Income Tax calculation and Filing of returns step by step

Income Tax calculation and Filing of returns step by step

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2. . MILITARY ACCOUNTS TRAINING INSTITUTE WAH CANTT

3. . Course on income Tax

4. Definitions and concepts related to the income tax Tax (from the Latin taxo ; "I estimate") is to impose a financial charge or other levy upon a taxpayer (an individual or legal entity) by a state or the functional equivalent of a state such that failure to pay is punishable by law.

5. Income tax Law in Pakistan Law concerning taxation of income in Pakistan is stated in the Income Tax Ordinance, 2001 (the Ordinance) and the rules framed there under viz. Income Tax Rules, 2002 (the Rules). The Ordinance is a Central statute and is, therefore, applicable to the whole of Pakistan. Under section 4 of the Ordinance, income tax is imposed for each tax year at specified rates on every person who has taxable income for the year.

6. Tax Year in Pakistan Tax year is a period of 12 months ending on 30th June and shall be denoted by the calendar year in which the said date falls.

7. Direct & indirect taxes Indirect Tax An indirect tax  collected by an intermediary who bears the ultimate economic burden of the tax . Examples:- sales tax, a specific tax, value added tax (VAT), or goods and services tax  (GST)

8. DIRECT TAXES A   direct tax  is generally a tax paid directly to the government by the person on whom it is imposed . Example:- Real and personal property, livestock, crops, wages, etc

9. Income tax An income tax is a tax levied on the income of individuals or businesses (corporations or other legal entities ). When the tax is levied on the income of companies, it is often called a corporate tax, corporate income tax, or profit tax.

10. sales tax A   sales tax  is a consumption tax charged at the point of purchase for certain goods and services . Taxable Income in Pakistan It is the total income of a person for a tax year reduced by the total of any deductible allowances.

11. Total Income It is the sum of a person's income under each of the heads of income for the year. Heads of Income in Pakistan Salary Income from property, Income from business, Capital gains and Income from other sources.

12. SALARY Salary means any amount received by an employee from any employment, whether of a revenue or capital nature, including — Any pay wages any other remuneration. leave pay overtime payment bonus/honorarium commission fees, gratuity

13. Continued………. SALARY Any perquisite, whether convertible to money or not . cost of living. Subsistence. rent . utilities . education . entertainment. expenditure incurred by an employee that is paid or reimbursed by the employer. The amount of any profits in lieu of, or in addition to, salary or wages.

14. Salary Sec 149,1 st schedule Taxable Income Rate of Tax From to 6,00,000 0 % 600,000 1,200,000 2.5% on amount exceeding Rs.600,000 1,200,001 24,00,000 15000 plus 12.5% on amount >Rs.12,00,000 2,400,000 3,600,000 165000 22.5% on amount > Rs . 24,00,000/- 3600,000 6,000,000 435000 27.5 % on amount > Rs.36,00,000/- 6,000,000 To onward 1,095,000 35% on amount > Rs . 60,00,000/-

15. Income from property The rent received or receivable by a person, other than rent exempted, shall be chargeable to tax under the head “Income from Property ”. “Rent” means amount received by the owner . Lease amount not included. An amount of amenities, utilities will not be charged under this head.

16. Deductions. Deduction in respect of repair /maintenance. premium paid against the risk of damage or destruction. local tax charged to local authority . Any ground rent paid . profit paid by way of mortgage. property acquired by the House Building Finance Corporation. interest paid on such mortgage. expenditure paid.

17. Continued…….. Deductions. E xpenditure paid for legal services acquired . unpaid rent in respect of the property . Expenditure against the defaulting tenant.

18. Income from business The profits and gains of any business . income derived by any trade, professional or similar association. income from the hire or lease of tangible movable property; income from prospective business relationship .

19. CAPITAL GAINS gain arising on the disposal of a capital asset . arising on the disposal of immovable property by a person in a tax year, shall be chargeable to tax in that year under the head Capital Gains at the rates specified.

20. Income from other sources. Dividend Royalty Profit on debt; Ground rent; rent from the sub-lease of land or a building; Income from the lease of any building together with plant or machinery;

21. Continued…….. Income from other sources. Any annuity or pension; Any prize bond, or winnings from a raffle, lottery[, prize on winning a quiz, prize offered by companies for promotion of sale] or cross-word puzzle; any other amount received as consideration for the provision, use or exploitation of property, including from the grant of a right to explore for, or exploit, natural resources.  

22. Some important terms Resident Tax Filing status Tax Deductions and tax allowances Penalties Tax credits Withholding tax

23. Adjustment of taxes 231A Cash Withdrawal 231AA Banking Transaction 231B Registration of New Car/Jeep 234 Tax on motor vehicles 236 Telephone or Mobile users 236B Advance Tax of Air Ticket (not mentioned in AI 03/2015) 236D Advance tax on functions and gatherings 236I Collection of advance tax by educational institutions. Clause 2 of Part III Vide Finance Act 2007; 25% rebate to full time teachers or Instructor

24. Adjustment of taxes continued…………. 12(7) If arrear results in taxation at higher rate, the employee by notice in writing to the Commissioner may opt for the amount to be taxed at the rates applicable to the year to which the salary relates. Option to be exercised by the due date for filing the return. Clause 61 of Part I of Second Schedule. CHARITABLE DONATION . Donation paid to charitable institutions' approved under the Clause 61 of Part I of 2nd Schedule maximum 30% of Taxable Income is allowed to be deducted directly from the total income.

25. Allowances are exempted from levying of tax: Kit Allowance Ration Allowance CILB Special Messing Allowance SSG Allowance Northern Area Compensatory Allowance Special Pay for Northern Areas Height Allowance

26. . . . Practical Study

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