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Zain Bc220212809 FIN623

Mr. Samad is classified as a non-resident for tax purposes in the tax year 2025, as he spent only 125 days in Pakistan and does not meet the criteria for resident status. His gross taxable income amounts to Rs. 3,000,000, which includes rental income and a capital gain from the sale of a warehouse, while remittances and technical fees from abroad are not taxable. The analysis is based on the Income Tax Ordinance, 2001.

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60 views2 pages

Zain Bc220212809 FIN623

Mr. Samad is classified as a non-resident for tax purposes in the tax year 2025, as he spent only 125 days in Pakistan and does not meet the criteria for resident status. His gross taxable income amounts to Rs. 3,000,000, which includes rental income and a capital gain from the sale of a warehouse, while remittances and technical fees from abroad are not taxable. The analysis is based on the Income Tax Ordinance, 2001.

Uploaded by

naqvi8294
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© © All Rights Reserved
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TAXATION MANAGEMENT (FIN623)

Student Name: Syed Zain Ul Abideen

Student ID: Bc220212809

a. Determining Residential Status


Under Section 82 of the Income Tax Ordinance, 2001, a person is treated as a resident
individual for a tax year if they satisfy either of the following conditions:
1. They are present in Pakistan for 183 days or more during the tax year.
2. They are an employee of the Federal Government or a Provincial Government posted
abroad during the tax year.

Analysis of Mr. Samad's situation:


- The tax year 2025 runs from 1 July 2024 to 30 June 2025.
- Mr. Samad stayed in Morocco for 8 months (July 2024–February 2025) to perform
official duties, which equates to approximately 240 days abroad.
- This means he was in Pakistan for approximately 125 days (365 - 240) during the tax
year.

Conclusion on residential status:


Since Mr. Samad was in Pakistan for less than 183 days, he does not qualify as a resident
under Section 82(a). Additionally, as he is not a government employee posted abroad,
Section 82(b) is not applicable. Therefore, Mr. Samad is a non-resident for tax purposes
for the tax year 2025.

b. Determining Gross Income (5 Marks)


For non-residents, only income sourced from Pakistan is taxable under Section 11(5) of
the ITO 2001. Let's analyze each income source:

1. Rental Income (Rs. 1,500,000)


- Income derived from immovable property situated in Pakistan is considered Pakistan-
sourced under Section 101(3).
- This is fully taxable for non-residents under Section 15.
Taxable Amount: Rs. 1,500,000

2. Gain from Sale of Warehouse (Rs. 1,500,000)


- The warehouse is located in Karachi, Pakistan. The gain from its disposal is taxable
under Section 37(1) as a capital gain.
- Since it was used for keeping industrial goods, it is not exempt under Section 37(5).
Taxable Amount: Rs. 1,500,000
3. Remittance from Iceland (Rs. 1,000,000)
- Income remitted from abroad is not taxable for non-residents under Section 101(10).
Taxable Amount: Rs. 0

4. Technical Fee from Morocco (Rs. 2,000,000)


- Income earned from services performed outside Pakistan is not taxable for non-residents
under Section 101(8).
Taxable Amount: Rs. 0

Gross Income Calculation:


The gross income includes only the Pakistan-sourced income:

Income Source Amount (Rs. Taxability Reason/Section


Rental income 1500000 Taxable Section 15, Section
101(3)
Gain from 1500000 Taxable Section 37(1),
warehouse sale Section 101(3)
Remittance from 1000000 Not Taxable Section 101(10)
Iceland
Technical fee 2000000 Not Taxable Section 101(08)
(Morocco)

Total Gross Income: Rs. 3,000,000

Final Answers
a. Residential Status:
Mr. Samad is a non-resident for the tax year 2025 under Section 82 of the ITO 2001.

b. Gross Income:
Mr. Samad's gross taxable income for the tax year 2025 is Rs. 3,000,000 as per the
relevant sections of the ITO 2001.

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