BBA MARKETING

& FINANCE

LECTURE 4
CONTENTS
Scope of tax
Tax year
Computation of taxable
income
Residential status
Capital Gains
Profit from Business
SCOPE OF TAX
Income tax law deals with the
levy of tax on the income of a
person

“Income tax shall be

imposed for each tax year
on every person who has
taxable income, as per the
applicable tax rates”
 TAX YEAR
There are three kinds of tax years as
stipulated in Section 74 of the Income Tax
Ordinance, 2001: 

Normal Tax Year

Special Tax Year

Transitional Tax Year

 NORMAL TAX
YEAR
Normal tax year is a period of
twelve months ending on the
30th day of June and is
denoted by the calendar year
in which the said date falls.
 SPECIAL TAX YEAR
Where a person’s income year is different from the
normal tax year,

or where, by an order, a person has been allowed by

the Commissioner to use a twelve months’ period
different from normal tax year,

such income year or such period shall be that

person’s special tax year and shall be denoted by the
calendar year relevant to normal tax year in which
the closing date of the special tax year falls.
 SPECIAL TAX YEAR
The Board has authority to prescribe any special tax year in respect of any
particular class of taxpayer. For example, in respect of certain classes of
assesses following special tax years are specified by the Board.

A person dissatisfied with the order may file a review application with the
Board against the decision of the Commissioner at the time of granting
permission for a special tax year or withdrawal of the same and the decision
by the Board on such application shall be final
 Transitional Tax Year
Where the tax year of a person changes as a result
of an order by the Commissioner of Income tax

either from the normal tax year to special tax year

or vice versa,

the period between the end of the last tax year

prior to change and the date on which the
changed tax year commences shall be treated as a
‘transitional tax year’.
EXERCISE
ANSWER
COMPUTATION
OF TAXABLE
INCOME
 INCOME
Income includes;
Any amount chargeable to tax under the
Income Tax Ordinance, 2001 (e.g. income from
salary)
Any amount subject to collection or deduction
of tax under final tax regime (e.g. on exports);
Any amount treated as income under any
provision of the Ordinance (e.g. dividends,
royalty, profit on debt etc.),
and Any loss of income
 HEADS OF INCOME
For the purposes of the imposition of tax and the computation of total income, all
incomes shall be classified under the following heads, namely:

CAPITAL
INCOME GAINS &
FROM INCOME FROM
PROPERTY OTHER
SOURCES

INCOME
SALARY FROM
BUSINESS
 INCOME UNDER A PARTICULAR
HEAD
The income of a person under a head of income for a tax year shall be the total of the
amounts derived by the person in that tax year that are chargeable to tax under the
head as reduced by the total deductions,

If the total deductions allowed to a person for a tax year under a head of income
exceed the total amounts derived by the person in that tax year chargeable under
that head, the person shall be treated as sustaining a loss under that head for that
tax year of an amount equal to the excess.
INCOME OF
A RESIDENT
PERSON
INCOME OF A
RESIDENT
The income of a resident person is
computed by taking into account
amounts that are his Pakistan-source
income and amounts that are his
foreign-source income.

On the other hand, income of a non-

resident person is computed by taking
into account only the amounts that are
his Pakistan-source income.
INCOME FROM HEADS
 INCOME OF A RESIDENT
In view of aforesaid provisions of law, the equation to determine the taxable
income is as under
CHAPTER
OVERVIEW
Scope of Tax
Tax year
Computation of taxable
income
Residential status
Capital Gains
Profit from Business