07-15-2011, 04:04 PM
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by Star</i>
<br />I have only dividend income & profit on bank deposit other than this profit on debt. You know tax deducted on dividend & profit on bank deposit is final when reciepent is an individual.
Third source of income is the profit on debt. If income tax is not deducted by foreign company then it will be treated my "income from other sources" and applicable slab comes as 15%.
As i said my ealier thread, if tax is deducted & deposited in foreign country it will be 10%. In this case profit on debt received (net of tax) will not be taxed in Pakistan. Am I right?
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<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
I think I could not explain it properly. I try to elaborate it with example. You understand that credit is given after tax liability calculation. So first we calculate your tax liability.
Assume that your foreing source profit on debt income is Rs.100 and slab applicable to it is 15%
So in Pakistan your TAX LIABILITY will be Rs.15
Now if foreign tax at source @10% i.e Rs.10 has been paid then you are entitled to foreign tax credit. Entitlement to foreign tax credit means that the amount of tax credit shall be deducted from your tax liability i.e. Rs.15.
Now the question is how to work out amount of foreign tax crdit. S.103 guides us in this regard. It says that foreign tax credit will be equal to
i tax actually paid in foreign country (Rs.10) or
ii. tax payable in Pakistan (Rs.15)
WHICHEVER IS LESS
It is clear that lesser amount is Rs.10.
So from your tax liability of Rs.15 you may deduct Rs.10 as foreign tax credit and remaining you have to pay.
So in aggregate you have to pay Rs.15 in any case.
I hope I would have been succeeded in communicating my point of view.
<br />I have only dividend income & profit on bank deposit other than this profit on debt. You know tax deducted on dividend & profit on bank deposit is final when reciepent is an individual.
Third source of income is the profit on debt. If income tax is not deducted by foreign company then it will be treated my "income from other sources" and applicable slab comes as 15%.
As i said my ealier thread, if tax is deducted & deposited in foreign country it will be 10%. In this case profit on debt received (net of tax) will not be taxed in Pakistan. Am I right?
*
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
I think I could not explain it properly. I try to elaborate it with example. You understand that credit is given after tax liability calculation. So first we calculate your tax liability.
Assume that your foreing source profit on debt income is Rs.100 and slab applicable to it is 15%
So in Pakistan your TAX LIABILITY will be Rs.15
Now if foreign tax at source @10% i.e Rs.10 has been paid then you are entitled to foreign tax credit. Entitlement to foreign tax credit means that the amount of tax credit shall be deducted from your tax liability i.e. Rs.15.
Now the question is how to work out amount of foreign tax crdit. S.103 guides us in this regard. It says that foreign tax credit will be equal to
i tax actually paid in foreign country (Rs.10) or
ii. tax payable in Pakistan (Rs.15)
WHICHEVER IS LESS
It is clear that lesser amount is Rs.10.
So from your tax liability of Rs.15 you may deduct Rs.10 as foreign tax credit and remaining you have to pay.
So in aggregate you have to pay Rs.15 in any case.
I hope I would have been succeeded in communicating my point of view.
