SCOPE OF TAX

Asad Rafaq
 Income tax is an annual charge upon a person
deriving such income, during the tax year, which is
chargeable to tax under any provision of the
Income Tax Ordinance, 2001. This Ordinance
requires a person to:
1. Pay income tax.
CHARGE OF
TAX 2. Deduct or collect the tax-at-source and deposit
it in Government Treasury.
3. Pay tax in advance during the tax year
4. Pay default surcharge and penalties, in case of
default
5. Pay fees.
 The Ordinance segregates the taxpayers into
different classes. These classes are based on
sources of income and/or taxability of the
CATEGORIES OF persons. Major categories of the taxpayers are:
TAXPAYER 1. Individuals (salaried and non-salaried)
2. Associations of persons (AOPs)
3. Companies (banking companies, small
companies & other companies).
 There are various modes of charging income tax under the
Income Tax Ordinance, 2001, which are commonly known as
Tax Regimes: Coming paragraphs contain a brief description of
each of the tax regimes,

Normal Tax Regime (NTR) is that method, of taxation, under which

the income of a person under each head of income is computed and
TAX REGIMES included in total income. While computing income Under a head of
income all deductions admissible under that head are deducted from
gross income/ revenue .To compute taxable income: the total income is
reduced by deductible allowances on account of Zakat, WPPF, WWF.
Profit on debt on loan for houses & Education expenses.
Separate Tax Regime (STR) is that method of taxation under which
certain incomes are not included under any head of income; rather, are
kept separate and charged to tax at some special tax rates (other than
the normal tax rates applicable to incomes under NTR). The amount so
calculated shall be the tax payable on such income. It shall not be
reduced by any deductions, deductible allowances or tax credits
otherwise available to the taxpayer.
 Final Tax Regime or Presumptive Tax Regime (FTR/PTR)
is that method of taxation under which certain incomes or
transactions are treated or presumed as income and tax
deductible or collectable at source on such transaction is
considered as full and final discharge of tax liability in respect
of such incomes/transactions. The amount treated as income is
not reduced by any deductions and deductible allowances. It
shall not be included in total income and no tax credits shall be
allowed against tax computed under this regime,
CONTINUE
Minimum Taxation (MTR) is that method of taxation under
which the tax deducted or collected at source is treated as
minimum tax in respect of such incomes. Under this regime,
the tax liability of person shall be the higher of the tax
under:1.2.Normal tax regime (NTR); or The minimum tax
specified under the law.
 TAXABLE INCOME (9, 60, 60A, 60B 60C &
60D]A person is liable to pay income tax on his
TAXABLE taxable income for a tax year. Taxable income is
INCOME computed as below: 'Total income' from all heads
of income (other than the exempt incomes)Less:
'Deductible allowances 'Taxable income
 Amount received as submarine allowance by officers of the Pakistan
Navy or flying allowance is treated as separate block of income and
charged to tax @ 2.5% of the amount received. Flying allowance of
the following persons is taxed as a separate block of income:
1. Flight engineers and navigators of Pakistan Armed Forces,
Pakistani Airlines and Civil Aviation Authority
TAXATION OF 2. Junior Commissioned Officers and other ranks of Pakistan
SUBMARINE Armed Forces.
ALLOWNCW AND Limit on Flying Allowance and Submarine Allowance
FLYING Reduction in tax on account of flying allowance and submarine
ALLOWANCE allowance (i.e., taxable@ 2.5%) shall be available to so much of
these allowances as does not exceed an amount equal to the basic
salary of the taxpayer. Where amount of allowance exceeds the
amount of basic salary, the following procedure shall be adopted:
3. Amount of allowance equal to the basic salary shall be taxed @
2.5%; and2.Amount of allowance exceeding the basic salary
shall be included in salary income of the person and charged to
tax under NTR.
 Allowances received by pilots of any Pakistani airlines shall
be chargeable to tax as par the following rules
1. Total Allowances Equal to Basic Pay: Allowances shall
become part of the salary income and charged to tax as per
normal procedure and at normal tax rates.
ALLOWANCES
RECEIVED BY 2. Total Allowances Exceeding the Basic Pay: Under this
PILOTS case the following procedure shall be adopted:
• Amount of total allowances equal to the basic pay shall be
included in salary income of the person and charged to tax
under NTR
• So much of the total allowance as exceeds the basic pay
shall be treated as a separate block of income and charged
to tax @7.5%
 In the case of a full time teacher or a researcher, employed in
a non-profit educational or research institution (including
government research institutions) duly recognized by Higher
Education Commission, a Board of Education or a University
REDUCTION IN TAX recognized by the Higher Education Commission, tax
LIABILITY IN CASE payable shall be reduced by an amount equal to 25% of tax
OF TEACHERS OR payable on income from salary.
RESEARCHERS
Note: This tax credit shall not be available to teachers of
medical profession who derive income from private medical
practice or who receive share of consideration received from
patients.
 A teacher, etc., is allowed a reduction in tax @
TEACHERS OR 25% tax payable on his income from salary.
RESEARCHERS Where such person has some other taxable income
HAVING NON- also, then the benefit of reduction in tax shall be
SALARY INCOME restricted to the tax payable in respect of his salary
income.