DEFINITIONS

Q.1. What is an agriculture income; give five examples of agriculture income & five
examples of non agriculture income. Is agriculture income taxable in Pakistan? (20
marks)
MEANING OF AGRICULTURE INCOME [SECTION 41]
The agriculture income means income:
I. Derived from land;
II. Land is situated in Pakistan;
III. Land is used for agriculture income.
EXPLANATION:
Any income derived as rent, revenue, or from sale of any produce which is grown on a Pakistani land
is agriculture income. However, it is necessary to understand that the land must be used for
agriculture purposes, which means that some human labor and efforts are necessary to be
employed. If a produce is grown wild or spontaneously‫ خودبخود‬on land without any human effort or
labor, it will no be treated as agriculture income under this definition.
ILLUSTRATIONS:
1. Income derived from forests of spontaneous growth is not agricultural income, because no
human efforts are involved.
2. If a Zamindar grows trees on his own land and derives income there from, it is agricultural
income.
3. Salary received as agricultural manager is non-agricultural income.
4. A person grows wheat in his form and sells the crop. The cash received is agricultural
income.
5. A landlord receives rent in the form of share of crop. It is agricultural income.
TYPES OF AGRICULTURAL INCOME
1. Rent / Revenue Derived From Agricultural Land:
2. Income Derived From Agricultural Land By Agricultural Operation:
3. Income derived from land by hiring cultivator.
4. Income Derived From Any Building Required For Agricultural Purposes:
Examples of Agricultural Income:
1. Income from growing tea.
2. Income from growing tobacco.
3. Income from sale of honey.
4. Income from sale of wheat.
5. Income from building used for agricultural purpose.
Examples of Non-Agricultural Income:
1. Income from stone quarries.
2. Income from fisheries & ferries.
3. Income from mining .‫کان کنی‬
4. Income from land used as market.
5. Income from a flour mill.
6. Income form land used for storing timber.
Examples of Partly Agricultural & Partly Non-Agricultural Income:
1. Income of a person who grows tea leaves on his own farms in Pakistan and then
manufactures into tea.
2. Income of a sugar mill which grows sugarcane and manufactures sugar.
 IS AGRICULTURAL INCOME TAXABLE IN PAKISTAN?
Agricultural income is completely exempt from tax in Pakistan.

Q.2. Discuss the residential status of different types of taxpayers in Pakistan? OR Discuss
the residential status of following taxpayers:
Individual Resident Company Resident Associations of Persons (20 Marks)
Answer:
For the purpose of income tax, all the persons are grouped under two categories:
a) Resident
b) Non-Resident
Resident

Individual Company Association of Persons

RESIDENT INDIVIDUAL [Section 82]
An individual will be resident of Pakistan in any tax year if he fulfils any of the following two
conditions:
1. He is in Pakistan for a period or periods amounting in all, to 183 days or more.
Explanation:
An individual will become a resident of Pakistan in a tax year if his total stay in
Pakistan in that tax year is 183 days or more. But it is not necessary that the stay should
be continuous. Purpose of stay is also immaterial. It is also not necessary that the stay
should not be at one place only. Merely physical presence for the period is sufficient.
2. He is an employee or official of the Federal Govt. posted abroad in the tax year.
Fulfillment of anyone of the requirement given in clause (1), (2) is sufficient. The purpose or nature
of stay, the place of stay, the frequency of visits, the circumstances of visits etc. have no bearing on
the determination of residential status.
EXAMPLES:
During the year 2001-2002:
Exp.1: Mr. Ahmed stayed in Pakistan in a rented house for 170 days, then went abroad and came
back. He again stayed in a hotel at Karachi for 15 days.
Mr. Ahmed will be considered as Resident because his total stay during the tax year is more than
183 days (continuous stay is not necessary)
Exp.2: for the first time in his life, Mr. Salman left Pakistan for Canada on July 5, 2006 and came
back on May 15, 2007.
During the tax year 2006-2007 his stay is only for (5+46) 51 days so Mr. Salman will be considered as
non-resident
RESIDENT COMPANY [Section 83]
A company shall be a resident company for a taxpayer if it fulfills any one of the following conditions:
a) It is incorporated or formed by or under any law in Pakistan.
Explanation:
In case of company incorporated in Pakistan it will always resident in Pakistan.
 b) The control and management of the company is situated wholly or almost wholly in Pakistan
at any time in the year ; or
Explanation:
In case of other companies they will become resident in Pakistan only if their control and
management is wholly or almost wholly situated in Pakistan. Partial control is not sufficient for
this purpose.
c) It is a Provincial Govt. or local authority in Pakistan.

RESIDENT ASSOCIATION OF PERSONS [Section 84]

An association of persons shall be resident for any tax year, if the control and the management of
the affairs of association are situated wholly or partly in Pakistan at any time in the year.
Explanation:
In case of an Association of persons even a partial‫ نا‬control is sufficient to become a resident for
the tax purposes. Moreover, it is not necessary that the control should be exercised for the whole
year. The residences------- of the members of the Association are not a resident of Pakistan does not
necessarily mean that association is also not a resident.