from the year 1988-89 (Funancial for the issue of the National Tax Number (NTN)to every tax-payer by the end of this year. It will be plastic-coated and smaller in size the National Identity card.

Investment Allowances

Investment Allowances 

           Following are the allowable Investments in respect of which Investment Allowance can be claimed.the aggreate of such investment should not exceed 1/3 of the total income or Rs. 50,000 or investment whichever is less;

1)Life Insurance Premium (self , wife and dependent children) restricted 10% of the sum assured;
2)Investment in Government Securities & Debentures;
3)Investment in approved Industrial Undertakings;
4)Post Office Savings Bank Certificates;
5)Contribution to Resognised Provident Fund;
6)Purchase of Books of Professional and Technical nature;
7)Retirement Annuity Contract;
8)Investment in NIT and ICP Certificates;


Allowances & Exemptions

                    Following allowances and axemptions will be deducted from the total income and thereafter the taxable income will be calculated;-


1)statutory Deduction of Rs.40,000 from Gross Income,if it is less than Rs. 100,000;
2)Zakat - paid under the zakat & ushar Ordinance;
3)Wealt Tax Paid;
4)Donations are admissible as deductions provided the amount is paid to such organizatons as are recognised under section 15/D of the Income Tax Act or to such funds which are specifically notified by the Government;
5)Subscriptions paid for membership of professional Associatons is exempted;
6)Group Insurance & Benevolent Fund are exempted for rebate computation on investment;

Income From Interest & Securities

Friday, December 13, 2013

Income From Interest & Securities

       1)Income from government securities earned by an Indvidual is exempt upto Rs . 5,000;
2)Interest on KHAS DEPOSIT is totally exempted;
3)Interest on saving Bank Account of a Scheduled Bank is exempted uto Rs. 1,000;
4)Interest on post Office Saving Band Account Is totally exempted;
5)Dividend income from shares of private companies is exempted upto Rs. 5,000 but the total dividend income is restricted to Rs. 15,000;
6)Dividend Income from listed and unlisted companies,NIT , ICP and PLS account shall be taxable and is no more exempted now and is taxable @ 10% under a separate block of income;
7)Royalty Income For Literary or artistic work is exempted upto Rs. 25,000;


Income From Business-

   Share of income from a Registered firm is to be included in the total income.In case of income from an unregistered firm,it is not to be included in the total income;it will be included only for rate purposes.

Treatment Of Provident Funds

Thursday, December 12, 2013

5) Treatment Of Provident Funds

 There are three types of provident Funds 
i)Government Provident Fund;
ii)Recognized Provident Fund, and
iii)Unrecognised Provident Fund.
         
       Employee contribution in respect of the said three funds will be included in the total income.Interest on P.F. will not be included in respect of Govt.Provident Fund and Unrecognised Provident Fund and will be included in respect of Recognised Provident Fund.

1)Local Compensatory allowance is exempted upto 10% of salary or 2,400 whichever is lower and the rest is taxable;
2)Arrears of pay received are taxable in the year of receipt;Dearness Allow and Special Dearness Allowance is totally exempted;
3)Bonus & Commission etc. are taxable;
4)Indexed pay is taxable.

b)Income From Property

       In computing the Income from property.the following allowance and deduction shall be allowed;.

a)In respect of repairs,an allowance equal to one fifth of the income;
b)Vacancy allowance for the period the property remained vacant;
c)Unrealised rent;
d)Taxes of Government and local bodies;
e)Fire Insurance Premim;
f)Interest on borrowed capital ;
g)Collection charges upto 6% of the actual rent;
 
   AMOUNT received in the trom of DEPOSIT, 10% of such deposit will be added towards the property income,
 
  Income from newly constructed house is exempt upto 5 years if the rental value is upto Rs. 18,000 (in case of Islamabad upto Rs. 24,000).If the income exceeds Rs. 18,000 (Rs.24,000 in case of Islamabad) the exemption is restricted to Rs. 9,000.

CALCULATION OF TOTAL & TAXABLE INCOME IMPORTANT RULES

CALCULATION OF TOTAL & TAXABLE INCOME IMPORTANT RULES

  a)Income from salary-

       Salary includes wages,annuity,pension and gratuity,fees compensation,perquisites,indexed pay and profits.Any compensation received in connection with termination of service and advance salary is also taxable.

1)House rent allowance

a)If House Rent Allowance is received as Cash Allowance,the amount in excess of 45% of the minimum of the time scale of the salary is taxable;

b)If rent Free unfurnished accommodation has been provided by Employer,A>L>V. exceeding 45% of initial basic salary subject to the maximum of 15% of salary,shall be included in the total income and taxable;

c)If Rent Free furnished accommodation has been provided by Employer,A.L.V.exceeding 45$ of initial basic salary subject to the maximum of 25% of salary,shall be included in the total income shall be taxable;


2)Conveyance Allowance

1)Where no coneyance provided by the employer,nor owned by the employee,cash received in excess of Rs. 3,600 per or in excess of the actual expenditure,whichever is the higher,shall be included in his income,and he will be required to pay tax thereon;
2)Where employer owns or hires the conveyance and bears running and maintenance cost,whole of the conveyance allowance if any shall be included in his income
   
3)Where conveyance is owned and maintained by employee, Rs. 3,600 or 10% of basic salary which is higher is exempt and the remainder shall be included in the total income;
4)Where free conveyance has been provided by employer,Rs. 3600 or 50% of maintenance cost,whichever is lower is lower shall be exempt and the remainder will be taxable;
5)Where employee owns and bears running and maintenance cost.the amount which exceeds Rs .4,800 or 10% of the basic salary,whichever is higher,shall be included in his income;(used exclusively for business purposes);
6)where employee owns the conveyance and wmployer bears running and maintenance cost,the amount which exceeds Rs.2,400 or 7.5% of the basic salary,whichever is higher, shall be included in his income.

3)Entertainment Allowance

      The entire amount of entertainment is taxable in the hands of the employee and will be added to his income for tax purposes.Actual expenditure incurred by an employee and reimbursed to him by the employer will not however be taxable.

4)Medical Fees & Expenses

       The amount, if any,by which the sum received by the exceeds the actual expenditure incurred by him is to be included in the salary.


Permissible Deduction

Wednesday, December 11, 2013

Permissible Deduction 

           The Following expenses can be claimed as deduction and the interest after being deducted,these deduction shall be taxed;-
1)Any interest paid by an to any banking company or other person on moneys borrowed by him for the purpose of investment in securities;and
2)Any commission paid to a banking company for realising interest on such securities on behalf ;


Interest On Securities Exempt From Tax.

          Interest on securities is exempt from tax in the following cases;-
1)Securities held by or the property of any Provident Fund to the provident Fund Act 1925 applies;
2)Securities of the provincial Government issued income tax free;
3)Securities held under Trust or other legal obligation wholly for religious or charitable purposes;
4)Securities of the Federal Government issued free of income tax;
5)Securities held on behalf of Recognised Provident Fund;
6)Securities held on behalf of an approved super annution Fund;
7)Securities held by an Investment Company;
8)Securities received by an individual on securities of Federal or Provincial Government;
9) Apporved Debentures received by an other than company.The aggregate under 8 and 9 shall be Rs. 5,000;
10)Securities received by a holder on selling cum-interest. 


Permissible Deductions-

              In Computing the income under the head "Interest on Securities".the following deductions are allowed;-


1)Collection Charges

    Any sum deducted from such interest by way of commission by a banker for realising such interest on behalf of the assessee.Any commission charged by a bank other than in the course of collection of the interest is inadmissible.Again,any commission charged by any person other than the bank is inadmissible.


2)Interest On Borrowed Money

      Interest payable on money borrowed by the assessee for the purpose of investment in securities is allowable as a dedution.If such interest is payable outside Pakistan,deduction can be allowed only if the income tax has been deducted at sources.   

Interest On Securities

Interest On Securities 

                Following are the important provisions of the Ordinance in this behalf;
An income in order to be considered as "Interest on Securities"must fulfill the following conditions;-

1)It must have been received as interest;
2)It must be on "securities when received from Govt.or on"securities"or "debentures"when received from a local authority or a Pakistani company;
3)It must have been received from;
a)The Federal Government,
b)A Provincial Government,
c)A Local Authority,
d)A Pakistani Company.

   The above conditions are cumulative and not alternative.In other words these must all be satisfied before the amount becomes taxable under this head.If it does not satisfy even one of the above conditions,it cannot be taxed under this head.

          The following are not taxable under the head "Interest on Securities";- 

1)Dividend received on preference shares from a co;
2)Interest received from Government on a claim decreed by a Court of Law;
3)Interest received from an individual or from a partnership firm;
4)Interest received from a company , on a book debt or on an overdraft or on a loan bank;--- 

Inadmissible Expenses

Inadmissible Expenses

                     The following expenses have been declared as inadmissible expenses;
1)any case,rate or tax levied on profits or as proportion of profits;
2)Salaries paid without deduction of tax;
3)Interest,salary, commission or remuneration paid to partners of a firm;
4)Interest , salary etc .paid to members of an association;
5)Brokerage or commission paid to non - residents if tax has not been deducted;
6)Any payment to a provident fund or other fund established for the benefit of employees unless the employer has made effective arrangements to secure that tax shall be deducted at source from any payment made from the fund which is taxable under head salaries;
7)Any allowances on account of perquistes or other benefits to employees that exceed 30% of salary of the employee;
8)Any allowance in respect expenditure on entertainment as may be prescribed under sec . 10(4)(e).:-----

Computation Of Taxable Profits

Computation Of Taxable Profits

              The general principles governing the computation of taxable profits of a business are  below;-


1)Profits should be computed in accordance with the method of accounting regularly employed by the provided the true profits can be deducted from such method.
2)Expenses expressly allowed should be deducted from gross receipts,will expenses expressly or disallowed should not be so deducted.
3)Certain expenses and business losses should be from gross receipts,provided such expenses and losses are really incidential to the trade.
4)Deduction can be permitted only in respect of those expenses and losses which are incurred in the relevant accounting year;
5)Expenses which relate to a business closes before commenecment of the accounting year cannot be deducted from the profits of a separate existing business.Expenses of a dead business become capital losses.
6)Speculation losses can be set off only against speculation profits.:---

Interest On Securities Exempt From Tax

Interest On Securities Exempt From Tax

             Interest on securities is example from tax in the following cases;-
1)Securities held by or the property of any Provident Fund to the Provident fund Act 1925 applies;
2)Securities of the Provincial Government issued income tax free;
3)securities of the Federal Government issued free of income tax;
4)Securities held under Trust or other legal obligation wholly for religious or charitable purposes;
5)Securities held on behalf of an approved super  Fund;
6)Securities held on behalf of Knowledge Provident Fund;
7)Securities held by an Investment Company;
8)Securities received by an individual on securities of Federal or Provincial Government;
9) Approved  Debentures received by an  other than company . The aggregate under 8 and 9 shall be Rs. 5,000;
10)Securities received by a holder on selling cum-interest.


Permissible Deductions

         In Computing the income under the head "Interest on Securities",the following deductions are allowed;-

 1)Collection Charges-

          Any sum deducted from such interest by way of commission by a banker for  such interest on behalf of the course of collection charged by inadmissible.Again,any commission charged by any person other than the bank is inadmissible.

2)Interest On Borrowed Money-

        Interest payable on money borrowed by for the purpose of investment in securities is allowable as information . If such interest is payable outside Pakistan,between,can be allowed only if the income tax has been at sources.

Inadmissible Expenes

Tuesday, December 10, 2013

Inadmissible Expenes

                    The following expenses have been declared as inadmissible expenses;
1)Any cases , rate or tax levied on profits or as proportion of profit;
2)Salaries paid without deduction of tax;
3)Interest salary , commission or remuneration paid to partners of a firm;
4)Interest , salary etc , paid to members of an association;
5)Brokerage or commission paid to non-residents if tax has not been deducted;
6)Any payment to a provident fund or other fund established for the benefit of employer has made effective arrangements to secure that tax shall be deducted at source from any payment made from the fund which is taxable under head salaries;
7)Any allowances on account of perquistes or other benefits to employees that exceed 30% of salary of the employee;
8)Any allowance in respect expenditure on entertainment as may be prescribed under sec.104(4)(e).;;;

Allowable Expenses

Allowable Expenses -

                    The following are the allowable expenses out of the business income;

1)Rent of premises;
2)Tenant,s Repairs;
3)Interest on Borrowed Capital;
4)Special Reserve created with the permission of central government,amount not exceeding 10% of total income;
5)Insurance premium insuring assets;
6)Current repairs to building, machinery etc;
7)Depreciation and Obsolescence;
8)Rates and Taxes (Land revenue & local taxes);
9)Bonus to Employees;
10)Bad Debts after fulfilling certain conditions;
11)Expenditure on Scientific Research;
12)Expenditure in Educational Institution and Hospitals;
13)Expenditure on Training of Citizens of Pakistan;
14)Other Business Expenditures;
15)Expenditure of Trade Delegations;
16)Subscription to Trade Assocations ;

Heads Of Income

HEADS OF INCOME


      Income profits and gains under the ordinance are taxable under the following heads;
1)Salaries                                             (Section 16)
2)Interest on Securities                         (Section 17) 
3)Income from property                       (Section 18) 
4)profits and gains of business,             
  profession or vocation                         (Section 22)
5)Capital gain.                                       (Section 27)
6)Income From other sources                (Section 30)
   

           The fifth head is a general head and income not covered under any of the other is taxed under this head . Bonus shares issued are taxed in the heads of the company.

           Income under different heads is not taxed separately. Therefore , assessment of the whole of income and as such income under the different heads is taxed at the same time and tax is computed on the total income and not income under each head separately . The logic behind the classification of income in different heads is to have different machinery for computing income under each head.

Failure TO Pay Tax Or Penalty

5)Failure TO Pay Tax Or  Penalty (Sec.59)

         If the assessee fails to pay tax levied,he shall be liable to pay additional tax @ 15% per annum on the amount of such tax or penalty;such additional tax shall be calculated from the date on which such tax or penalty or part thereof,as the case may be,was originally payable to the date on which it is paid.


6)Reduction In Additional Tax/penalty(Sec.90)

      If the amount of tax or penalty in respect of which additional tax is chargeable under Section 86, 87, 88 or 89 is reduced,the additional tax,if any.levied under any of the aforesaid sections shall be reduced accordingly.

Charge Of Additional Tax(sec.86)

2)(Sec.86)

      
            If the assessee fails to pay the tax  due on him,he will be liable to pay additional tax at the rate of 15 percent per annum on the amount paid from the date on which he was required to pay such tax to the date of the payment thereof. 


3)Failure To Pay Advance Tax (Sec.87)

         If the assessee fails to pay (i) any instalment ,(ii)on or before specified date,or(iii)full amount payable by him,he shall  



4)Failure To pay Tax With The Return (Sec.88)

                   If can assessee fails to pay tax under sec.54 or the tax so paid is less than the tax payable under this section,he shall be liable to pay additional tax at 15% per annum on the amount not paid and such additional tax shall be calculated from the first day of October.

Tax Recovery Officer

Tax Recovery Officer

                    Tax Recovery Officer is appointed by the Central Board of revenue From amongst the income tax officers and assist income tax officers.Jurisdiction over certain areas is given to him by the respective commissioner under whom he is required to work.Wide powers have been given to him under the relevant rules in the matter of recover of arrears.On receipt of recovery certificate the proceeds to recover the tax. 


Recovery Of Tax

                Important provisions with regard to recovery of tax have been given under Sections 85 to 95.Legal Provisions governing these are given below:


1)Payment Of Tax On Demand(sec.85)

                If any tax is payable as a result of any assessment,the income Tax officer shall serve upon the assessee or any other person on his hehalf, a notice of demand specifying the sum payable and the said will be payable by him to the credit of Federal Government.

Inspector Of Income Tax

Monday, December 9, 2013

Inspector Of Income Tax

          The Inspector Of Income Tax officer is assisted by Inspector of income tax in  the exercise of his judicial functions.He is appointed subject to the specified rules and orders of the Central Government.He enjoys both executive and judicial powers.He performs such functions as are assigned to him by the income tax authority under whom he is appointed to work and is subordinate to such authority. 
     His powers,duties and functions are:
1)Outdoor inspection and survey to find new assesses;
2)Examination of books of account of assesses;
3)Enquiries regarding new sources of income of existing assesses;
4)Recoveries of outstanding demands from the defaulter assesses;

Assistant Income Tax Officer

Assistant Income Tax Officer

      He is appointed subject to the specified rules and orders of the Central Government.He performs such functions as may be assigned to him by the income tax authority under whom he is required to work and is subordinate to such authority.He has restricted jurisdiction is respect of assessable limits beyond which he cannot make assessment without prior approval of inspecting Assistant Commissioner.The senior assistant income tax officer can make assessment upto Rs.100,000 without any prior approval of the Inspecting Assistant Commissioner.The Class II Officer can write off irrecoverable tax upto Rs. 250 in each case.

Income Tax Officer

Income Tax Officer

    

    The Income Tax Officer occupies an important position in the Income tax department.He is vested with vast powers in the matters of assessment,collection of taxes and handing over the defaulter to the concerned authorities for the collection of arrears of taxes.He has both executive and judicial powers.The central Board of revenue can appoint as many Income tax officers as it thinks fit.It also includes an Assistant Income Tax Officers and a tax Recovery Officer.New discretionary powers have been given and the ones which have been withdrawn are those which could have been used by the tax officer in favour of the assessee and not against him.

Inspecting Assistant Commissioner

Inspecting Assistant Commissioner

            Inspecting Assistant Commissioner,who is appointed by the Central Board of Revenue,is directly under the control of the commissioner,and he performs his functions is respect of such persons,income and areas as the Commissioner may direct.he may also be directed to exercise the powers of income tax officer in respect of specified cases.
  His important powers,duties and functions are as under;-
1)Approve the extension of time for filing of Return;
2)Accord approval for levy of penalty;
3)Revise orders of subordinates;
4)Rectify mistakes apparent from records;
5)Enter any place and inspect any accounts,stamp the same,make note of stock and make enquiries;
6)Take evidence on oath;
7)Inspect and take copies of a company;
8)Institute prosecution and compound the same with the prior approval of C.B.R;
9)Issue certificate under Transfer of property Act;
10)Write off irrecoverable arrears between Rs. 100 and Rs. 2,500.

Commissioner Of Income Tax

Commissioner Of Income Tax

       Commissioner are appointed by the central board of revenue and its territorial jurisdiction is also assigned by it.The Inspecting Assistant Commissioner,Income tax officer,Assistant income tax officers and tax Recovery officers are subordinate to and under the control of commissioner.He enjoys both executive and judicial powers.
      The most important powers,duties and function of the commissioner are:
1)Allocate and distribute work among subordinates;
2)Transfer eases from one income tax officer to another;
3)Pass orders on revision petition;
4)Specify authority for realising arrears of tax;
5)Set of refunds against pending dermand ;
6)Recommend prosecution of an office or disclosure;
7)Recognise provident fund and very rules;
8)Decide misconduct if income tax practitioner and 
9)Decide jurisdiction of more than one income tax officer;
10)Refer cases to High Court against orders of Appellate tribunal;
11)Write off irrecoverable arrears between Rs. 2,500 to Rs. 25,000


Director Of Inspection

Director Of Inspection 

         
                Director Of Inspection is appointed by the Central Board of revenue and is under the control of the central board of revenue.He performs such duties and functions of any other income tax authority as maybe assigned to him.It includes additional Director,Deputy Director and assistant Director.He may issue necessary instructions for the guidance of special officer,Tax Recovery Officer,Income Tax officers and Assistant Income Tax Officers.They Are subordinate to him in the matter of assessment or recovery of tax.
       

Central Board Of Revenue(CBR)

The Central Board Of Revenue is a statutory body appointed by the central government and is a statutory body appointed by the central government and is attached to the ministry of finance.It is the highest executive authority in the adminstrstion of income tax law and has power to make rules and issue orders, instructions and directions to all officers and persons employed in the execution of the ordinance,but bot to income tax appellate tribunal or court of law.Its special powers.duties and functions are as under:
1)Declare any foreign unincorporated association a company;
2)Determine a commercial year as previous year;
3)Appoint commissioners of income tax direction of inspection;
4)Appoint assistant commissioners,special officers and income tax officers;
5)Assign work,interpret ordinance and exercise general control;
6)Hear appeal against to grant recognition to provident fund;
7)Recognise provident fund,supernannuation fund and frame rules therefore;
8)Frame rules under Section 59;
9)Recognise qualified persons to practice as income tax practitioners;
10)Determine place of assessment and jurisdiction.

Income Tax Authorities

Income Tax Authorities

   income tax Authorities can be divided into two broader groups-Executive and Judicial.
 Executive Authorities look after the administration of the ordinance and constitute the following:

1)central board of revenue
2)director of inspection
3)regional commissioner
4)commissioner of income tax
5)inspecting assistant commissioners
6)income tax officers
7)special officers
8)inspector of income tax
Judicial Authorities exercise judicial functions and can be the following:
1)Appellate Tribunal
2)Commissioner of income tax with Revisional and appeal powers
3)appellate assistant commissioner
Some of these important authorities are discussed hereunder in detail.

BASIS OF INCOME TAX LAWS

BASIS OF INCOME TAX LAWS

     The Pakistan Government adopted the income Tax act,1922 after independence,In June 1958,a Taxation Inquiry committee was set up.Its final reports appeared in two volume,central Board of Revenue set up another taxation committee with the objective of simplifing the income tax act and procedure and streamlining the law in general.The Taxation Committee set up in Pakistan submitted its Interim Report in July 1971.Income Tax Ordinance,1979 was promulgated by the president of Pakistan on june 30,1979.So the 1979 Ordinance is the present Income Tax Law in Pakistan.

   We can summarise the position of income tax laws and practices in pakistan as under;-

Income Tax Ordinance 1979

Income Tax Ordinance 1979


      The ordinance is administered by the central board of rvenue  which is the highest authority of Income tax in the country.this Borad has four members two of them look after income tax,sales tax.These members are of the status of joint secretaries to the Government of Pakistan in the Ministry of Finance.The Board is working for the attainment of the following objectives:

    a)To re-arrange the provisions in a more systematic and logical form:
    b)To simplify the law so as to make it easily understandable by the tax-payers:
    c)to plug loop-holes,remove lacunae and ambiguities;
    d)To introduce a system of assessment desgned to create an atmosphere of mutual trust and confidence between the tax-payers and the tax officials

Income Tax Case Law

Income Tax Case Law

    High courts and supreme court of pakistan have given carious Rulings from time to time also facilitate the interpretation and the application of the Income Tax Act.Therefore such Rulings and Decisions taken by the learned courts in Pakistan are also considered part of Income Tax Law And Practice In Pakistan.

Notification And Instructions

   Notification And Instructions have also been issued by the Government of pakistan in clarification of the Act and these also form part of the Act.The Central Board Of Revenue issue instructions,explanations and notications and these have to be taken into consideration inthe application of income tax LAW.
 

LAW OF INCOME TAX

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