Income tax ordinance Index 2013

8/12/2019 Income tax ordinance Index 2013

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INCOME TAX MANUAL

PART I

INCOME TAX ORDINANCE, 2001

AMENDED UPTO30thJune, 2013


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GOVERNMENT OF PAKISTANFEDERAL OARD OF REVENUE

!REVENUE DIVISION".

INCOME TAX MANUAL

PART I

INCOME TAX ORDINANCE, 2001

AMENDED UPTO 30T#JUNE, 2013

Pu$%&'he( $)*

FACILITATIONANDTAXPA+ERSEDUCATIONING


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INCOME TAX ORDINANCE 2001

TALE OF CONTENTS

C#APTER 1

PRELIMINAR+

1. Short title, extent and commencement 12. Definitions 13. Ordinance to override other laws 22

C#APTER II

C#ARGE OF TAX

4. Tax on taxable income 235. Tax on dividends 24

. Tax on certain !a"ments to non#residents 24

$. Tax on shi!!in% and air trans!ort income of a non#

resident !erson

25

&. 'eneral !rovisions relatin% to taxes im!osed (nder

sections 5, and $

25

C#APTER III

TAX ON TAXALE INCOME

PART ICOMPUTATION OF TAXALE INCOME

). Taxable income 2$1*. Total income 2$11. +eads of income 2$

PART II#EAD OF INCOME

SALAR+

12. Salar" 2)13. al(e of !er-(isites 3114. m!lo"ee share schemes 35
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PART III#EAD OF INCOME

INCOME FROM PROPERT+

15. /ncome from !ro!ert" 3$

150. Ded(ctions in com!(tin% income char%eable (nderthe head /ncome from ro!ert"

3$

1. on#ad(stable amo(nts received in relation to

b(ildin%s

4*

17. Omitted by the Finance Act, 2006.

PART IV#EAD OF INCOME

INCOME FROM USINESS

D&-&'&.n IIn/.e . u'&ne''

1&. /ncome from b(siness 421). S!ec(lation b(siness 43

D&-&'&.n IIDe(u/t&.n'

Gene% P&n/&4%e'

2*. Ded(ctions in com!(tin% income char%eable (nder

the head /ncome from 6(siness

44

21. Ded(ctions not allowed 45

D&-&'&.n IIIDe(u/t&.n'

S4e/&% P.-&'&.n'

22. De!reciation 4$23. /nitial allowance 51230. 7irst 8ear 0llowance 52236. 0ccelerated de!reciation to alternate ener%"

!roects.

52

24. /ntan%ibles 52

25. re#commencement ex!endit(re 552. Scientific research ex!endit(re 552$. m!lo"ee trainin% and facilities 52&. rofit on debt, financial costs and lease !a"ments 52). 6ad debts 5&2)0 rovision re%ardin% cons(mer loans 5)


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3*. rofit on non#!erformin% debts of a ban9in%

com!an" or develo!ment finance instit(tion

*

31. Transfer to !artici!ator" reserve *

D&-&'&.n IV

T5 A//.unt&n6

32. :ethod of acco(ntin% 1

33. ;ash#basis acco(ntin% 1

34. 0ccr(al#basis acco(ntin% 1

35. Stoc9#in#trade 3

3.


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51. 7orei%n#so(rce income of ret(rnin% ex!atriates $&52. Omitted by Finance Ordinance, 2002

53. xem!tions and tax concessions in the SecondSched(le

$)

54. xem!tions and tax !rovisions in other laws $)

55.


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C#APTER7IV

COMMON RULES

PART IGENERAL

. /ncome of oint owners 1*2$. 0!!ortionment of ded(ctions 1*2&. 7air mar9et val(e 1*2). Cecei!t of income 1*3$*. Ceco(!ed ex!endit(re 1*3$1. ;(rrenc" conversion 1*3$2. ;essation of so(rce of income 1*3$3. C(les to !revent do(ble derivation and do(ble

ded(ctions1*4

PART IITAX +EAR

$4. Tax "ear 1*5

PART IIIASSETS

$5. Dis!osal and ac-(isition of assets 1*$$. ;ost 1*$

$$. ;onsideration received 1*)$&. on#arms len%th transactions 11*$). on#reco%nition r(les 11*

C#APTER V

PROVISIONS GOVERNING PERSONS

PART ICENTRAL CONCEPTS

D&-&'&.n I

Pe'.n'

&*. erson 112

D&-&'&.n IIRe'&(ent n( N.n7e'&(ent Pe'.n'

&1. Cesident and non#resident !ersons 113
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&2. Cesident individ(al 114&3. Cesident com!an" 114&4. Cesident association of !ersons 114

D&-&'&.n III

A''./&te'

&5. 0ssociates 115

PART IIINDIVIDUALS

D&-&'&.n IT5t&.n . In(&-&(u%'

&. rinci!le of taxation of individ(als 11$

&$. Deceased individ(als 11$

D&-&'&.n IIP.-&'&.n' Re%t&n6 t. A-e6&n6

&&. 0n individ(al as a member of an association of!ersons

11&

&&0. Share !rofits of com!an" to be added to taxableincome

11&

&). 0(thors 11)

D&-&'&.n IIIIn/.e S4%&tt&n6

)*. Transfers of assets 11))1. /ncome of a minor child 12*

PART IIIASSOCIATIONS OF PERSONS

)2. rinci!les of taxation of associations of !ersons 12193. Omitted by the Finance Act, 2007.

PART IVCOMPANIES

)4. rinci!les of taxation of com!anies 122)5. Dis!osal of b(siness b" individ(al to wholl"#owned

com!an"122

). Dis!osal of b(siness b" association of !ersons towholl"#owned com!an"

124


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)$. Dis!osal of asset between wholl"#owned com!anies 125)$0. Dis!osal of asset (nder scheme of arran%ement and

reconstr(ction.12$

PART VCOMMON PROVISIONS APPLICALE TO

ASSOCIATIONS OF PERSONS AND COMPANIES

)&. ;han%e in control of an entit" 12)

PART VATAX LIAILIT+ IN CERTAIN CASES

)&0. ;han%e in the constit(tion of an association of!ersons

13*

)&6. Discontin(ance of b(siness or dissol(tion of anassociation of !ersons

13*

)&;. S(ccession to b(siness, otherwise on death 13*

C#APTER7VI

SPECIAL INDUSTRIES

PART IINSURANCE USINESS

)). S!ecial !rovisions relatin% to ins(rance b(siness 132

PART IIOIL, NATURAL GAS AND OT#ER MINERAL

DEPOSITS

1**. S!ecial !rovisions relatin% to the !rod(ction of oiland nat(ral %as, and ex!loration and extraction ofother mineral de!osits

133

1**0. S!ecial !rovisions relatin% to ban9in% b(siness. 1331**6. S!ecial !rovision relatin% to ca!ital %ain tax. 133

C#APTER VII

INTERNATIONAL

PART IGEOGRAP#ICAL SOURCE OF INCOME

1*1. 'eo%ra!hical so(rce of income 135
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PART IITAXATION OF FOREIGN7SOURCE INCOME OF

RESIDENTS

1*2. 7orei%n so(rce salar" of resident individ(als 13)1*3. 7orei%n tax credit 13)1*4. 7orei%n losses 14*

PART IIITAXATION OF NON7RESIDENTS

1*5. Taxation of a !ermanent establishment in a9istan ofa non#resident !erson

141

1*. Thin ca!italiEation 142

PART IVAGREEMENTS FOR T#E AVOIDANCE OF

DOULE TAXATION ANDPREVENTION OF FISCAL EVASION

1*$. 0%reements for the avoidance of do(ble taxation and!revention of fiscal evasion

145

C#APTER VIIIANTI7AVOIDANCE

1*&. Transactions between associates 141*). Ce#characteriEation of income and ded(ctions 1411*. Salar" !aid b" !rivate com!anies 14111. >nex!lained income or assets 14112.


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C#APTER X

PROCEDURE

PART IRETURNS

114. Cet(rn of income 154115. ersons not re-(ired to f(rnish a ret(rn of income 15)11. Aealth statement 1111$. otice of discontin(ed b(siness 1311&. :ethod of f(rnishin% ret(rns and other doc(ments 1311). xtension of time for f(rnishin% ret(rns and other

doc(ments15

PART IIASSESSMENTS

12*. 0ssessments 1$12*0. Omitted by Finance Act, 2005

121. 6est (d%ment assessment 1&122. 0mendment of assessments 1$*1220. Cevision b" the ;ommissioner 1$31226. Cevision b" the Ce%ional ;ommissioner 1$4122;. rovisional assessment 1$4123. rovisional assessment in certain cases 1$5

124. 0ssessment %ivin% effect to an order 1$51240. owers of tax a(thorities to modif" orders, etc. 1$$125. 0ssessment in relation to dis!(ted !ro!ert" 1$$12. vidence of assessment 1$$

PART IIIAPPEALS

12$. 0!!eal to the ;ommissioner F0!!ealsG 1$)12&. roced(re in a!!eal 1&112). Decision in a!!eal 1&1

13*. 0!!ointment of the 0!!ellate Trib(nal 1&3131. 0!!eal to the 0!!ellate Trib(nal 1&5132. Dis!osal of a!!eals b" the 0!!ellate Trib(nal 1&$133. Ceference to +i%h ;o(rt 1&&134. Omitted by Finance Act, 2005

1340. 0lternative Dis!(te Cesol(tion 1)1135. Omitted by the Finance Ordinance, 2002

13. 6(rden of !roof 1)3


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PART IVCOLLECTION AND RECOVER+ OF TAX

13$. D(e date for !a"ment of tax 1)5

13&. Cecover" of tax o(t of !ro!ert" and thro(%h arrest oftax!a"er 1)

13&0. Cecover" of tax b" District Officer FCeven(eG 1)$13&6. state in ban9r(!tc" 1)$13). ;ollection of tax in the case of !rivate com!anies

and associations of !ersons1)$

14*. Cecover" of tax from !ersons holdin% mone" onbehalf of a tax!a"er

1)&

141.


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153. a"ments for %oods, services and contracts 22*1530. Omitted by Finance Act, 2005

154. x!orts 225155. /ncome from !ro!ert" 2215. riEes and winnin%s 22&

150. etrole(m !rod(cts 22&156. Aithdrawal of balance (nder !ension f(nd 22&157. Omitted by the Finance Ordinance, 2002

15&. Time of ded(ction of tax 22)

D&-&'&.n IVGene% P.-&'&.n' Re%t&n6 t. the A(-n/eP)ent . T5 . the De(u/t&.n . T5 t

S.u/e

15). xem!tion or lower rate certificate 23*1*. a"ment of tax collected or ded(cted 23111. 7ail(re to !a" tax collected or ded(cted 23112. Cecover" of tax from the !erson from whom tax was

not collected or ded(cted232

13. Cecover" of amo(nts !a"able (nder this Division 23314. ;ertificate of collection or ded(ction of tax 23315. Statements 233150. 7(rnishin% of information b" ban9s 23

1. riorit" of tax collected or ded(cted 23$1$. /ndemnit" 23$1&. ;redit for tax collected or ded(cted 23$1). Tax collected or ded(cted as a final tax 23)

PART VIREFUNDS

1$*. Cef(nds 242

1$1. 0dditional !a"ment for dela"ed ref(nds 243

PART VIIREPRESENTATIVES

1$2. Ce!resentatives 2451$3.


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PART VIIIRECORDS, INFORMATION COLLECTION AND

AUDIT

1$4. Cecords 24&1$5. ower to enter and search !remises 24)1$. otice to obtain information or evidence 25*1$$. 0(dit 2511$&. 0ssistance to ;ommissioner 2541$). 0cco(nts, doc(ments, records and com!(ter#stored

information not in >rd( or n%lish lan%(a%e254

1&*. ower to collect information re%ardin% exem!tincome

254

PART IXNATIONAL TAX NUMER CERTIFICATE

1&1. Tax!a"er?s Ce%istration 2551&10. 0ctive tax!a"ers? list 2551&16. Tax!a"er card 2551&1;. Dis!la"in% of ational Tax (mber 255

PART XPENALT+

1&2. Offences and !enalties 25

1&3. xem!tion from !enalt" and defa(lt s(rchar%e 211&4. Omitted by the Finance Act, 2010.

1&5. Omitted by the Finance Act, 2010.

1&. Omitted by the Finance Act, 2010.

1&$. Omitted by the Finance Act, 2010.

1&&. Omitted by the Finance Act, 2010.

1&). Omitted by the Finance Act, 2010.

1)*. Omitted by the Finance Act, 2010.

PART XIOFFENCES AND PROSECUTIONS

1)1. rosec(tion for non#com!liance with certainstat(tor" obli%ations

25

1)2. rosec(tion for false statement in verification 21)20. rosec(tion for concealment of income. 21)3. rosec(tion for fail(re to maintain records 21)4. rosec(tion for im!ro!er (se of ational Tax

(mber ;ertificate2


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1)5. rosec(tion for ma9in% false or misleadin%statements

2$

1). rosec(tion for obstr(ctin% an income tax a(thorit" 2$1)$. rosec(tion for dis!osal of !ro!ert" to !revent

attachment2$

1)&. rosec(tion for (na(thoriEed disclos(re ofinformation b" a !(blic servant

2&

1)). rosec(tion for abetment 2&2**. Offences b" com!anies and associations of !ersons 2&2*1. /nstit(tion of !rosec(tion !roceedin%s witho(t

!re(dice to other action2)

2*2. ower to com!o(nd offences 2)2*3. Trial b" S!ecial B(d%e 2)

2*30. 0!!eal a%ainst the order of a S!ecial B(d%e 2$*

2*4. ower to tender imm(nit" from !rosec(tion 2$*

PART XIIADDITIONAL TAX

2*5. Defa(lt s(rchar%e 2$22*50. Ced(ction in defa(lt s(rchar%e, conse-(ential to

red(ction in tax or !enalt"2$4

PART XIIICIRCULARS

2*. ;irc(lars 2$2*0. 0dvance r(lin% 2$

C#APTER XI

ADMINISTRATION

PART IGENERAL

2*$. /ncome tax a(thorities 2$$2*&. 0!!ointment of income tax a(thorities 2$&

2*). B(risdiction of income tax a(thorities 2$)21*. Dele%ation 2&1211. ower or f(nction exercised 2&3212. 0(thorit" of a!!roval 2&3213. '(idance to income tax a(thorities 2&4214. /ncome tax a(thorities to follow orders of the 6oard 2&42140. ;ondonation of time limit 2&42146. ower of the 6oard to call for records 2&5


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214;. Selection for a(dit b" the 6oard 2&5215. 7(rnishin% of ret(rns, doc(ments etc. 2&21. Disclos(re of information b" a !(blic servant 2&21$. 7orms and noticesI a(thentication of doc(ments 2)*21&. Service of notices and other doc(ments 2)*

21). Tax or ref(nd to be com!(ted to the nearest C(!ee 2)122*. Cecei!ts for amo(nts !aid 2)1221. Cectification of mista9es 2)2222. 0!!ointment of ex!ert 2)2223. 0!!earance b" a(thoriEed re!resentative 2)2224. roceedin%s (nder the Ordinance to be (dicial

!roceedin%s2)5

225. roceedin%s a%ainst com!anies (nder li-(idation 2)522. ;om!(tation of limitation !eriod 2)522$. 6ar of s(its in ;ivil ;o(rts 2)

22$0. Ceward to officers and officials of /nland Ceven(e 2)

PART IIDIRECTORATES7GENERAL

22&. The Directorate#'eneral of /nternal 0(dit 2)$22). Directorate 'eneral of Trainin% and Cesearch 2)$23*. Directorate 'eneral F/ntelli%ence and /nvesti%ationG,

/nland Ceven(e2)$

PART IIIDIRECTORATES7GENERAL

23*0. Directorate#'eneral of Aithholdin% Taxes 2))23*6. Directorate#'eneral of


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234. Tax on motor vehicles 3*42340. ;' Stations. 3*5235. lectricit" ;ons(m!tion 3*523. Tele!hone (sers 3*230. 0dvance tax at the time of sale b" a(ction 3*

236. 0dvance tax on !(rchase of air tic9et 3*$23;. 0dvance Tax on sale or transfer of immovable

ro!ert"3*$

23D. 0dvance tax on f(nctions and %atherin%s 3*&23 0dvance tax on forei%n#!rod(ced T !la"s and

serials3*&

237. 0dvance tax on cable o!erators and other electronicmedia

3*&

23'. 0dvance tax on sales to distrib(tors, dealers andwholesalers

3*)

23+. 0dvance tax on sales to retailers 3*)23/. ;ollection of advance tax b" ed(cational instit(tions 3*)23B. 0dvance tax on dealers, commission a%ents and

arhatis etc.31*

C#APTER XIIIMISCELLANEOUS

23$. ower to ma9e r(les 31123$0. lectronic record 31223&. Ce!eal 312

23). Savin%s 31223)0. Transition to 7ederal 6oard of Ceven(e. 3123)6. Ceference to a(thorities 3124*. Cemoval of diffic(lties 31

SC#EDULES


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FIRST SC#EDULE

PART IRATES OF TAX

31&

D&-&'&.n IRte' . T5 . In(&-&(u%' n( A''./&t&.n .

Pe'.n'31&

D&-&'&.n IA(Omitted by the Finance Act, 2013)

D&-&'&.n I(Omitted by the Finance Act, 2012)

D&-&'&.n IIRte' . T5 . C.4n&e'

325

D&-&'&.n IIIRte . D&-&(en( T5 32

D&-&'&.n IVRte . T5 .n Cet&n P)ent' t. N.n7

e'&(ent'32

D&-&'&.n VRte . T5 .n Sh&44&n6 . A& Tn'4.t In/.e

. N.n7e'&(ent Pe'.n32$

D&-&'&.n VI(Omitted by the Finance Act, 2013)

D&-&'&.n VIIC4&t% G&n' .n (&'4.'% . Se/u&t&e' 32)
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D&-&'&.n VIIIC4&t% G&n' .n D&'4.'% . I.-$%e P.4et)

33*

PART II

Rte' . A(-n/e T5T5 .n I4.t . G..('

331

PART IIAC.%%e/t&.n . T5 . D&'t&$ut.',

De%e', An( h.%e'%e'

332

PART III

DEDUCTION OF TAX AT SOURCE 333

D&-&'&.n IP.&t .n (e$t 333

D&-&'&.n IIP)ent' t. n.n7e'&(ent' 333

D&-&'&.n IIIP)ent' . G..(' . Se-&/e' 334

D&-&'&.n III A(Omitted by the Finance Act, 2012)

D&-&'&.n IVE54.t' 33

D&-&'&.n VIn/.e . P.4et) 33$

D&-&'&.n VIP&8e' n( &nn&n6' 33&


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D&-&'&.n VIAPet.%eu P.(u/t' 33&

D&-&'&.n VICNG Stt&.n' 33)

PART IVDEDUCTION OR COLLECTION OF

ADVANCE TAX

34*

D&-&'&.n II.9e6e C.&''&.n 34*

D&-&'&.n IIARte' . C.%%e/t&.n . T5 $) St./9 E5/hn6e

Re6&'tee( &n P9&'tn341

D&-&'&.n II

Rte' . /.%%e/t&.n . t5 $) NCCPL 341

D&-&'&.n IIIT5 .n .t. -eh&/%e' 341

D&-&'&.n IVE%e/t&/&t) C.n'u4t&.n 343

D&-&'&.n VTe%e4h.ne u'e' 345

D&-&'&.n VIC'h :&th(:% . $n9 34


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D&-&'&.n VIAA(-n/e t5 .n Tn'/t&.n' &n n9 34

D&-&'&.n VIIPu/h'e . M.t. C' n( Jee4' 34

D&-&'&.n VIIIA(-n/e t5 t the t&e . '%e $) u/t&.n 34$

D&-&'&.n IXA(-n/e t5 .n Pu/h'e . A& T&/9et 34$

D&-&'&.n XA(-n/e t5 .n '%e . tn'e .

I.-$%e 4.4et)34$

D&-&'&.n XIA(-n/e t5 .n un/t&.n' n( 6the&n6' 34$

D&-&'&.n XIIA(-n/e t5 .n .e&6n74.(u/e( &%' n( TV

4%)'34&

D&-&'&.n XIII 34&

D&-&'&.n XIVA(-n/e t5 .n '%e t. (&'t&$ut.', (e%e' .:h.%e'%e'

34)

D&-&'&.n XVA(-n/e t5 .n '%e t. et&%e' 34)


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D&-&'&.n XVIC.%%e/t&.n . (-n/e t5 $) e(u/t&.n%

&n't&tut&.n'34)

D&-&'&.n XVIIA(-n/e t5 .n (e%e', /.&''&.n 6ent' n(

ht&', et/;34)

T#E SECOND SC#EDULEEXEMPTIONS AND TAX CONCESSIONS

35*

PART IEXEMPTIONS FROM TOTAL INCOME 35*

PART IIREDUCTION IN TAX RATES 3)2

PART IIIREDUCTION IN TAX LIAILIT+ 4*1

PRT IVEXEMPTION FROM SPECIFIC PROVISIONS 4*5

T#E T#IRD SC#EDULE 43

PART I

DEPRECIATION 43

PART IIINITIAL ALLOANCE 43&
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PART IIIPRE7COMMENCEMENT EXPENDITURE 43)

T#E FOURT# SC#EDULERULES FOR T#E COMPUTATION OF T#E

PROFITS AND GAINS OF INSURANCE USINESS

44*

T#E FIFT# SC#EDULE 445

PART I

RULES FOR T#E COMPUTATION OF T#EPROFITS AND GAINS FROM T#E EXPLORATIONAND PRODUCTION OF PETROLEUM

445

PART IIRULES FOR T#E COMPUTATION OF T#E

PROFITS AND GAINS FROM T#E EXPLORATIONAND EXTRACTION OF MINERALS DEPOSITS

!OT#ER T#AN PETROLEUM"

451

T#E SIXT# SC#EDULE 454

PART IRECOGNI


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T#E SEVENT# SC#EDULE 4$*

RULES FOR T#E

COMPUTATION OF T#E PROFITS AND GAINS OFA ANKING COMPAN+ AND TAX PA+ALE

T#EREON

4$2

T#E EIG#T# SC#EDULE 4$)

RULES FOR T#E COMPUTATION OF CAPITALGAINS ONLISTED SECURITIES

4$)

Income tax ordinance Index 2013

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Transcript of Income tax ordinance Index 2013