What is income? Taxation? Flashcards
What is income under ITO? Is relief from expense is income? Receipt in trust?
- Inclusive definition i.e. in normal meaning + any amount (designated) charged to tax e.g Sec 16 IFP/NASD (liability) [132 such incomes are charged] + any amounts on which W/H applies (To cover FTR) + loss of income (compensation/recoupment for loss of income) + treated as income
- Relief from expense is not income e.g. rebate
- Receipt in trust – Chanda & zakat collection o centers is not income
What is difference between vocation and profession? Under what head of income they are charged to tax? What is income of a singer? Nazrana paid to religious scholar (Maulana sb)?
- Definition of Business includes any trade, commerce, manufacture, profession, vocation or adventure or concern in the nature of trade, commerce, manufacture, profession or vocation, but does not include employment services to its members.
- Profession (degree based) “minds”; Vocation (not degree based) “heart”.
- Singer/Religious scholars’ income is income from business under category of vocation.
Is one-off/seasonal venture business? A school teacher derives income from one-off sale of AC purchased in winter to sell and make profit in summer where will income be taxed? Capital gain?
Business as “in the nature of trade”.
Capital gain when personal AC. Further not necessarily one-off.
Essence is trade like trade
Income from Business – What is chargeable to tax gross income or net u/S18?
Rule 32 (2) Profits and gains i.e. Sales-(Exp + loss)
Are theft/embezzlement, loss of stock due to fire, impairment of intangibles allowed? If yes why
Yes Rule 32 (2) All expenses allowed u/IAS unless disallowed by tax law (DNA).
What if business ceases and income derived from activity which was carried before cease
S70 Derived income is taxable
What are important points included in Business Income 7 Points
- Income from trade/profession/similar associations;
- rent from movable property (Lease/Hire, not leasing as business);
- Benefits received from business relations at FMV;
- Loan waiver by SBP;
- Management Fee;
- Leasing Business;
- Financial Institutions
Why trade/provision of services by a trade/profession association like chamber of commerce taxed?What about a club?
Doctorine of mutuality states “You can not earn from yourself” – Sec 18 (b) Business income specifically provides exception to this rule and includes them in the definition of business income.
However club is not trade/professional association hence outside the purview of definition and not taxable.
What are incomes related to Property and under which head of incomes they are taxed?
Property: Intangible, Tangible moveable (Stock, depreciable asset, personal asset) Tangible immovable (Land, Building)
Possible Incomes Rentals, Gain from disposal
Rental
- Intangibles – Royalty IFOS
- Tangible- movable – IFB
- Tangible – Immovable - IFP
- Tangibe+Intangible – Machinery+Building – IFOS
- Sublease/rental of Tangible – Immovable -IFOS
- Ground rent of Tangible – Immovable -IFOS
Disposal
- Intangibles – used in Biz – IFB
- Intangibles – Stock – IFB
- Intangibles – Personal nature – Not taxable S37 (5)
- Intangibles – Not in biz but sold (personally developed) – CG
- Tangible- movable - stock –biz -IFB
- Tangible- dep. assets – used in biz/dep -IFB
- Tangible- Personal -Not chargeable to tax S37 (5)
- Tangible- Personal excluded from CG S37-IFOS
- Tangible – Immovable – used in biz – IFB
- Tangible – Immovable – personal – CG
Interest earning/PoD; When is it IFB and when IFOS
- When lending not a businesss- IFOS;
- Main Business – IFB
When is dividend income of Bank/FI is business income
when received from MF/VCF/PE out of their interest income is IFB for Banks/FI while for others dividend income.
If dividend dist. Not from ineterst income then dividend for FI/Banks and not IFB.
