ICAP CA Taxation Syllabus

Taxation syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Taxation in ICAP CA, not a summary of it.

1. 1

   Framework of Income Tax

   3 topics

   • Income Tax Ordinance 2001 structure
   • Definitions and residential status
   • Heads of income and tax year
2. 2

   Income from Salary

   2 topics

   • Salary computation and perquisites
   • Exemptions and tax credits
3. 3

   Income from Property and Business

   2 topics

   • Income from property
   • Income from business
4. 4

   Capital Gains and Other Sources

   2 topics

   • Capital gains taxation
   • Income from other sources
5. 5

   Taxation of Companies and AOPs

   3 topics

   • Corporate tax computation
   • Minimum and alternative corporate tax
   • Taxation of association of persons
6. 6

   Withholding Tax and Compliance

   2 topics

   • Advance tax and withholding regime
   • Returns, assessments and appeals
7. 7

   Sales Tax

   3 topics

   • Sales Tax Act 1990 framework
   • Input and output tax adjustments
   • Registration, records and returns
8. 8

   Federal Excise and Provincial Sales Tax

   2 topics

   • Federal Excise Duty
   • Sales tax on services

Taxation flashcards for ICAP CA

23 of 49 cards from the Taxation deck — real questions with worked answers.

1. Under the Income Tax Ordinance 2001, what is the general scheme/structure in terms of chapters and schedules?

   The Ordinance is divided into 13 Chapters (I to XIII) containing numbered Sections, supplemented by 8 Schedules. The Schedules cover matters such as exemptions (Second Schedule), depreciation/amortization and capital gains rules, withholding tax rates, and rules for specific computations.

2. What are the five 'heads of income' recognized under Section 11 of the Income Tax Ordinance 2001?

   (1) Salary, (2) Income from Property, (3) Income from Business, (4) Capital Gains, and (5) Income from Other Sources.

3. How is 'tax year' defined under the Income Tax Ordinance 2001, and what are its three types?

   Tax year is a period of 12 months ending on 30 June (the normal tax year, denoted by the calendar year in which it ends). The three types are: Normal tax year, Special tax year (a 12-month period ending on a date other than 30 June, approved by FBR), and Transitional tax year (the period between the end of one year and start of another when changing year-ends).

4. What is the test for an individual to be a 'resident' person for a tax year under Section 82?

   An individual is resident if present in Pakistan for 183 days or more in the tax year, OR is an employee/official of the Federal or Provincial Government posted abroad during the tax year. (Day counting: any part of a day counts as a whole day, subject to specified exceptions.)

5. When is a company treated as a 'resident company' under Section 83?

   A company is resident if it is incorporated/formed under any law in force in Pakistan, OR its control and management of affairs is situated wholly in Pakistan at any time in the tax year, OR it is a Provincial/Local Government in Pakistan.

6. How is residential status of an Association of Persons (AOP) determined under Section 84?

   An AOP is resident for a tax year if the control and management of its affairs is situated wholly or partly in Pakistan at any time in that year.

7. What is the difference between 'Pakistan-source' and 'foreign-source' income, and how does residence affect taxability?

   A resident person is taxed on world income (both Pakistan-source and foreign-source income). A non-resident person is taxed only on Pakistan-source income. The geographical source of income is determined under Sections 101 and 101A.

8. What amounts are included in 'salary' as chargeable income under Section 12?

   Salary includes pay, wages, leave pay, overtime, bonus, commission, fees, gratuity, work condition supplements, perquisites, allowances (e.g., cost of living, rent, utilities), amounts in lieu of/on termination of employment, pension, annuity, and any profits in lieu of salary received from employment.

9. How is the perquisite of an employer-provided motor vehicle valued for salary tax purposes?

   If used partly for personal and partly for official use: 5% of the cost (or fair market value/lease cost) of the vehicle is added to salary. If used wholly for personal use: 10% of the cost (or FMV/lease cost) is added to salary.

10. How is the perquisite of employer-provided accommodation valued under the Income Tax Rules?

    The amount taxable is the higher of the rent that would have been paid if not provided rent-free, OR 45% of the minimum of the time scale of basic salary (or the basic salary where there is no time scale). For certain cities/cases a lower percentage (e.g., 30%) may apply per rules.

11. How is a concessional/interest-free loan from an employer treated as a perquisite (Section 13(7))?

    For loans exceeding Rs. 1,000,000, the difference between the benchmark rate (10% per annum) and the actual interest charged is added to salary as a perquisite. Loans up to Rs. 1,000,000 are exempt from this treatment.

12. What is the difference between an 'exemption', a 'tax credit', and an 'allowance/deduction' in income tax?

    An exemption removes income from the tax net entirely (not included in total income). A deductible allowance reduces taxable income before applying the rate. A tax credit reduces the tax payable directly (computed at the taxpayer's average rate of tax), and is applied after gross tax is calculated.

13. Name two key tax credits available to individuals under the Income Tax Ordinance 2001 and their basis.

    (1) Charitable donations tax credit (Section 61) — credit at average rate on eligible donations, subject to a cap of 30% of taxable income for individuals/AOP. (2) Tax credit for investment in pension fund / approved pension scheme (Section 63), within prescribed limits.

14. How is 'Income from Property' computed under Section 15, and what is the chargeable amount?

    Income from property is the rent received or receivable for the tax year from the lease of land or buildings, taxable as a separate head. 'Rent' includes any amount for the use/occupation of property and any forfeited deposit under a sale contract. Rent chargeable to tax is the higher of actual rent or fair market rent (subject to specified exceptions).

15. What deductions are allowed against Income from Property under Section 15A?

    Allowable deductions include: repairs allowance (1/5th of rent), property tax/local rates, insurance premium, ground rent, interest/profit on loan to acquire/construct/renovate the property, administration and collection charges (capped), legal charges, and irrecoverable rent (subject to conditions).

16. What is the basis of charge for 'Income from Business' under Section 18?

    Income from business includes profits and gains of any business carried on; income from hire/lease of tangible movable property; FMV of perquisites from business relationships; profit on debt where the business is banking/money-lending; and any management fee derived by a management company.

17. What is the difference between the 'cash basis' and 'accrual basis' of accounting for business income (Section 32)?

    On a cash basis, income is recognized when received and expenses when paid. On an accrual basis, income is recognized when entitled to receive (derived) and expenses when the liability to pay arises (incurred). Companies must use the accrual basis; other persons may use cash or accrual.

18. State the formula and key conditions for the depreciation deduction under Section 22.

    Depreciation = Written Down Value (WDV) x prescribed rate (reducing balance method). It is allowed on depreciable assets owned and used in business. WDV = cost less depreciation previously allowed. Initial allowance under Section 23 (currently 25% of cost for eligible plant/machinery) is granted in the year the asset is first used, in addition to normal depreciation.

19. How is a 'capital gain' computed and which assets are charged under Section 37?

    Capital gain = Consideration received on disposal of a capital asset less the cost of the asset. A 'capital asset' is property of any kind held by a person, excluding stock-in-trade, depreciable assets, and personal movable effects (with exceptions). For securities and immovable property, separate sections (37A/37) and rates apply.

20. How are capital gains on disposal of securities taxed under Section 37A?

    Gains on disposal of 'securities' (shares of listed companies, units, debt securities, etc.) are taxed separately at rates specified in the First/Eighth Schedule based on the holding period. The gain is computed and collected under the separate block regime, with NCCPL involved in collection for listed securities.

21. What is the 75% holding-period rule for capital gains on capital assets (other than securities/immovable property)?

    Under Section 37, if a capital asset (other than securities and immovable property) is held for more than one year, only 75% of the capital gain is taxable (i.e., a 25% reduction); gains on assets held for one year or less are 100% taxable.

22. What types of income fall under 'Income from Other Sources' (Section 39)?

    Income not falling under any other head, including: dividends, royalty, profit on debt (interest), ground rent, rent from sub-lease of land/building, rent of plant/machinery let out with services, annuities/pensions (not chargeable as salary), prize bond/lottery/quiz/raffle winnings, and consideration for a restrictive covenant. Also includes the FMV of certain gifts/loans received otherwise than by banking channels (deemed income).

23. How are prize/lottery/quiz/raffle winnings taxed under the Income Tax Ordinance?

    Winnings from prize bonds, lotteries, raffles, quizzes and crossword puzzles are taxed under 'Income from Other Sources'. Tax is collected at source (Section 156) as a final tax — at 15% on prize bonds/Sukuk and 20% on raffles, lotteries, quizzes and cross-word puzzles.

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