Project Topic: Income Tax Systems in Pakistan, India & UK

Project Topic
Income Tax Systems in Pakistan, India & UK
Over View of this Report
The main purpose of this report is to study the tax systems exists in India and UK and then compare the similarities & differences with Income Tax Law in Pakistan. India is a developing country where as UK is a developed country. So, we briefly overview the Tax Systems of India and UK and then at the end compare it with Pakistan Income Tax Systems. Tax revenue collection is one significant issue of economic development among others. It has been said that what the government gives it must first take away. The economic resources available to society are limited, and so an increase in government expenditure normally means a reduction in private spending. Taxation is one method of transferring resources from the private to the public sector, but there are others i.e. creation of more money, to charge for the goods and services it provides or to borrow. Taxation has its limits as well, but they considerably exceed the amounts that can be raised by resorting to the printing press, charging consumers directly, or borrowing. So while governments often use all four methods of raising resources, taxation is usually by far the most important source of government revenue. Pakistans economic performance since its emergence in 1947 has remained volatile across the sectors and provinces, and even its structure has changed over the time. The tax efficiency in Pakistani tax system remained focal point for the last 25 years. However, despite all efforts the tax to GDP ratio remained constant during this period.
Income Tax Project [Sec-C]
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TAXATION SYSTEM IN INDIA

Executive Summary
The government of India imposes an income tax on taxable income of individuals, Hindu Undivided Families (HUFs), companies, firms, co-operative societies and trusts (identified as body of individuals and association of persons) and any other artificial person. Levy of tax is separate on each of the persons. The levy is governed by the Indian Income Tax Act, 1961. The Indian Income Tax Department is governed by the Central Board for Direct Taxes (CBDT) and is part of the Department of Revenue under the Ministry of Finance, Govt. of India. There are close to 35 million income tax payers in India.
The taxation system in the Republic of India is quite well structured. The Department of Revenue of the Finance Ministry of the Government of India is responsible for the computation; levy as well as collection of most the taxes in the country. However, some of the taxes are even levied solely by the Local State Bodies or the respective governments of the different states in the nation. Central Government levies taxes on income (except tax on agricultural income, which the State Governments can levy), customs duties, central excise and service tax. Value Added Tax (VAT), stamp duty, state excise, land revenue and profession tax are levied by the State Governments. Local bodies are empowered to levy tax on properties, octroi and for utilities like water supply, drainage etc.
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Income Tax in India

According to Income Tax Act 1961, every person, who is an assessee and whose total income exceeds the maximum exemption limit, shall be chargeable to the income tax at the rate or rates prescribed in the Finance Act. Such income tax shall be paid on the total income of the previous year in the relevant assessment year. Assessee means a person by whom (any tax) or any other sum of money is payable under the Income Tax Act, and includes Every person in respect of whom any proceeding under the Income Tax Act has been taken for the assessment of his income (or assessment of fringe benefits) or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person; Every person who is deemed to be an assessee under any provisions of the Income Tax Act; Every person who is deemed to be an assessee in default under any provision of the Income Tax Act.
Where a person includes: Individual Hindu Undivided Family (HUF) Association of persons (AOP) Body of individuals (BOI) Company Firm A local authority and, Every artificial judicial person not falling within any of the preceding categories.
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Indian Tax Year

Income tax is an annual tax imposed separately for each assessment year (also called the tax year). Assessment year commences from 1st April and ends on the next 31st March. The total income of an individual is determined on the basis of his residential status in India.
For tax purposes, an individual may be resident, nonresident or not ordinarily resident.
Resident
An individual is treated as resident in a year if present in India: For 182 days during the year or For 60 days during the year and 365 days during the preceding four years. Individuals fulfilling neither of these conditions are nonresidents. (The rules are slightly more liberal for Indian citizens residing abroad or leaving India for employment abroad.)
Resident but not Ordinarily Resident

A resident who was not present in India for 730 days during the preceding seven years or who was nonresident in nine out of ten preceding years is treated as not ordinarily resident.
Non-Residents
Non-residents are taxed only on income that is received in India or arises or is deemed to arise in India. A person not ordinarily resident is taxed like a non-resident but is also liable to tax on income accruing abroad if it is from a business controlled in or a profession set up in India. Non-resident Indians (NRIs) are not required to file a tax return if their income consists of only interest and dividends, provided taxes due on such income are deducted at source.
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Personal Income Tax Rates

Personal income tax is levied by Central Government and is administered by Central Board of Direct taxes under Ministry of Finance in accordance with the provisions of the Income Tax Act. Income tax slabs for individual taxpayers for the year 2012-13 to be as follows:
Income Tax Rates/Slabs Upto 1,80,000 Upto 1,90,000 (for women) Upto 2,50,000 (senior citizens) 1,80,001 5,00,000 5,00,001 8,00,000 8,00,001 and above Tax amendments for the FY 2011-12 are mentioned below : Increase in base income tax slab of men and senior citizens.
Rate (%)
NIL
10 20 30
Tax exemption limit remains the same i.e Rs. 20,000 on investment in tax saving Infrastructure bonds. A set of New Direct Tax Codes have been proposed, which will be active from Financial Year 2011. Senior citizen age reduced from 64 years to 60 years. People above 80 years of age to be included in the newly introduced 'Very Senior citizen' category.
Proposal to allow individual tax payers, a deduction of upto Rs 10,000 for interest from savings bank accounts. Proposal to allow deduction of upto Rs 5,000 for preventive health check up. Senior citizens not having income from business proposed to be exempted from payment of advance tax.
Income Tax Project [Sec-C] Page 5
Status Resident and ordinarily resident Resident but not ordinary resident Non-Resident
Indian Income Taxable Taxable Taxable
Foreign Income Taxable Not taxable Not taxable
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Heads of Income
The total income of a person is divided into five heads: 1. 2. 3. 4. 5. Salary income Income from house property, Income from business or profession, Capital Gain Income from other sources.
Individual Heads of Income Income from Salary

All income received as salary under Employer-Employee relationship is taxed under this head. Employers must withhold tax compulsorily, if income exceeds minimum exemption limit, as Tax Deducted at Source (TDS), and provide their employees with a Form 16 which shows the tax deductions and net paid income. In addition, the Form 16 will contain any other deductions provided from salary such as: Medical reimbursement: Up to 15,000 per year is tax free if supported by bills. Transport allowance: Up to 800 per month (9,600 per year) is tax free if provided as transport allowance. No bills are required for this amount. Conveyance allowance:is tax exempt. Professional taxes: Most states tax employment on a per-professional basis, usually a slabbed amount based on gross income. Such taxes paid are deductible from income tax. House rent allowance: the least of the following is available as deduction Actual HRA received 50%/40%(metro/non-metro) of basic salary Rent paid minus 10% of 'salary'. basic Salary for this purpose is basic+DA forming part+commission on sale on fixed rate. Income from salary is the least of all the above deductions. Perquisites and Exemptions u/s 10 The term "Perquisite" includes value of any benefit or amenity/value of any concession provided by the employer to the employees. Perquisite Valuation does not include certain medical benefits. Section 10 exemptions are available for the following perquisites: Leave Travel Concession u/s 10(5) Perquisites paid to Indian Citizens Employed Abroad 10(7) no Tax Paid on Behalf of Any Employee by the Employer 10(10CC)
Income from House property

Income from House property is computed by taking into account what is called Gross Annual Value of the property. The annual value (in the case of a let out property) is the maximum of the following: Rent received . Municipal Valuation Fair Rent (as determined by the IT department) If a house is not let out and not self-occupied, annual value is assumed to have accrued to the owner. Annual value in case of a self occupied house is to be taken as NIL. (However if there is more than one self occupied house then the annual value of the other house/s is taxable.) From this, deduct Municipal Tax paid and you get the Net Annual Value. From this Net Annual Value, deduct : 30% of Net value as repair cost (This is a mandatory deduction) No other deduction available Interest paid or payable on a housing loan against this house In the case of a self occupied house interest paid or payable is subject to a maximum limit of Rs,1,50,000 (if loan is taken on or after 1 April 1999 and construction is completed within 3 years) and Rs.30,000 (if the loan is taken before 1 April 1999). For all non selfoccupied homes, all interest is deductible, with no upper limits. The balance is added to taxable income.
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Income from Business or Profession

The income referred to in section 28, i.e., the incomes chargeable as "Income from Business or Profession" shall be computed in accordance with the provisions contained in sections 30 to 43D. However, there are few more sections under this Chapter, viz., Sections 44 to 44DA (except sections 44AA, 44AB & 44C), which contain the computation completely within itself. Section 44C is a disallowance provision in the case non-residents. Section 44AA deals with maintenance of books and section 44AB deals with audit of accounts. In summary, the sections relating to computation of business income can be grouped as under: Deductible Expenses - Sections 30 to 38 [except 37(2)]. Inadmissible Expenses - Sections 37(2), 40, 40A, 43B & 44-C. Deemed Incomes - Sections 33AB, 33ABA, 33AC, 35A, 35ABB & 41. Special Provisions - Sections 42 & 43D Self-Coded Computations - Sections 44, 44A, 44AD, 44AE, 44AF, 44B, 44BB, 44BBA, 44BBB, 44-D & 44-DA. The computation of income under the head "Profits and Gains of Business or Profession" depends on the particulars and information available.[4] If regular books of accounts are not maintained, then the computation would be as under: Income (including Deemed Incomes) chargeable as income under this head xxx Less: Expenses deductible (net of disallowances) under this head xxx Profits and Gains of Business or Profession xxx However, if regular books of accounts have been maintained and Profit and Loss Account has been prepared, then the computation would be as under: Net Profit as per Profit and Loss Account Add : Inadmissible Expenses debited to Profit and Loss Account Deemed Incomes not credited to Profit and Loss Account xxx Less: Deductible Expenses not debited to Profit and Loss Account xxx xxx xxx xxx
Incomes chargeable under other heads credited to Profit & Loss A/c xxx xxx Profits and Gains of Business or Profession xxx
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Corporate Tax in India
Definition of a company
A company has been defined as a juristic person having an independent and separate legal entity from its shareholders. Income of the company is computed and assessed separately in the hands of the company. However the income of the company, which is distributed to its shareholders as dividend, is assessed in their individual hands. Such distribution of income is not treated as expenditure in the hands of company; the income so distributed is an appropriation of the profits of the company.
Residence of a company
A company is said to be a resident in India during the relevant previous year if: It is an Indian company If it is not an Indian company but, the control and the management of its affairs is situated wholly in India A company is said to be non-resident in India if it is not an Indian company and some part of the control and management of its affairs is situated outside India.
Corporate sector tax

The taxability of a company's income depends on its domicile. Indian companies are taxable in India on their worldwide income. Foreign companies are taxable on income that arises out of their Indian operations, or, in certain cases, income that is deemed to arise in India. Royalty, interest, gains from sale of capital assets located in India (including gains from sale of shares in an Indian company), dividends from Indian companies and fees for technical services are all treated as income arising in India. A limited company in India is liable for tax in the financial year 2011-2012 at the rate of 30% for a local company and 40% for a foreign company with the addition of surcharge (for income above INR 10 millions, 5% for domestic companies, 2% for foreign companies) as well as an education tax (CESS) of 3%. The top effective tax rate in India is 32.45% for a local company and 42.02% for a foreign company. Companies in India whose tax liability is less than 18.5% of the "book profits" pay a 18.5% minimum alternative tax, MAT on the "book profits" with a surcharge and CESS, bringing the effective tax rate of 20.01% for domestic companies and 19.44% for foreign companies
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Tax Rebates for Corporate Tax

The classical system of corporate taxation is followed in India Domestic companies are permitted to deduct dividends received from other domestic companies in certain cases. Inter Company transactions are honored if negotiated at arm's length. Special provisions apply to venture funds and venture capital companies. Long-term capital gains have lower tax incidence. There is no concept of thin capitalization. Liberal deductions are allowed for exports and the setting up on new industrial undertakings under certain circumstances. There are liberal deductions for setting up enterprises engaged in developing, maintaining and operating new infrastructure facilities and power-generating units. Business losses can be carried forward for eight years, and unabsorbed depreciation can be carried indefinitely. No carry back is allowed. Dividends, interest and long-term capital gain income earned by an infrastructure fund or company from investments in shares or long-term finance in enterprises carrying on the business of developing, monitoring and operating specified infrastructure facilities or in units of mutual funds involved with the infrastructure of power sector is proposed to be tax exempt. . A driving force behind many multinational companies locating in India has been the tax incentives offered by the government. One reason for the creation of a tax-friendly policy was India's complicated tax structure that included a base corporate tax rate of 30-35% and a variety of other indirect taxes that could end up creating a total tax rate in excess of 50%. By offering a 10-year tax holiday, India was able to attract many players in the IT industry. Building on that success, it is offering the same incentives to the manufacturing community. "Through the establishment of Special Economic Zones (SEZ) the government is able to steer companies toward geographical locations that are in need of development. The SEZ regulations offer tax exemptions from 50% -100% over a fifteen year period," explains Dharmesh Pandya, the leader of KPMG LLP's India Center of Excellence.
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India Reporting Dates and Payment

The tax year in India begins on April 1 and ends on March 31. An individual whose income is from a business must submit an annual return by October 31. There is a fine of 10% of the tax payable for each month's delay. An individual whose income is from a wage or whose income is subject to a deduction of tax at source, is exempt from submitting an annual return. An advance payment must be made on 3 dates - September 15, December 15 and March 15. There is an official body in India that deals with the subject of pre-ruling in connection with tax problems that are presented for discussion.
India Deduction of Tax at Source

Taxation of Employees An employer is obligated to deduct tax at source on a monthly basis from a salaried employee and to make additional contributions to a provident fund and insurance. The Indian employer's contribution to provident fund is 12% in general. Employees pay to provident funds 10%-12% of their salary.
India Other deductions
The following payments to non-residents are subject, in India, to a deduction of tax at source (rates are before surcharge and cess): Dividend - 0%. Interest - 20%. Royalties - 10%. Technical Fees-10%.
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Tax Penalties
The major number of penalties initiated every year as a ritual by I-T Authorities is under section 271(1)(c) which is for either concealment of income or for furnishing inaccurate particulars of income. "If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of any proceedings under this Act, is satisfied that any person(b) has failed to comply with a notice under sub-section (1) of section 142 or sub-section (2) of section 143 or fails to comply with a direction issued under sub-section (2A) of section 142, or (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty,(ii) in the cases referred to in clause (b), in addition to any tax payable by him, a sum of ten thousand rupees for each such failure; (iii) in the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such income.
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Agricultural Income in India
Agriculture income is exempt under the Indian Income Tax Act. This means that income earned from agricultural operations is not taxed. The reason for exemption of agriculture income from Central Taxation is that the Constitution gives exclusive power to make laws with respect to taxes on agricultural income to the State Legislature. However while computing tax on nonagricultural income agricultural income is also taken into consideration.
What does the term Agricultural Income mean? As per Income Tax Act income earned from any of the under given three sources meant Agricultural Income; 1. Any rent received from land which is used for agricultural purpose. 2. Any income derived from such land by agricultural operations including processing of agricultural produce, raised or received as rent in kind so as to render it fit for the market, or sale of such produce. 3. Income attributable to a farm house subject to the condition that building is situated on or in the immediate vicinity of the land and is used as a dwelling house, store house etc.
Now income earned from carrying nursery operations is also considered as agricultural income and hence exempt from income tax. In order to consider an income as agricultural income certain points have to be kept in mind: There must me a land. The land is being used for agricultural operations. Agricultural operation means that efforts have been induced for the crop to sprout out of the land . If any rent is being received from the land then in order to assess that rental income as agricultural income there must be agricultural activities on the land. In order to assess income of farm house as agricultural income the farm house building must be situated on the land itself only and is used as a store house/dwelling house.
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Certain income which is treated as Agriculture Income;
(a) Income from sale of replanted trees. (b) Rent received for agricultural land. (c) Income from growing flowers and creepers. (d) Share of profit of a partner from a firm engaged in agricultural operations. (e) Interest on capital received by a partner from a firm engaged in agricultural operations. (f) Income derived from sale of seeds.
Certain income which is not treated as Agricultural Income;
(a) Income from poultry farming. (b) Income from bee hiving. (c) Income from sale of spontaneously grown trees. (d) Income from dairy farming. (e) Purchase of standing crop. (f) Dividend paid by a company out of its agriculture income. (g) Income of salt produced by flooding the land with sea water. (h) Royalty income from mines. (i) Income from butter and cheese making. (j) Receipts from TV serial shooting in farm house is not agriculture income.
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Certain points to be remembered;
(a) Agricultural income is considered for rate purpose while computing tax of Individual/HUF/AOP/BOI/Artificial Judicial Person. (b) Losses from agricultural operations could be carried forward and set off with agricultural income of next eight assessment years. (c) Agriculture income is computed same as business income.
Tax after including agricultural income in total income: Although agricultural income is fully exempt from tax, the Finance Act, 1973, introduced a scheme whereby agricultural income is included with non-agricultural income in the case of noncorporate assessees who are liable to pay tax at specified slab rates. The process of computation is as follows: (a) Income tax is first calculated on the net agricultural income plus the assessees total income from non-agricultural sources. (b) Income tax is then calculated on the basic exemption slab increased by the assessees net agricultural income. (c) The difference between (a) and (b) is the amount of tax payable by the assessee. This process of computation is, however, followed only if the assessees non-agricultural income is in excess of the basic exemption slab. Clearly, despite agricultural income being tax-exempt, assessees have to be extra careful while dealing with such income. They must make sure that they aggregate agricultural income with their total income to avoid interest payments and possible penalties for concealment of income. Assessees must also maintain credible records to provide the tax authorities with proof of ownership of agricultural land and evidence of having earned agricultural income.
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AGRICULTURAL INCOME TAX in PAKISTAN

A BRIEF SURVEY
In 1860 the British Imperialists levied income tax in India. Agricultural Income was also taxable. In 1882 Agricultural Income was exempted from taxation. In 1922 Income Tax Act was promulgated and Agricultural Income was exempted from taxation. In 1925 Indian Taxation Enquiry Committee was constituted, which recommended taxation of all incomes including the agricultural incomes. In 1935, the taxation system was divided been the central and provincial governments. Agricultural tax was removed from the purview of the central government. In 1944, a law for the imposition of Agricultural Income Tax was promulgated in the Province of Bengal. In 1948 in Pakistan, the Provinces of Punjab-Bhawalpur and N.W.F.P. promulgated similar laws. In 1956, with the promulgation of the constitution, the agricultural tax was removed from the purview of the central government. IN 1959, Taxation Enquiry Committee recommended taxation of agricultural income but the Food and Agricultural Committee recommended exemption of Agriculture from taxation. In 1963, Fact Finding Committee on Agriculture opposed imposition of tax on agriculture. In 1964, Taxation and Tariff Commission recommended the imposition of tax on agriculture and handing over the subject to the Federal Government, but the Government of West Pakistan vetoed the proposal. In 1970, the Enquiry Committee on Agriculture recommended the imposition of income tax on agricultural income on a very limited scale, but it was not accepted. In the 1973 Constitution, agricultural income was again exempted from taxation. In 1977, the Federal Government repealed the I.T. Act of 1922. In 1977 the Assembly passed the Financial Ordinance, which exempted 25 Acres irrigated and 50 Acres non irrigated land from taxation. Due to the imposition of Martial Law, it could not be Implemented. In 1979, Agricultural Income was exempted from taxation by the I.T. Ordinance.
In 1986, the National Taxation Reform Commission examined the imposition of Agricultural Income tax but there was no outcome. In 1992 there was a serious deficit in tax revenue. Serious consideration started to be given to the imposition of agricultural income tax. In 1993 The Care-taker Prime Minister Moin Qureshi rescinded the Section 5-a of the Wealth Tax Act (1963) so that agricultural income may be taxed on a limited scale. From the above it is clear that during the last Century and Half the question of Agricultural income tax has been a subject of debate, but without any result. The taxation policy throughout the world is on income- period. It was only in India and Pakistan that the distinction between agricultural and income from other sources was made. Even in India the distinction was later done away with. The reason is not difficult to fathom, the exemption from taxation was the privilege granted to the scions of those elements who helped the British Imperialists in occupying and ruling the sub- continent. Therefore while the middle class and the salaried people are crushed under the dual burden of taxation and rising cost of living, the feudal and land owning classes are free to earn millions from their fruit orchards and fields. The exemption of agriculture from income tax has also given rise to fraudulent practices where income from shady sources is filed under the heading of agricultural income, thereby depriving the exchequer of millions in taxes. The industrialists, the traders and the civil and military bureaucrats, all are utilizing this loophole to defraud the treasury. The gravity of the situation is apparent to any literate citizen of Pakistan, but the Government of the day is totally blind to the situation. Their policy is, pocket their profits and then go with the begging bowl to the West to finance the economy. Because the repayment of these loans( $ 52 Billion by 2009) will be made by the people and their future generations and not the ruling classes. The late Dr. Mahbub ul Haq is on record as saying that the Deficit in the 1985 budget of 65 billion rupees could have been met had the government chosen to impose income tax on agriculture then. The political leadership of all major political parties today are shouting themselves hoarse about their commitment to democracy. Can we venture to question them as to what their democracy means, if everyone is not equal before the law? It was only in moribund states and societies, such as Russia and France that the Feudal class and the Churches were exempt from taxation. Even in England, across the board taxation was imposed very early. Today the acid test of who really represents the people, lies in identifying as to who is ready to fight for the economic emancipation of the people, let all the political parties bear this in mind when they are judged by History.
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Taxation in Pakistan
Executive Summary
As we have studied Income Tax Laws in Pakistan in detail throughout the semester, so we dont go in detail hereWe just discuss the problems and a brief summary here International experience shows that tax reform can deliver large increases in the tax-toGDP ratio. While there are other developing countries at Pakistanis income level with similarly low tax-to-GDP ratios, countries in the region set a different example. Pakistans taxto-GDP ratio stands today at just below 10 percent and it have been falling steadily. The fall in tax-to-GDP ratio in recent years has come at a time when governments efforts have been increasing focused on macroeconomic stabilization, under the impetus of various on-going IMF programs. Greater emphasis has been placed on budget deficit reduction in order to contain the rate of inflation and restore a measure of fiscal sustainability by arresting the increase in the debt-to-GDP ratio. But the fall in the tax-to-GDP ratio has made this task increasingly difficult, necessitating sharp cutbacks in public expenditure, especially on development, thereby affecting the growth momentum of the economy. Pakistans tax collection has failed to improve since the late 1990s mainly due to inherent structural problems, including a narrow tax-base, massive tax evasion and administrative weaknesses, Federal Board of Revenue (FBR) said in its quarterly report. The report said that taxpayers distrust public institutions and the tax-to-Gross Domestic Product (GDP) ratio had declined in recent years. But in fiscal 2009/10 (July-June), tax-to-GDP ratio is expected to rise to 9.3 percent from 8.8 percent in 2008/09. Exemptions are made part of the tax system for a variety of reasons including the income tax threshold and GST exemption on basic foodstuffs are granted to protect the most vulnerable groups of society, the FBR report said. Exemptions are also introduced to protect certain industries, including those which are new, it added. There are also political exemptions (for) diplomats, top echelon of civil and military bureaucracy, and employees of the international organizations. Temporary exemptions are also granted to address issues that arise from time-totime. The report said that Pakistan needs to look thoroughly at the available reform options, pursuing twin-track reforms of tax policy and administration, which would help the government to meet its medium-term revenue collection targets.
Most of the Pakistanis are not willing to pay taxes because
First, there is a strong, and quite well-founded belief, that a large part of the tax collected will not be spent on the welfare of the public at large, but rather on the politicians personal needs/wants, or the needs/wants of these politicians favorites. Second, due to the above problem, people simply do not expect that paying taxes will lead to any increase in the quantity and quality of public goods and services provided by the state. Hence, they have nothing to gain from paying taxes. The solution to this problem, while obviously not easy, does not require any new fundamental breakthrough in technology or human thinking in general. Decent governance, careful planning, and honest work are all thats needed. While one has to admit that even these relatively basic changes will take time in Pakistan, its nevertheless nothing that cannot be done. Its simply a matter of will, and time.
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Agriculture Income in Pakistan

The economy of Pakistan has been in a very deplorable situation especially for the previous three decades and it has kept on deteriorating ceaselessly throughout this period. It has entrapped in a vicious cycle due to high inflation, unemployment, credit cost and income disparity on the one hand and poor resource generation, low investment, dismal law and order situation and extremely influential political cum feudal forces. A major reason for the economic stagnation is foreign debts that have been on the rise at alarming rate especially in the previous few couple of years. It has made our country a dependent parasite at one end and corrodes our public exchequer annually in the form of huge foreign debt servicing payments at the other. The total foreign debt and liabilities of Pakistan has reached $58.512 billion, while it was just $47 billion a couple years ago. Pakistan had to pay a total of $5.614 billion as debt serving in the fiscal year 2009-2010, which account for almost more than 33% of the entire foreign exchange reserves of country (The Economic Survey of Pakistan, 2010). The taxation of agricultural sector has always been a controversial issue in Pakistan throughout the history of the country. There have been divergent views of expert policy makers and legislators on the said issue. It is known to all of us that Pakistan and India both inherited the same revenue collection system on their independence, but now we see there is a huge difference between India and Pakistan with regard to their taxation regimes. Taxation is the price of civilization of a society. The degree of civilization of a society depends upon the participatory polity which becomes vague if there is no participatory economy. In a civilized society equals must pay equally to public exchequer to make a country economically sovereign so that its political sovereignty can be secured. All the developed countries like UK, USA and Canada have brought agricultural income under tax net and even India is far ahead than Pakistan in this regard. Agriculture is the back bone of economy of Pakistan contributing almost 22% to GDP but its share in tax is only 1% (The Economic survey of Pakistan, 2010). This is a very dismal situation of affairs. There have been sporadic efforts to bring such a big sector of economy in tax net but all the efforts have remained almost ineffective and we have failed to harness a huge source of public exchequer. The biggest argument against agricultural income tax has been the cost benefit analysis factor which shows that perhaps there is a very nominal potential in this sector. Agriculture sector is characterized by backwardness in Pakistan like other developing countries where poverty and illiteracy are rampant. In economic development, "modern sector" consisting of industry and service sectors receives top priority. "Modern" sector is comparatively more developed with higher literacy, income and documentation. On the other hand, agriculture is primitive and primarily of subsistence nature.
Taxation in the United Kingdom (UK)
Executive Summary
Income tax was announced in Britain by William Pitt the Younger in his budget of December 1798 and introduced in 1799, to pay for weapons and equipment in preparation for the Napoleonic. Pitt's new graduated (progressive) income tax began at a levy of 2 old pence in the pound (1/120) on incomes over 60 (5,077 as of 2012), and increased up to a maximum of 2 shillings (10%) on incomes of over 200. Pitt hoped that the new income tax would raise 10 million, but actual receipts for 1799 totaled just over 6 million.
Taxation in the United Kingdom may involve payments to a minimum of two different levels of government: 1. The central government (HM Revenue and Customs) & 2. Local government.
Central government revenues come primarily from income tax, National Insurance contributions, value, corporation tax and fuel duty. Local government revenues come primarily from grants from central government funds, business rates in England and Wales, Council Tax and increasingly from fees and charges such as those from on-street parking. In the fiscal year 200708, total government revenue was 39.2 per cent of GDP, with net taxes and National Insurance contributions standing at 36.9 per cent of GDPapproximately 600 billion (using 2008 nominal GDP measured in dollars, and converting using 2009 conversion rate).
A uniform Land tax was introduced in England during the late 17th century. This formed the main source of government revenue throughout the rest of the 17th century, the 18th century and the early 19th century.
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Income Tax Schedules in UK
Income tax was levied under five schedules. Income not falling within those schedules was not taxed.
The schedules were:
1. 2. 3. 4.
Schedule A (tax on income from UK land) Schedule B (tax on commercial occupation of land) Schedule C (tax on income from public securities) Schedule D (tax on trading income, income from professions and vocations, interest, overseas income and casual income) 5. Schedule E (tax on employment income) 6. Later a sixth Schedule, Schedule F (tax on UK dividend income) was added.
Residence
An individual in UK is resident when staying in the UK for more than 183 days in a tax year, or when having annual visits to the UK for 91 days in 4 consecutive years. A company is UK resident if incorporated in the UK, or when the management is in the UK.
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Tax year in UK
The tax year in the UK, which applies to income tax and other personal taxes, runs from 6 April in one year to 5 April the next (for income tax purposes). Hence the 2010-11 tax year ran from 6 April 2010 to 5 April 2011.
The tax year is sometimes also called the Fiscal Year. The Financial Year, used mainly for corporation tax purposes, runs from 1 April to 31 March. Financial Year 2011 runs from 1 April 2010 to 31 March 2011, as Financial Years are named according to the calendar year in which they end.
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Income Tax in UK
Income tax forms the single largest source of revenues collected by the government (followed by national insurance contributions, an additional levy on incomes at around 20%). Each person has an income tax personal allowance, and income up to this amount in each tax year is free of tax for everyone. For 2010-11 the tax allowance for under 65s is 6,475. This reduces by 1 for every 2 of taxable income above 100,000; whilst this allowance is withdrawn the effective income tax rate is 60% and with the NI rate in this band the effective tax rate is 62%. On 22 June 2010, the Chancellor (George Osborne) increased the personal allowance by 1000 in his emergency budget, bringing it to 7,475 for the tax year 2011-12. For the 2012/13 tax year, taxfree allowance is 8105. Above this amount there are a number of tax bands each taxed at a different rate (as of 2012/13): Rate Dividend income Savings income Other income (inc Band (above any employment) personal allowance) 0 Lower rate N/A 10% N/A
this band
8,105
applies only if total income falls in
Basic rate
10%
20% 40% 60% 40%
20% 40% 60% 40%
8,106 - 34,370[15] 34,371 - 100,000 100,001 - 114,890 114,891 - 150,000
Higher rate 32.5% (Lower Band) Regressive rate 56.25%
Higher rate 32.5% (Upper Band) Additional rate 42.5%
50%(45% from 50%(45% from Aprover 150,000 Apr-2013) 2013)
This table reflects the removal of the 10% starting rate from April 2008, which also saw the 22% income tax rate drop to 20%. Alistair Darling announced in the 2009 budget (22 April 2009) that, from April 2010 there would be a new 50% income tax rate for those earning more than 150,000.
After consideration of employer and employee National Insurance contributions, the effective marginal top rate for 2011-12 is 58%: that is, after the first 150,000, to pay an employee an additional 1,000 of taxable income costs the employer 1,138 and the employee receives 480 after deductions. The taxpayer's income is assessed for tax according to a prescribed order, with income from employment using up the personal allowance and being taxed first, followed by savings income (from interest or otherwise unearned) and then dividends. Foreign income of UK residents is taxed as UK income, but to prevent double taxation the UK has agreements with many countries to allow offset against UK tax what is deemed paid abroad. These deemed amounts paid abroad are not necessarily as much as actually paid.[19] Sometimes it is necessary to inform foreign authorities that tax should be withheld at the deemed rate. Rental income on a property investment business (such as a buy to let property) is taxed as other savings income, after allowing deductions including mortgage interest. The mortgage does not need to be secured against the property receiving the rent, subject to a maximum of the purchase prices of the property investment business properties (or the market value at the time they transferred into the business). Joint owners can decide how they divide income and expenses, as long as one does not make a profit and the other a loss. Losses can be brought forward to subsequent years.
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Corporation Tax in UK
U.K. corporate tax revenue as a percentage of GDP compared to the OECD and the EU 15.
Corporation tax is a tax levied in the United Kingdom on the profits made by companies and on the profits of permanent of non-UK resident companies and associations that trade in the EU.
UK's corporate tax rate for 2010-2011 is 28%. For UK resident companies with annual profits below GBP 300,000 the tax rate is 21%.
Business rates
Business rates are the commonly used name of non-domestic rates, a United Kingdom rate or tax charged to occupiers of non-domestic property. Business rates form part of the funding for local government, and are collected by them, but rather than receipts being retained directly they are pooled centrally and then redistributed. In 2005/06, 19.9 billion was collected in business rates, representing 4.35% of the total UK tax income.
Capital Gains
Capital gains of individuals are generally taxed at 18%. There is an annual exemption of GBP 10,000. Capital gains for companies are generally taxed at the standard corporate tax rate. There is a participation exemption for sale of shares, subject to certain terms.
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Deduction of Tax at Source in U.K.

In the U.K. tax is deducted at source from the following payments to non residents:

Dividend- 0%. (20% for dividends paid by REITs). Interest- 20%. Royalties- 20%.
Social Security in U.K.

National Insurance Contributions (NIC) in the UK. The contributions by the employer and the employee are subject to ceiling defined by law. Employer: 12.8% on salary above GBP 5,715. Employee: 11% on salary of GBP 5,715- GBP 43,875, with additional 1% for salary above GBP 43,875. Self employed pay 8% for income of GBP 5,715- GBP 43,875 with additional 1% on income exceeding GBP 43,875.
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Tax allowances
If you live in the UK on a day to day basis you are entitled to a basic personal tax allowance, unless your income is over 100,000 a year. You may also be entitled to other allowances on top of the basic allowance. This means that some of your income, which would otherwise be taxable, will be tax-free. If you are an employee and so are taxed under Pay As You Earn (PAYE), your personal allowances will be spread throughout the year, so that each week or month you will have a certain amount of tax-free income and then pay tax on the remainder. If you are self-employed or have taxable income but are not working, your personal allowances will be taken into account when your tax bill is calculated after you have sent in your annual tax return or repayment claim.
Tax reliefs
In addition to personal tax allowances, income spent on certain things, for example, professional subscriptions or the cost of the tools of your trade, can be deducted when calculating tax. This is known as tax relief on outgoings. These reliefs reduce the amount of your taxable income so you pay less tax. Tax reliefs for employees are spread throughout the year in the same way as personal tax allowances. Tax reliefs for self-employed people and people who have taxable income but are not working are taken into account when their tax bill is calculated after they have sent in their annual tax return or repayment claim.
Record keeping
If you are a taxpayer, you must, by law, keep records of your income and any expenses you claim against tax. You will need these records if the tax office asks you to complete a tax return. You must keep personal or non-business records for 22 months after the end of the tax year to which they relate, and you must keep business records for 5 years and 10 months after the end of the tax year to which they relate.
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How HM Revenue and Customs collects income tax
Deduction of tax at source

Most taxpayers pay their tax through deductions that are made from their income before they receive it. This is called deduction at source. Some of the most common examples of deduction at source are PAYE, see below, and bank and building society interest, see below
Pay As You Earn (PAYE)

By law, anyone making payments to employees or members of occupational pension schemes is obliged to operate the PAYE system. This means they must deduct income tax and class 1 national insurance contributions from the payments that they make, and must send these sums to HM Revenue and Customs (HMRC). You are entitled to receive written confirmation of deductions that have been made by: payslips, showing gross pay, deductions made and net pay if you are an employee; and a P60 certificate at the end of each tax year, confirming the amount of gross earnings or pension, and any income tax and class 1 national insurance contributions deducted; and a P45 certificate whenever you change jobs, which shows the pay and tax in the job you are leaving, the tax code operating on your earnings at the time you left and, in some cases, the earnings and income tax deducted in the tax year to date.
Bank and building society interest

Banks and building societies deduct income tax from the interest paid on most deposits made with them by individuals, and pay this over to HMRC. This is done before the interest is paid into your account. The bank or building society must confirm the amount of interest earned in each tax year and the amount of income tax deducted. The bank or building society must give you the information free of charge if you ask for it. A number of banks and building societies send these details to all their investors each year, as a matter of course. Statements and pass books may also show this information. If you do not need to pay any tax on this interest, for example, because your total taxable income from all sources falls below your personal tax allowances for the tax year, you can arrange to
receive your interest gross, that is, without deduction of any tax. You should ask your branch of the bank or building society for form R85, which you must complete and return to the branch. Interest will then be paid without tax deduction, avoiding the need to claim a tax refund.
Collection of tax by Self Assessment

Tax will have to be paid to HMRC direct through the system of Self Assessment where the full liability was not, or could not be, met by deduction at source. If you need help with the Self Assessment process, you should contact HM Revenue and Customs, or consult an experienced adviser, for example, at a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB.
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Objectives of the UK tax system
The current government's objectives for the British tax system are broadly as follows:
The burden of tax: To keep the tax burden as low as possible (the burden of tax for a country can be measured by the % of GDP taken in taxes)
To improve incentives: The government believes that reducing tax rates on income and business profits helps to sharpen incentives to work and create wealth in the economy as a strategy to enhance long-run growth
Tax spending rather than income: To shift the balance of taxation away from taxes on income towards taxes on spending this is because it is thought that taxes on income have a greater effect on work incentives
Equitable taxes: To ensure taxes are applied equally and fairly to everyone. Equality is not always the same as fairness see the notes below on the canons of taxation
Correct for market failure: As with many other governments in other countries, the UK government believes in the use of taxes to make markets work better (including taking account of externalities) this is an important microeconomic objective. The government is committed to using the tax system as an instrument of correcting for market failures.
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The table below shows the main sources of direct and indirect tax revenues for the UK projected for the 2004-05 financial year. Income tax and national insurance contributions together account for over 205 billion of government tax revenues each year. VAT is the biggest single source of indirect tax revenue although over 40 billion of revenue comes each year from excise duties. Income from taxation for the UK government 1999-00 billion Income tax National Insurance contributions VAT Corporation tax Fuel duties Council Tax Business rates Other taxes Stamp duties Tobacco duty Vehicle excise duty Beer & cider duties Inheritance tax Spirits duties Insurance Premium tax Capital gains tax Wine duties 95.7 56.1 56.4 34.3 22.5 13.1 15.4 8.1 6.9 5.7 4.9 3.0 2.1 1.8 1.4 2.1 1.7 2004-05 billion 127.2 78.1 73.0 34.1 23.3 20.1 18.7 11.7 9.0 8.1 4.7 3.3 2.9 2.4 2.4 2.3 2.2
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Customs Duties & levies Betting & Gaming duties Petroleum revenue tax Air Passenger duty Climate Change Levy Land fill tax Aggregates levy Oil royalties
2.0 1.5 0.9 0.9 0.0 0.4 0.0 0.4
2.2 1.4 1.3 0.9 0.8 0.7 0.3 0.0
Revenue collection
Suggestions for improvements to increase certainty and/or reduce compliance costs for taxpayers should bear in mind the need to preserve the capacity of the Tax Office to collect legitimate revenue. Income tax paid by individuals and business is the largest source of funding for Government spending priorities or the retirement of debt. In 2002-03, $129.6 billion was collected in income tax (excluding petroleum resource rent tax).
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Tax Rates in Pakistan, India and United Kingdom
Tax Rates in Pakistan
RATES OF TAXATION: The tax on salary income is calculated at the rates prescribed in Income Tax Ordinance, 2001. Through Finance Act 2011 rates for the TY 2012 are amended. The rates for Tax Year 2012 are as follows: S.No Taxable Income Where the taxable income does not exceed Rs.350,000. 1 Where the taxable income exceeds Rs.350,000 but does not exceed 2 Rs.400,000. Where the taxable income exceeds Rs.400,000 but does not exceed 3 Rs.450,000. Where the taxable income exceeds Rs. 450,000 but does not exceed 4 Rs.550,000. Where the taxable income exceeds Rs. 550,000 but does not exceed 5 Rs.650,000. Where the taxable income exceeds Rs. 650,000 but does not exceed 6 Rs.750,000. Where the taxable income exceeds Rs. 750,000 but does not exceed 7 Rs.900,000. Where the taxable income exceeds Rs. 900,000 but does not exceed 8 Rs.1,050,000. Where the taxable income exceeds Rs. 1,050,000 but does not exceed 9 Rs.1,200,000. 10 Where the taxable income exceeds Rs. 1,200,000 but does not exceed Rs.1,450,000. 11 Where the taxable income exceeds Rs. 1,450,000 but does not exceed Rs.1,700,000. 12 Where the taxable income exceeds Rs. 1,700,000 but does not exceed Rs.1,950,000. 13 Where the taxable income exceeds Rs. 1,950,000 but does not exceed Rs.2,250,000. 14 Where the taxable income exceeds Rs. 2,250,000 but does not exceed Rs.2,850,000. 15 Where the taxable income exceeds Rs. 2,850,000 but does not exceed Rs.3,550,000. 16 Where the taxable income exceeds Rs. 3,550,000 but does not exceed Rs.4,550,000.
Rate of Tax 0.5% 1.5% 2.5% 3.5% 4.5% 6.0% 7.5% 9.0% 10.0% 11.0% 12.5% 14.0% 15.0% 16.0% 17.5% 18.5%
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17
Where the taxable income exceeds Rs. 4,550,000.
20.0%
MARGINAL RELIEF: Through Finance Act 2008 the provision for marginal relief in the tax rates was introduced to remove anomaly in the tax rates. The marginal relief is available on amount in excess of maximum limit of the preceding slab relative to slab in which the taxable income fall. The marginal amount will be taxed at the following rates: S.No 1 2 3 4 5 If taxable income of the tax payer is Up to Rs.550,000 550,001 to 1,050,000 1,050,001 to 2,250,000 2,250,001 to 4,550,000 4,550,001 and above Percentage of incremental income taxable at next applicable tax rate 20% 30% 40% 50% 60%
Income of Business in Pakistan: All public companies (other than banking companies) incorporated in Pakistan are assessed for tax at corporate rate of 39%. However, the effective rate is likely to differ on account of allowances and exemptions related to industry, location, exports, etc. Income of Property in Pakistan: Property tax is a provincial tax levied on the value of property. It is generally levied at a flat rate of 10% but the tax rates vary, depending on the province. Property tax is levied at progressive rates in the Punjab province. In the province of Sindh, property tax is levied at a flat rate of 20% on the annual rental value of the land and building. Individuals who purchase real property in urban areas or acquire the right to use the real property for more than 20 years are liable to pay capital value tax. The tax is levied at 4% on the propertys recorded value. If no property value is recorded, the tax is levied at PKR50 (US$0.58) per square yard of the property. Association of Persons in Pakistan: Resident and non-resident persons.1. A person shall be a resident person for a tax year if the person is a) a resident individual, resident company or resident association of persons for the year; or b) the Federal Government.
2. A person shall be a non resident person for a tax year if the person is not a resident person for that year Resident association of persons.An association of persons shall be a resident association of persons for a tax year if the control and management of the affairs of the association is situated wholly or partly in Pakistan at any time in the year. An individual as a member of an association of persons.If, for a tax year, an individual has taxable income and derives an amount or amounts exempt from tax under sub-section (1) of section 92, the amount of tax payable on the taxable income of the individual shall be computed in accordance with the following formula, namely: (A/B) x C Where A is the amount of tax that would be assessed to the individual for the year if the amount or amounts exempt from tax under sub-section (1) of section 92 were chargeable to tax; B is the taxable income of the individual for the year if the amount or amounts exempt from tax under sub-section (1) of section 92 were chargeable to tax; and C is the individuals actual taxable income for the year.
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Rates of Tax for Individuals and Association of Persons: S.No Taxable Income Where taxable income does not exceed Rs.100,000 1 Where the taxable income exceeds Rs.100,000 but does not 2 exceed Rs.110,000 Where the taxable income exceeds Rs.110,000 but does not 3 exceed Rs.125,000 Where the taxable income exceeds Rs.125,000 but does not 4 exceed Rs.150,000 Where the taxable income exceeds Rs.150,000 but does not 5 exceed Rs.175,000 Where the taxable income exceeds Rs.175,000 but does not 6 exceed Rs.200,000 Where the taxable income exceeds Rs.200,000 but does not 7 exceed Rs.300,000 Where the taxable income exceeds Rs.300,000 but does not 8 exceed Rs.400,000 Where the taxable income exceeds Rs.400,000 but does not 9 exceed Rs.500,000 10 Where the taxable income exceeds Rs.500,000 but does not exceed Rs.600,000 11 Where the taxable income exceeds Rs.600,000 but does not exceed Rs.800,000 12 Where the taxable income exceeds Rs.800,000 but does not exceed Rs.10,00,000 13 Where the taxable income exceeds Rs.10,00,000 but does not exceed Rs.13,00,000 14 Where the taxable income exceeds Rs.13,00,000 Rate of Tax 0% 0.50% 1.00% 2.00% 3.00% 4.00% 5.00% 7.50% 10.00% 12.50% 15.00% 17.50% 21.00% 25.00%
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Provided that where income of a woman taxpayer is covered by this clause, no tax shall be charged if the taxable income does not exceed Rs.125,000/S.No 1 2 3 4 5 6 Taxable income. Where taxable income does not exceed Rs. 100,000. Where taxable income exceeds Rs. 100,000 but does not exceed Rs. 150,000 Where taxable income exceeds Rs. 150,000 but does not exceed Rs. 300,000. Where taxable income exceeds Rs. 300,000 but does not exceed Rs. 400,000. Where taxable income exceeds Rs. 400,000 but does not exceed Rs. 700,000. Where taxable income exceeds Rs. 700,000. Rate of tax. 0% 7.5% of the amount exceeding Rs. 100,000 3,750 plus 12.5% of the amount exceeding Rs. 150,000 22,500 plus 20% of the amount exceeding Rs. 300,000. 42,500 plus 25% of the amount exceeding Rs. 400,000. 117,500 plus 35% of the amount exceeding Rs. 700,000.
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Where the income of an individual chargeable under the head salary exceeds fifty percent of his taxable income, the rates of tax to be applied shall be as set out in the following table namely: S.No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Taxable Income Where taxable income does not exceed Rs.150,000 Where the taxable income exceeds Rs.150,000 but does not exceed Rs.200,000 Where the taxable income exceeds Rs.200,000 but does not exceed Rs.250,000 Where the taxable income exceeds Rs.250,000 but does not exceed Rs.300,000 Where the taxable income exceeds Rs.300,000 but does not exceed Rs.350,000 Where the taxable income exceeds Rs.350,000 but does not exceed Rs.400,000 Where the taxable income exceeds Rs.400,000 but does not exceed Rs.500,000 Where the taxable income exceeds Rs.500,000 but does not exceed Rs.600,000 Where the taxable income exceeds Rs.600,000 but does not exceed Rs.700,000, Where the taxable income exceeds Rs.700,000 but does not exceed Rs.850,000, Where the taxable income exceeds Rs.850,000 but does not exceed Rs.950,000, Where the taxable income exceeds Rs.950,000 but does not exceed Rs.1,050,000, Where the taxable income exceeds Rs.1,050,000 but does not exceed Rs.1,200,000, Where the taxable income exceeds Rs.1,200,000 but does not exceed Rs.1,500,000, Where the taxable income exceeds Rs.1,500,000 but does not exceed Rs.1,700,000, Where the taxable income exceeds Rs.1,700,000 but does not exceed Rs.2,000,000, Where the taxable income exceeds Rs.2,000,000 but does not exceed Rs.3,150,000, Where the taxable income exceeds Rs.3,150,000 but does not exceed Rs.3,700,000, Where the taxable income exceeds Rs.3,700,000 but does not exceed Rs.4,450,000, Where the taxable income exceeds Rs.4,450,000 but does not exceed Rs.8,400,000, Where the taxable income exceeds Rs.8,400,000. Rate of Tax 0% 0.25% 0.50% 0.75% 1.50% 2.50% 3.50% 4.50% 6.00% 7.50% 9.00% 10.00% 11.00% 12.50% 14.00% 15.00% 16.00% 17.50% 18.50% 19.00% 20.00%
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Tax Rates in India

Rates of Taxation: For resident men below the age of 65 yrs: Income Up to 160,000 160,001 - 300,000 300,001 - 500,000 Above 500,000 For resident women below the age of 65 years: Income Up to 190,000 190,001 - 300,000 300,001 - 500,000 Above 500,000 Tax Rates Nil 10% Rs 11,000 plus 20% Rs 51,000 plus 30% Tax Rates Nil 10% Rs 14,000 plus 20% Rs 54,000 plus 30%
For senior citizens (men or women who are 65 years or more at any time during the Previous Year): Income Up to 240,000 240,001 - 300,000 300,001 - 500,000 Above 500,000 Income of Business in India: The corporate tax rate is 32.445%. Domestic companies are taxed at a rate of 30%, however profits from life insurance business in India are taxed at a rate of 12.5%. Foreign companies are taxed at a rate of 40%. A minimum alternate tax (MAT) is levied at 18.5% of the adjusted profits of companies where the tax payable is less than 18.5% of their book profits. Dividend distribution tax (DDT) is levied at 15% on dividends distributed by a domestic company. Surcharge and education cess is applicable on the above taxes. A 5% surcharge in case of domestic companies and a 2% surcharge in case of foreign companies is applicable if the total income is in excess of INR 10 million. Education cess of 3% is applicable on income tax plus surcharge, if any. Wealth tax is imposed at a rate of 1% on the value of specified assets held by the taxpayer in excess of the basic exemption of INR 3 million. Securities transaction tax (STT)
Tax Rates Nil 10% Rs 6,000 plus 20% Rs 46,000 plus 30%
is levied on the value of taxable securities transactions in equity shares and units of equity oriented funds. Income of Property in India: Income from House property is calculated by considering the Annual Value. The annual value (for a let out property) will be maximum of the following: HRA Rent received Municipal Valuation Fair Rent (as determined by the I-T department)
However if a house is not let out and not self-occupied, then annual value is assumed to have accrued to the owner. In case of a self occupied house, annual value is to be taken as NIL. But if there is more than one self occupied house then the annual value of the other house/s is taxable. From this, Municipal Tax paid is deducted to arrive at the Net Annual Value. From this Net Annual Value, the following are deducted: 30% of Net value as repair cost - mandatory deduction Interest paid or payable on a housing loan for the house
Association of Persons in India: Tax Deducted at Source in India: Lets have a look at some of the income that is subjected to tax deduction at source (TDS). Income through the salary Interest rate generated from nay mode Rental charges Insurance commission Prize money from betting, lotteries and horse races Commission on sale of lottery ticket Income generated from the foreign countries Fees for professional and technical services
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Latest TDS (tax deducted at source) rate S.No Payment Source Threshold in Rupees Co-operative HUF (rate in society/Local %) authority/company firm (rate in %) 30 30 30 30 10 10 10 10 10 10 10 10 10 10 1 1 2 2 2 2 10 20 10 20 15 10 -
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Winning from lotteries Winning from horse races Commission on insurance Rent or property Interest from bank Commission/brokerage Professional fees Scrap Toll plaza Mining /quarrying Interest on debenture and securities Withdrawal from NSS Payment to nonresident sportsmen Income from ling term capital gain Income by way of short term capital gain Fees for technical services payable by Government or an Indian concern in Pursuance of an agreement made by nonResident with the government
10000 5000 20000 180000 10000 5000 30000 2500 -
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Tax Rates in United Kingdom

Rates of Taxation: Income Tax Band 0 to 2,710 Starting rate for savings 0 to 34,370 Basic rate 34,371 to 150,000 Higher rate Over 150,000 Additional rate Income Tax rate on non savings income Not available 20% 40% 50% Income Tax rate on savings 10% 20% 40% 50% Income Tax rate on dividends Not applicable - see basic rate band 10% 32.5% 42.5%
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Income Tax Offences and Penalties in India
Section 221(1)
Nature of Default Failure to pay tax; i.e., nonpayment of tax required by notice u/s. 156. Non-compliance with notice u/s. 142(1) to file returns or to produce documents required by assessing officer or u/s. 143(2) to produce evidence on which assessee relies or u/s. 142(2A) to get accounts audited. Concealment of the particulars of income, or furnishing inaccurate particulars thereof. Failure to maintain books or documents u/s. 44AA. Failure to keep and maintain information and documents u/s. 92D. Failure to get accounts audited and furnish Tax Audit Report as required u/s. 44AB.
Basis of Charge --
Quantum of penalty Amount of tax in arrears Rs. 10,000
271(1)(b)
--
271(1)(c)
Tax sought to be evaded -International transaction Total Sales, Turnover, or Gross Receipts
271A 271AA
100 % to 300 % of tax sought to be evaded Rs. 25,000 2% of International transaction 0.5% of total sales, turnover or gross receipts, or Rs. 1,00,000 whichever is less Rs. 1,00,000 Equal to the amount failed to be deducted
271B
271BA 271C
271D
271E
271F
Failure to furnish a report as required u/s. 92E. Failure to deduct the whole or part of the tax as required by or under Chapter XVII-B (Ss. 192 to 196D) or failure to pay the whole or part of tax u/s. 115-O. Contravention of the provisions of S. 269SS; i.e., by taking or accepting any loan or deposit otherwise than by ways specified therein. Contravention of S. 269T; i.e. repayment of any deposit otherwise than by modes specified therein. Failure to furnish Return of
-Tax failed to be deducted
Amount of loan or deposit so taken or accepted Amount of deposit so repaid --
Equal to the amount of loan or deposit so taken or accepted Equal to the amount of deposit so repaid Rs. 5,000
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Failure to furnish Return of Income under proviso to sub-section (1) of S. 139 by the due date. 271G 272A(1)
Income under sub-section (1) of S. 139 before the end of the relevant Assessment Year. --
Rs. 5,000
272A(2)
272AA(1)
272B 272BB(1) 272BBB
Failure to furnish information or document u/s. 92D (3). Failure to answer questions, sign statements, attend summons u/s. 131(1), apply for permanent account number u/s. 139A. Failure to: Comply with notice u/s. 94(6) furnishing information regarding securities Give notice of discontinuance of business - S. 176(3) Furnish in due time returns, statements, or particulars u/s. 133, 206 or 285B Allow inspection of any register(s) - S. 134 Furnish returns u/s. 139(4A) Deliver in due time a declaration mentioned in S. 197A Furnish a certificate u/s. 203. Deduct and pay tax u/s. 226(2) Furnish returns/ statements/ certificate u/s. 206C Furnish a statement of particulars of perquisites and profits in lieu of salary u/s. 192(2C) Failure to furnish the prescribed information required u/s. 133B (Refer to Form No. 45D). Failure to apply for Permanent Account Number (PAN) Failure to apply for Tax Deduction Account No. (TAN) (S. 203A) Failure to apply for Tax Collection Account No. (TCN)
International transaction --
2 % of such default. Rs. 10,000
Rs. 100 for every day during which the failure continues.
--
Rs. 1,000
----
Rs. 10,000 Rs. 10,000 Rs. 10,000
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Income Tax Offences and Penalties in UK
Tax return
HM Revenue & Customs (HMRC) will contact you, usually in April, if they think you need to fill in a tax return. You'll receive a letter which explains when you'll need to send your tax return back. If you've previously sent your return on paper, you'll receive a paper tax return. If HMRC hasn't contacted you, but you think you may need to complete a tax return, follow the link below to check. If HMRC asks you to complete a tax return but you think you don't need to, let HMRC know. It's important to do this as soon as possible. If you don't you may have to pay a penalty.
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Penalties if you miss the tax return deadline

If you miss the deadline, the longer you delay, the more you'll have to pay. So it's important to send your tax return to HMRC as soon as you can. The table below shows the penalties you'll have to pay if your tax return is late. If a Partnership tax return is late, each partner will have to pay the penalties shown below. Penalties for missing the tax return deadline Length of delay 1 day late Penalty you will have to pay A penalty of 100. This applies even if you have no tax to pay or have paid the tax you owe. 10 for each following day - up to a 90 day maximum of 900. This is as well as the fixed penalty above. 300 or 5% of the tax due, whichever is the higher. This is as well as the penalties above. 300 or 5% of the tax due, whichever is the higher. In serious cases you may be asked to pay up to 100% of the tax due instead. These are as well as the penalties above.
3 months late
6 months late
12 months late
Receiving a tax estimate if your return is late

If you don't send your return by the deadline HMRC may estimate the tax you owe. You will have to pay this and also pay interest on any tax that you pay late. You can only change this estimate by sending your tax return. You will also have to pay any penalties due for missing the HMRC will usually send you a 'Self Assessment Statement' that shows how much you owe. If you don't receive this, you'll need to work out the tax due yourself. You can use your tax calculation and previous statements or log in to HMRC Online Services and use the 'View Account' option.
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If you don't pay the tax you owe for the previous tax year on time, the longer you delay, the more you'll have to pay. So it's important to pay the tax as soon as you can.
Penalties for paying late Length of delay Thirty days late Six months late Penalty you will have to pay 5% of the tax you owe at that date 5% of the tax you owe at that date. This is as well as the 5% above. 5% of the tax unpaid at that date. This as well as the two 5% penalties above
Twelve months late
The penalties above do not apply to any payments on account that you pay late. Interest charges if you pay late You will have to pay interest on anything you owe and haven't paid, including any unpaid penalties, until HMRC receives your payment. You may think you have a reasonable excuse for paying your tax late. You can find out more about reasonable excuses in the 'How to appeal' article (see link below). You dont need to wait until you get a penalty, you should let HMRC know as soon as you can.
Late return and payment penalties before 6 April 2011 In some cases, you may have to pay a penalty under the 'old rules' that applied before 6 April 2011. For example if HMRC asked you to fill in a 2009-10 tax return and you still haven't sent it back.
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Conclusion & Recommendations
The reports said that Malaysia, India, Thailand, Turkey, and Sweden saw rapid growth and rising tax ratios, while in Pakistan tax collection rose just in line with the economic growth. In Asian Pacific countries, the tax collection ratio increased from 13.8 percent in 2000 to 16.5 percent in 2004, while in Pakistan it remained roughly constant as a percent of GDP since the early 2000. The simple average of the tax-to-GDP ratio in Bangladesh, India, and Sri Lanka countries with similar tax policies and administration is systematically higher than Pakistan, the report said adding that this gap increased during the present decade. The report said that Pakistan needs to look thoroughly at the available reform options, pursuing twin-track reforms of tax policy and administration, which would help the government to meet its medium-term revenue collection targets. Different studies conducted on Pakistan taxation system highlight that Pakistan has the potential to achieve the objective of increasing the tax to GDP ratio by 13-15 percent over the next five years. Agriculture Income should be taxed because a lot of revenue has been generated from agriculture land. All the developed countries like UK, USA and Canada have brought agricultural income under tax net and even India is far ahead than Pakistan in this regard. Agriculture is the back bone of economy of Pakistan contributing almost 22% to GDP but its share in tax is only 1% (The Economic survey of Pakistan, 2010). Punishments and penalties should be stick so that every Pakistani should Pay Tax. Corruption in FBR must be finished. As in UK, Govt of Pakistan should pay special attention on poor or unemployed persons. Govt should reduce their expenditures and pay special attention to the welfare activities.
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Our Special Research & Recommendations Regarding Agriculture Income
Our research syndicate recommends a stepwise levying of agricultural income tax in the following steps, in all these steps or mode the taxes that are already being paid will in the form of land revenue or Abiana will be treated as tax credit;
1-RATE PURPOSE In the first stage we can use agricultural income for rate purpose and proportionate relief will be given for agricultural income; In case of agricultural and income from other sources, agricultural income will be clubbed with the income from other heads of income and tax will be calculated. Proportionate relief and tax credits will be granted and total payable tax will be determined. In case where there is only agricultural income, the income from other heads of income will be taken as zero and proportionate relief will be given 80% of the entitled relief.
2. WITH HOLDING TAX The second stage for the taxation of agriculture can be with holding on the total consideration received for the sale of agricultural produce. The rate of this tax can be 3.5%.
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3. HEAD OF INCOME In the final stage agricultural income can be treated as a separate head and all the expenditures incurred on deriving income can be admitted as expense. For example agricultural inputs like seeds, fertilizer, medicines and labor involved. The expenses allowed can be the lesser of: Actual expenses occurred 50% of the total considerations received for agricultural produce.
The time frame to meet all the three stages can be decided by the agricultural taxation committee.
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References
http://indiantaxguide.wordpress.com/2009/05/08/agricultural-income/
http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/BeginnersGuideToTax/IncomeTax/Introduct iontoIncomeTax/DG_078825 http://www.hmrc.gov.uk/about/new-penalties/failure-to-notify.pdf
http://www.forexpk.com/highlights/todays-pick/agriculture-income-tax-the-reality.html
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Project Topic: Income Tax Systems in Pakistan, India & UK

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Project Topic: Income Tax Systems in Pakistan, India & UK

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Income Tax Systems in Pakistan, India & UK

Over View of this Report

Income Tax Project [Sec-C]

TAXATION SYSTEM IN INDIA

Income Tax Project [Sec-C]

Income Tax in India

Income Tax Project [Sec-C]

Indian Tax Year

Resident but not Ordinarily Resident

Income Tax Project [Sec-C]

Personal Income Tax Rates

Indian Income Taxable Taxable Taxable

Foreign Income Taxable Not taxable Not taxable

Income Tax Project [Sec-C]

Individual Heads of Income Income from Salary

Income from House property

Income Tax Project [Sec-C]

Income from Business or Profession

Income Tax Project [Sec-C]

Corporate Tax in India

Corporate sector tax

Income Tax Project [Sec-C]

Tax Rebates for Corporate Tax

Income Tax Project [Sec-C]

India Reporting Dates and Payment

India Deduction of Tax at Source

India Other deductions

Income Tax Project [Sec-C]

Income Tax Project [Sec-C]

Agricultural Income in India

Income Tax Project [Sec-C]

Certain income which is treated as Agriculture Income;

Certain income which is not treated as Agricultural Income;

Income Tax Project [Sec-C]

Certain points to be remembered;

Income Tax Project [Sec-C]

AGRICULTURAL INCOME TAX in PAKISTAN

Income Tax Project [Sec-C]

Most of the Pakistanis are not willing to pay taxes because

Income Tax Project [Sec-C]

Agriculture Income in Pakistan

Taxation in the United Kingdom (UK)

Income Tax Project [Sec-C]

Income Tax Schedules in UK

The schedules were:

Income Tax Project [Sec-C]

Income Tax Project [Sec-C]

applies only if total income falls in

20% 40% 60% 40%

20% 40% 60% 40%

8,106 - 34,370[15] 34,371 - 100,000 100,001 - 114,890 114,891 - 150,000

Higher rate 32.5% (Lower Band) Regressive rate 56.25%

Higher rate 32.5% (Upper Band) Additional rate 42.5%

50%(45% from 50%(45% from Aprover 150,000 Apr-2013) 2013)

Income Tax Project [Sec-C]

Income Tax Project [Sec-C]

Deduction of Tax at Source in U.K.

Social Security in U.K.