Format of Computation of Income Tax for Financial Year

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Computation of Income Tax

Concept of Total Income

The total income of a person for a tax year shall be the sum or aggregate of all the Following heads of income mentioned in Section 11 of the Income Tax Ordinance 2001.

  1. Income from salary (Section 12).
  2. Income from property (Section 15).
  3. Income from business or profession (Section 18).
  4. Capital gain (Section 37).
  5. Income from other sources (Section 39).

Concept of Taxable Income:

“Taxable Income” means taxable income as defined in Section 9 of the Ordinance. The taxable income of a person for a tax year shall be the total income of the person for the year reduced by deductible allowances (but not below zero) under Income Tax Ordinance.

Format

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  Note-1:- According to Section 60 of the Income Tax Ordinance, a person shall be entitled to a deductible allowance for the amount of any Zakat paid by the person / deducted at source in a tax year under the Zakat and Ushr Ordinance 1980.

Note-2:- The list of the institutions as specified in Clause 61 of Part-I of second schedule of the Ordinance is given below:

    1. National Trust Fund for the Disabled.
    2. Bagh-e-Quaid-e-Azam Project, Karachi.
    3. Fatimid Foundation, Karachi.
    4. Al Shifa Trust.
    5. Pakistan Red Crescent Society.
    6. BCCI (Bank of Credit and Commerce International) Foundation.
    7. ICIC Foundation.
    8. Shaheed Zulfiqar Ali Bhutto Memorial Award Society. I
    9. Iqbal Memorial Fund.
    10. Cancer Research Foundation of Paksitan, Lahore.
    11. Shaukat Khanum Memorial Trust, Lahore.
    12. Christian Memorial Hospital, Sialkot.
    13. National Museums & National Libraries.
    14. Mumtaz Bakhtawar Memorial Trust Hospital, Lahore.
    15. Faisal Shaheed Memorial Hospital, Gujranwala.
    16. Khair-ur-Nisa Hospital Foundation, Lahore.
    17. Rashid Minhas Memorial Hospital Fund.
    18. Sports Board like Pakistan Cricket Board.
    19. Any amount donated for Tameer-e-Karachi Fund.
    20. Any relief or welfare fund established by the Federal Government.

Noter-3:- Section 60A of the Income Tax Ordinance states that a person shall be entitled to a deductible allowance for the amount of any Workers’ Welfare Fund paid by the person in tax year under Workers’ Welfare Fund Ordinance 1971.

 Section 60B of the Income Tax Ordinance states that a person shall be entitled to a deductible allowance                 for  the amount of any Workers’ Participation Fund paid by the person in a tax year in accordance with              the  provisions of the Companies Profit (Workers’ Participation) Act 1968.

Note-4:- According to Section 64A an individual is entitled to a deductible allowance of the amount of profit or markup paid (including share of rent and share towards appreciation in value of the house) on loan from a scheduled bank or non-banking finance institution or a listed company for acquisition of a house or construction of a new house.

Note-5:- An individual is entitled to a deductible allowance in respect of tuition fee paid provided that his taxable income is less than Rs. 1,500,000. Deduction of education expenses can be claimed by either of the parents making payment of the fee on furnishing NTN or name of the educational institution.

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