Taxation Flashcards
What is Tax?
Tax is a collection of a share of a person’s income by a government under
authority of law.
What is Direct Tax?
A tax paid directly to the government by the person on which it was
imposed.
What is Indirect Tax?
A tax levied on the production or consumption of goods and services.
What is Tax Avoidance?
It is a legal use of the tax laws to one’s own advantage to reduce the
amount of tax payable.
What is Tax Evasion?
It is an illegal practice of unlawfully avoiding payments of tax. It is an act of
intentional concealment of true state of affairs to tax authorities.
What is Minimum Tax Regime?
Certain types of incomes are subject to minimum tax. The purpose is to
assure that a certain amount is paid by the tax payers regardless of their
taxable income. In this case tax is charged on the basis of turnover.
Normal Tax Year
It is a period of 12 months ending on 30th June. It is denoted by the
calendar year in which the closing date falls.
Special Tax Year
It is a period of 12 months different from the normal tax year. It is
denoted by the calendar year relevant to the normal tax year in which the
closing date falls
Transitional Tax Year
When a person changes their tax year, the period between the closing
date of last tax year prior to change and the opening date of the changed
tax year is known as a transitional tax year.
Individual
An individual is a resident if he is:
- Present in Pakistan for an aggregate period of at least 183 days
- An employee of a Federal or Provincial Government
AOP
An AOP is a resident if the control and management of its affairs is
situated wholly or partly in Pakistan at any time during the tax year.
Company
A Company is a resident if:
- it is incorporated or formed under any law in force in Pakistan;
- the control and management of its affairs is situated wholly in
Pakistan any time during the tax year;
- it is a Provincial or Local Government.
What are the Heads of Income?
- Income from Salary
- Income from Business
- Income from Property
- Capital Gain
- Income from Other Sources
What is a Capital Asset?
Muhammad Property of any kind held by a person, including jewelry, work of art,
antiques etc. but excluding:
- Stock-in-Trade
- Any property for which a depreciation/amortization deduction is
allowed under Income from Business
- Moveable property held for personal use
What is the tax treatment of a Limited
Liability Partnership?
An LLP is not treated as an AOP for tax purposes. Partners of an LLP are
taxed individually on their share from the profits of an LLP.
