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Income Tax is the tax collected on various types of income under the
provisions of the Income Tax Ordinance 1984.
Basic Principles of Charging/Imposing Income Tax: Sec. 16
General Principles u/s 16(1):
1. Income taxpayer: Income tax is payable by ‘every person’ [section 16(1)].
2. Income tax rate: Income tax rate is provided by an ‘Act of Parliament’, which is called the
Finance Act [section 16(1)].
3. Income tax base: Income tax base is the “total income” of the taxpayer during the income
year [section 16(1)].
4. Timing of income tax base: Income tax base, i.e., total income is to be computed for the
“income year” [section 16(1)].
5. Timing of income tax payment: Income tax is to be paid in the “assessment year” [section
16(1)].
Exceptions to General Principles:
1. Income tax payment otherwise: Tax deducted at sources or advanced payment of income
tax where applicable [section 16(2)].
2. Special income tax rate: For “capital gain”, “accidental income” or “non-corporate non-
resident’s income” tax rates are special and given in the Second Schedule [section 16(3)].
3. Imposition of surcharge: There may be surcharge to be imposed as a percentage of normal
income tax (section 16A).
4. Imposition of additional tax: By inserting section 16B by the FA 2002, a provision has
been made to impose additional tax on undistributed profit @ 5% (in addition to normal
tax) if a listed public limited company (not being a banking or insurance company) has not
issued, declared or distributed dividend or bonus share equivalent to at least 15% of paid
up capital within 6 months after the end of the income year. For AYs 2002-03 and 2003-
04, “undistributed profit” means total income with accumulated profit including free
reserve as reduced by the aggregate of dividend or bonus share issued, declared or
distributed for that year, the tax which is payable under section 74 and the paid-up capital.
From AY 2004-05, “undistributed profit” means accumulated profit including free reserve
(changed by FA 2004).
5. Imposition of excess profit tax: Under section 16C (inserted by the FA 2002), a bank
company operating under the Bank Companies Act 1991, if shows, in the return, profit
exceeding 50% of the aggregate sum of capital and reserve, shall pay tax @ 15% of such
excess profit as excess profit tax in addition to normal tax.
6. Imposition of minimum tax: Under section 16CC (inserted by the FA 2006), a company
shall pay a minimum income tax of Tk. 5,000 or 0.50% of turnover whichever is higher,
irrespective of profit or loss.
General Principles: Sec. 16(1)
Income tax shall be imposed on total income of the income year of every
person and payable in the assessment year at the tax rate determined by the
Finance Act.
Tax-base
Tax-base of income tax is the total income (taxable total
income) as defined in section 2(65) of the Income Tax
Ordinance 1984.
Total income: section 2(65)
“Total income” means –
• Total amount of income
referred to in section 17 [i.e., scope of total income of an
assessee, where both domestic and foreign income shall be
included in total income of a resident assessee, but only
domestic income shall be included in total income of a non-
resident assessee],
computed in the manner laid down in the Income Tax
Ordinance [section 43 deals with the provisions of
“computation of total income” and covers provisions
regarding: (i) allocation of partnership firm’s income among
the partners, and (ii) extent of income of the spouse or minor
child of an assessee or other prescribed related persons that is
to be included in the total income of the assessee.
and includes –
• any income which, under any provision of the ITO, is to be
included in the total income of the assessee.
Tax period