NUZHAT NAZAR

& SOHAIL SARFRAZ

ISLAMABAD: Pakistani artists including singers, players and others are liable to declare all foreign income/earnings in their income tax returns filed in Pakistan.

There have been an increasing number of Pakistani artists working in Indian film industry as actors and singers but are not declaring income earned in India in their income tax returns, informed sources in FBR told Business Recorder.

All those earning income abroad are bound to declare their income in Pakistan. Any Pakistani who has stayed in Pakistan for over 180 days is a ‘resident person’ under the law and his world income would be assessed in Pakistan.

The taxation or assessment of income in Pakistan is done on the basis of resident and non-resident status of individuals. The resident Pakistani has been defined in section 81 of the Income Tax Ordinance 2001, sources said.

If any Pakistani has paid tax in the country where he earned income, he can claim tax credit in Pakistan. If a singer has earned income in India and paid tax to the Indian Tax authorities, the FBR can give tax benefit to him. The amount of tax paid aboard would be minus the actual tax liability worked out in his income tax return. The process of claiming tax credit has been explained in the Income Tax Ordinance 2001. The non-declaration of income earned aboard in the returns would be treated as concealment under income tax law.

It is basic principal of income tax law that a resident Pakistani has to declare all his income or total income earned which would be chargeable to tax. There are a lot of other provisions of Income Tax Ordinance 2001 which deals with partial exemption, full exemption, reduced rates of taxes, admissible expenses or Avoidance of Double Taxation Treaties etc. These provisions may reduce the income tax liability of income earned by a resident individual or Association of Persons (AOP).

Recently, it was reported that the tax department had issued a notice to famous singer Rahat Fateh Ali Khan on his alleged concealment of foreign income/earnings in his income tax returns. The concerned Regional Tax Office (RTO) has sought an explanation from the singer as to why he has not declared his foreign income in his income tax returns.