Provisions governing persons (Income Tax)

PROVISIONS GOVERNING PERSONS

PROVISIONS GOVERNING PERSONS

CENTRAL CONCEPTS

Provisions Governing PersonsPerson.

(1) The following shall be treated as persons for the purposes of this Ordinance, namely: —

(a) An individual;

(b) a company or association of persons incorporated, formed, organized or established in Pakistan or elsewhere;

(c) the Federal Government, a foreign government, a political sub-division of a foreign government, or public international organisation.

Provisions Governing PersonsPerson. (2) For the purposes of this Ordinance — (a) ―association of persons‖ includes a firm, a Hindu undivided family, any artificial juridical person and any body of persons formed under a foreign law, but does not include a company; (b) company means (i) a company as defined in the Companies Ordinance, 1984 (XLVII of 1984); (ii) a body corporate formed by or under any law in force in Pakistan; (iii) a modaraba; (iv) a body incorporated by or under the law of a country outside Pakistan relating to incorporation of companies; (v) a trust, a co-operative society or a finance society [or any other society established or constituted by or under any law for the time being in force;] (vi) a foreign association, whether incorporated or not, which the [Board] has, by general or special order, declared to be a company for the purposes of this Ordinance; (vii) a Provincial Government;(viii) a [Local Government] in Pakistan; [or] (ix) a Small Company as defined in section 2;]

Provisions Governing PersonsPerson. (c) firm means the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all; (d) ―trust‖ means an obligation annexed to the ownership of property and arising out of the confidence reposed in and accepted by the owner, or declared and accepted by the owner for the benefit of another, or of another and the owner, and includes a unit trust; and (e) ―unit trust‖ means any trust under which beneficial interests are divided into units such that the entitlements of the beneficiaries to income or capital are determined by the number of units held.

Provisions Governing PersonsResident and Non-Resident Persons.

(1) A person shall be a resident person for a tax year if the person is —

(a) a resident individual, resident company or resident association of persons for the year; or

(b) the Federal Government.

(2) A person shall be a non-resident person for a tax year if the person is not a resident person for that year

Provisions Governing PersonsResident individual. —

An individual shall be a resident individual for a tax year if the individual —

(a) is present in Pakistan for a period of, or periods amounting in aggregate to, one hundred and [eighty-three] days or more in the tax year;

(b) is an employee or official of the Federal Government or a Provincial Government posted abroad in the tax year.

Provisions Governing Persons

INDIVIDUALS

Provisions Governing PersonsTaxation of Individuals:

Principle of taxation of individuals.— Subject to this Ordinance, the taxable income of each individual shall be determined separately.

Deceased individuals.— (1) The legal representative of a deceased individual shall be liable for – (a) any tax that the individual would have become liable for if the individual had not died; and (b) any tax payable in respect of the income of the deceased‘s estate. (2) The liability of a legal representative under this section shall be limited to the extent to which the deceased‘s estate is capable of meeting the liability.

Provisions Governing PersonsDeceased individuals.

(3) For the purpose of this Ordinance, — (a) any proceeding taken under this Ordinance against the deceased before his or her death shall be treated as taken against the legal representative and may be continued against the legal representative from the stage at which the proceeding stood on the date of the deceased‘s death; and (b) any proceeding which could have been taken under this Ordinance against the deceased if the deceased had survived may be taken against the legal representative of the deceased.

(4) In this section, legal representative means a person who in law represents the estate of a deceased person, and includes any person who intermeddles with the estate of the deceased and where a party sues or is sued in representative character the person on whom the estate devolves on the death of the party so suing or sued.

Provisions Governing PersonsAn individual as a member of an association of persons.

If, for a tax year, an individual has taxable income and derives an amount or amounts exempt from tax under sub-section (1) of section 92, the amount of tax payable on the taxable income of the individual shall be computed in accordance with the following formula, namely: —

(A/B) x C where — A is the amount of tax that would be assessed to the individual for the year if the amount or amounts exempt from tax under sub-section (1) of section 92 were chargeable to tax; B is the taxable income of the individual for the year if the amount or amounts exempt from tax under sub-section (1) of section 92 were chargeable to tax; and C is the individual‘s actual taxable income for the year

Provisions Governing PersonsShare profits of company to be added to taxable income .

(1) Notwithstanding the provisions of sub-section (1) of section 92, the share of profits derived by a company from an association of persons shall be added to the taxable income of the company.

(2) The company shall be allowed a tax credit in accordance with the following formula, namely: —

[(A/B) x C] Where — A is the amount of share of profits received by the company from the association; B is the taxable income of the association; and C is the amount of tax assessed on the association.

(3) The tax credit allowed under this section shall be applied in accordance with sub-section (3) of section 4.]

Provisions Governing PersonsIncome of a minor child.(1) Any income of a minor child for a tax year

chargeable under the head "Income from Business" shall be chargeable to tax as the income of the parent of the child with the highest taxable income for that year.

(2) Sub-section (1) shall not apply to the

income of a minor child from a business acquired by the child through an inheritance.


ASSOCIATIONS OF PERSONS.


ASSOCIATIONS OF PERSONS.

Association of persons includes a firm, a Hindu undivided family, any artificial juridical person and any body of persons formed under a foreign law, but does not include a company


Principles of Taxation of AOP

An association of persons shall be liable to tax separately from the members of the association and 2[where the association of persons has paid tax the] amount received by a member of the association in the capacity as member out of the income of the association shall be exempt from tax.


COMPANIES.

Provisions Governing PersonsCompany means (i) a company as defined in the Companies Ordinance, 1984 (XLVII of

1984); (ii) a body corporate formed by or under any law in force in Pakistan; (iii) a modaraba; (iv) a body incorporated by or under the law of a country outside Pakistan

relating to incorporation of companies; (v) a trust, a co-operative society or a finance society [or any other society

established or constituted by or under any law for the time being in force;]

(vi) a foreign association, whether incorporated or not, which the [Board] has, by general or special order, declared to be a company for the purposes of this Ordinance;

(vii) a Provincial Government;(viii) a [Local Government] in Pakistan; [or] (ix) a Small Company as defined in section 2

Provisions Governing PersonsPrinciples of taxation of companies.-

A company shall be liable to tax separately from its shareholders. The incomes of a company shall be charged to tax in the light of the following principles:

1. Taxable income (other than dividend income) shall be computed and treated as per normal procedure. Income tax under NTR shall be charged to tax @35% of taxable income of the company.

2. The dividend income received from a company shall be treated separate block of income and chargeable to tax @10% of the gross amount of dividend

Provisions Governing PersonsDisposal of business by individual to wholly-owned

company:




Provisions Governing PersonsDisposal of business by individual to wholly-owned

company:




Education

Provisions governing persons (Income Tax)