Define the following terms as defined in the income tax ordinance tax, Income, taxable income, accumulated profits
Income tax law contains few terms which are exclusivly meant for this subject. These terms have some specific meanings in the income tax ordinance. Important definitions have been explained under the section of income tax ordinance. To follow the subject more easily it is necessary that we should completely understand these definitions. Important definitions are given below :
Any amount which is imposed under the income tax law is called tax. It is also includes (a) Income tax (b) Fee (c) Penalty (d) Additional (e) Any other charges.
According to income tax ordinance income means
(a) Any amount chargeable to under tax this ordinance.
Income received from the following heads :
2. Income from business
3. Income from property
4. Income from capital gains
5. Income from other sources
(b) Any amount subject to collections or deduction of tax at the time of import of goods.
The value of import has been treated as income of the importer. So collector custom collects the tax the prescribed rates from the importer.
(c) Any payment received by a resident from a prescribed person for supply of goods and services.
Under the income tax law the total amount received against sale of goods or rendering of services is treated as income.
(d) Any amount received as export proceeds.
Under the law any foreign exchange received against exports is treated as income.
(e) Amount received on prizes and winnings.
Under the law the amount received on prizes and winnings is treated as income.
(f) Any amount collected from a person being the owner of goods transport vehicle by the excise department.
Under the law, owner of the vehicles have to pay advance tax, so this amount is treated as income.
(g) Any loss of income.
in case of (a) there is a chance of loss. So such loss is also considered income by the law.
TAXABLE INCOME :-
The total income of the person for a tax year as reduced by any deductible allowances is called taxable income.
Note : It shall never be less than zero.
ACCUMULATED PROFITS :-
It means :
a) All reserves maintained by a business out of its profits.
b) All profits of the company up to the date of distribution.
Sometimes a portion of earned profit is set a side by business for future use. It may be used for a specific purpose or may be distributed among the owners. For tax purpose such amount is treated as accumulated profit.