ICAP CA Taxation Syllabus

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.

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).

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.

What is the standard corporate tax rate and the small company rate under the Ordinance?

The standard corporate tax rate is 29%. A 'small company' (meeting conditions on capital, turnover, employees and not formed by splitting an existing business) is taxed at 20%. Banking companies are taxed at 39% (plus applicable surcharges/levies).

What is 'Minimum Tax on turnover' under Section 113, and how does it operate?

Minimum tax is payable by companies, individuals and AOPs (above a turnover threshold) at a prescribed rate (generally 1.25% of turnover) where normal tax payable on income is less than this amount or where there is a loss. The excess of minimum tax over normal tax may be carried forward and adjusted against tax payable for the following years (up to 3 years).

What is the 'Alternative Corporate Tax (ACT)' under Section 113C, and how is liability determined?

ACT applies to companies and equals 17% of 'accounting income' (with specified adjustments). The company pays the HIGHER of (a) corporate tax under normal provisions or (b) ACT. The excess of ACT over corporate tax can be carried forward and adjusted for up to 10 tax years.

Compare Minimum Tax (S.113), Alternative Corporate Tax (S.113C) and normal corporate tax — which is finally payable?

The company computes all three: normal corporate tax on taxable income, minimum tax (turnover-based, S.113), and ACT (accounting-income based, S.113C). The tax finally payable is the HIGHEST of these amounts. Carry-forward of the excess differs: minimum tax up to 3 years, ACT up to 10 years.

How is the income of an Association of Persons (AOP) taxed, and how is the share of members treated?

An AOP is taxed as a separate entity at the AOP slab rates (or 29% if applicable to certain AOPs/professional firms by threshold). The share of profit received by a member from the AOP is exempt in the member's hands but is taken into account for rate purposes (to determine the member's average rate on their other taxable income).

What is the tax treatment when a member of an AOP is a company?

Where one of the members of an AOP is a company, the share of that company in the AOP's income is taxed separately in the hands of that company at the corporate rate (the company's share is excluded from the AOP's taxable income, and the AOP is taxed on the balance).

What is the difference between 'final tax' and 'minimum tax' in the withholding regime?

Under a final tax regime, the tax withheld discharges the full tax liability on that income — no further tax is due and the income is not part of normal taxable income. Under a minimum tax regime, the tax withheld is the minimum payable; if normal tax on that income exceeds the withholding, the excess is payable, but the withheld amount cannot be refunded.

What is 'advance tax' under Section 147 and how is it calculated for a company/AOP?

Advance tax is paid quarterly (by 25 Sept, 25 Dec, 25 March, 15 June) by companies and AOPs based on a formula: (A x B/C) - D, where A = turnover for the quarter, B = tax assessed for the latest tax year, C = turnover for that latest year, and D = tax already paid/collected for the quarter. It is adjustable against final tax liability.

List four common withholding tax sections and the transactions they cover.

Section 149 — salary (by employer); Section 151 — profit on debt; Section 152 — payments to non-residents; Section 153 — payments for goods, services and contracts; Section 155 — income from property (rent); Section 231AA / 236 — various banking/utility/transaction taxes.

Who is required to file a return of income under Section 114?

Required filers include: every company; every person (other than a company) whose taxable income exceeds the basic threshold; any person owning immovable property/motor vehicle/NTN above prescribed criteria; persons charged to tax in any of the two preceding years; non-profit organizations; and any person required by the Commissioner via notice.

What is the difference between 'self-assessment' (Section 120) and 'best judgment assessment' (Section 121)?

Under self-assessment (S.120), a return furnished is treated as an assessment order issued by the Commissioner on the day it is filed (deemed assessment). Best judgment assessment (S.121) is made by the Commissioner — based on available material — when a person fails to file a return or required documents.

What is 'amendment of assessment' under Section 122 and the time limitation for it?

The Commissioner may amend an assessment to correct it if satisfied that income was under-assessed, assessed at too low a rate, under-charged, or wrongly relieved/refunded. The amendment can generally be made within 5 years from the end of the financial year in which the original assessment order was issued (with a separate limitation for definite information cases).

Describe the income tax appeals hierarchy from first appeal to final reference.

(1) Commissioner (Appeals) — first appeal against assessment/order; (2) Appellate Tribunal Inland Revenue (ATIR) — appeal against the Commissioner (Appeals); (3) High Court — reference on a question of law; (4) Supreme Court — final appeal. (Recent reforms also route certain higher-value appeals directly to the ATIR.)

What is the scope of the Sales Tax Act 1990 — what does it tax and at what standard rate?

The Sales Tax Act 1990 levies sales tax on the supply of taxable goods made in Pakistan by a registered person in the course of business, and on imported goods. The standard rate is 18% of the value of supply. It is a consumption-based value-added tax (VAT) collected at each stage with input adjustment.

Define 'taxable supply', 'exempt supply' and 'zero-rated supply' under the Sales Tax Act 1990.

Taxable supply: a supply of taxable goods chargeable at the standard/other rate, with input tax allowed. Exempt supply: a supply on which no sales tax is charged (per Sixth Schedule) and no input tax can be claimed. Zero-rated supply: charged at 0% (e.g., exports, Fifth Schedule items) but input tax IS allowed and refundable.

What is the formula for sales tax liability using output and input tax?

Sales Tax Payable = Output Tax (tax on taxable supplies made) - Input Tax (tax paid on purchases/imports of taxable goods used in making taxable supplies), subject to limitations. If input exceeds output, the excess is carried forward (and refundable in zero-rating/export cases).

What is the '90% input tax limitation' under Section 8B of the Sales Tax Act 1990?

A registered person (other than specified exceptions) may not adjust input tax in excess of 90% of the output tax for a tax period. Any disallowed/excess input is carried forward to subsequent periods and may be adjusted, subject to annual reconciliation.

List three situations where input tax is NOT allowed (inadmissible) under Section 8 of the Sales Tax Act 1990.

Input tax is inadmissible on: goods/services used for purposes other than taxable supplies; supplies where the buyer fails to provide proper tax invoice or the seller is not on the active taxpayer list; vehicles/building materials/office equipment not directly used in taxable production (per rules); fake/flying invoices; and goods/services excluded by an SRO/notification.

What is the difference between 'output tax' and 'input tax'?

Output tax is the sales tax charged/levied by a registered person on the taxable supplies (sales) it makes. Input tax is the sales tax paid by that person on taxable goods/services it acquires (purchases/imports) for the business. Net payable = Output tax minus admissible Input tax.

Who is required to register under the Sales Tax Act 1990?

Persons required to register include: manufacturers (above the cottage industry threshold), importers, wholesalers/dealers/distributors, retailers meeting prescribed criteria (Tier-1 retailers), exporters seeking refunds, and any person required to be registered under any Federal/Provincial law. Registration is done electronically via the FBR (IRIS) system.

What is a 'tax period' under sales tax, and when must the sales tax return be filed?

A 'tax period' is one month (or as notified). The monthly sales tax return must be filed electronically, with the tax due paid by the 15th and the return filed by the 18th of the month following the tax period (specific annexures/summary may have separate dates).

What records must a registered person maintain under Section 22 of the Sales Tax Act 1990, and for how long?

Records include: records of supplies and purchases (with tax invoices), records of zero-rated and exempt supplies, sales tax invoices, credit/debit notes, bank statements, inventory records, utility bills, and import/export documents. These must be retained for 6 years (or until pending litigation is finalized).

What is a 'tax invoice' under the Sales Tax Act 1990 and what particulars must it contain?

A tax invoice is issued by a registered person for a taxable supply and must show: name, address and registration number of supplier and recipient; serial number and date of issue; description, quantity and value of goods; amount of sales tax; and value inclusive of tax. Only a registered person may issue a tax invoice.

What is the difference between a 'debit note' and a 'credit note' in sales tax adjustments (Section 9)?

They adjust tax already accounted for when the value of supply changes after invoicing. A credit note is issued by the supplier when the value/tax is reduced (e.g., return of goods or price reduction), decreasing output tax. A debit note is issued when the value/tax increases. Adjustments must be made within the period prescribed by the rules.

What is Federal Excise Duty (FED) and on what is it levied under the Federal Excise Act 2005?

FED is a duty levied on: goods produced or manufactured in Pakistan; goods imported into Pakistan; specified services rendered in Pakistan; and goods produced in non-tariff areas brought to tariff areas. Dutiable goods/services and rates are listed in the First Schedule. It is generally charged on the basis of value (ad valorem) or a fixed amount, or retail price for specified items.

How does Federal Excise Duty interact with the sales tax 'VAT mode', and what is the difference between specific and ad valorem FED?

For certain goods, FED is charged and collected in 'VAT mode', meaning duty is levied at each stage with adjustment of duty paid on inputs (like input tax), and is paid along with the sales tax return. 'Specific' FED is a fixed amount per unit/quantity, whereas 'ad valorem' FED is a percentage of the value (or retail price) of the dutiable goods/services.