Appendix
Takes Rs.5 million lump sum amount
Option 1:
Scenario 1(A):
Ali stays in Pakistan for the entire tax year. He finishes his book in two months and takes lump sum
amount of Rs.5 million. This amount is paid by his publisher friend who is a resident and has a
publishing house in Pakistan.
In this case Ali is a resident of Pakistan and the royalty is his Pakistan Source income, which will be
taxed at the rate given in Division IIIB, which is 15% at source by the Publisher as per Section 153B
which will be adjustable. He has also finished his book within 24 months which means he has to pay
tax on the full amount. Assuming that he has no other income for the year, royalty income will be
considered as his income from other sources and taxed at the non-salaried rate.
Scenario 1(B):
Ali stays in Pakistan for the entire tax year. He finishes his book in two months and takes lump sum
amount of Rs.5 million. This amount is paid by his publisher friend who is not a resident but has a
publishing house in of Pakistan.
In this case Ali is a resident of Pakistan and the royalty is his Pakistan Source income because the
income is generated by an establishment in Pakistan of a non-resident person as per
Section 101(8)(B). The income will be taxed at the rate given in Division IIIB, which is 15% at source
by the Publisher as per Section 153B which will be adjustable. He has also finished his book within 24
months which means he has to pay tax on the full amount. Assuming that he has no other income
for the year, royalty income will be considered as his income from other sources and taxed at the
non-salaried rate.
Scenario 1(C):
Ali stays in Pakistan for the entire tax year. He finishes his book in two months and takes lump sum
amount of Rs.5 million. This amount is paid by his publisher friend who is a resident but has a
publishing house outside of Pakistan.
In this case Ali is a resident of Pakistan and the royalty is his Foreign Source income because the
income is generated by an establishment outside of Pakistan as per Section 101 (8)(A). The income
will be taxed at the rate given in Division IIIB, which is 15% at source by the Publisher as per Section
153B which will be adjustable. He has also finished his book within 24 months which means he has
to pay tax on the full amount. Assuming that he has no other income for the year, royalty income
will be considered as his income from other sources and taxed at the non-salaried rate.
Scenario 1(D):
Ali stays in Pakistan for the entire tax year. He finishes his book in two months and takes lump sum
amount of Rs.5 million. This amount is paid by his publisher friend who is not a resident and has a
publishing outside of Pakistan.
In this case Ali is a resident of Pakistan and the royalty is his Foreign Source Income because the
income is generated by a non-resident person in an establishment outside of Pakistan as per
Section 101 (8)(A). The income will be taxed at the rate given in Division IIIB, which is 15% at source
by the Publisher as per Section 153B which will be adjustable. He has also finished his book within 24
months which means he has to pay tax on the full amount. Assuming that he has no other income
for the year, royalty income will be considered as his income from other sources and taxed at the
non-salaried rate.
In ALL these scenarios the tax will be same for Ali for Tax Year 2021.
Rs.5 million - Non salaried
4 million
620,000
1 million - 30%
300,000
920,000
Less: 15% * 5 million (750,000)
Tax Payable
170,000 - total tax payable Rs.920,000
Scenario 2(A & B):
Ali stays in Pakistan for the entire tax year. He finishes his book after 1st November 2020 and takes
lump sum amount of Rs.5 million. This amount is paid by his publisher friend who is a resident and
has a publishing house in Pakistan or is a non-resident and has a publishing house in Pakistan.
In this case Ali is a resident of Pakistan and the royalty is his Pakistan Source income, because the
income is generated by a an establishment in Pakistan as per Section 101 (8) which will be taxed at
the rate given in Division IIIB, which is 15% at source by the Publisher as per Section 153B which will
be adjustable. However he has finished his book after 24 months which means he has a choice to
pay royalty on full amount or take it on account of royalties in respect of the work as having been
received in that tax year and the preceding two tax years in equal proportions. Assuming that he has
no other income for the year, royalty income will be considered as his income from other sources
and taxed at the non-salaried rate.
Scenario 2 (C & D):
Ali stays in Pakistan for the entire tax year. He finishes his book after 1st November 2020 and takes
lump sum amount of Rs.5 million. This amount is paid by his publisher friend who is a resident and
has a publishing house outside of Pakistan or is a non-resident and has publishing house outside of
Pakistan.
In this case Ali is a resident of Pakistan and the royalty is his Foreign Source income, because the
income is generated by an establishment outside of Pakistan as per Section 101 (8) which will be
taxed at the rate given in Division IIIB, which is 15% at source by the Publisher as per Section 153B
which will be adjustable. However he has finished his book after 24 months which means he has a
choice to pay royalty on full amount or take it on account of royalties in respect of the work as
having been received in that tax year and the preceding two tax years in equal proportions.
Assuming that he has no other income for the year, royalty income will be considered as his income
from other sources and taxed at the non-salaried rate.
Rs.5 million - Non salaried (Per Year Rs.1.67m)
Tax on1.2 million
70,000
On 0.467 million - 15% 70,000
Year 2021
140,000
Add: Previous Years
280,000
Tax Liability
420,000
Less: 15% * 5 million
(750,000)
Tax Refundable
330,000 - total tax payable Rs.750,000
Option 2:
Scenario 1 (A & B):
Ali leaves for Thailand on 7th July 2020 and comes back on 7th September 2020, he then goes back on
15th November 2020 and returns to Pakistan on 15th March 2020 for the remaining tax year. He
finishes his book before 1st November 2020 and takes lump sum amount of Rs.5 million. This amount
is paid by his publisher friend who is a resident and has a publishing in Pakistan or is a non-resident
and has a publishing house in Pakistan.
Tax Year 2021:
1st July - 7th July 2020: 7 days
7th September – 30th September 2020: 24 days
October 2020: 31 days
1st November – 15th November 2020: 15 days
15th March – 31st March 2021: 16 days
April 2021: 30 days
May 2021:31 days
June 2021: 30 days
Total time spent in Pakistan = 184 days.
In this case Ali is a resident of Pakistan and the royalty is his Pakistan Source income, because the
income is generated by a an establishment in Pakistan as per Section 101 (8) which will be taxed at
the rate given in Division IIIB, which is 15% at source by the Publisher as per Section 153B which will
be adjustable. He has finished his book within 24 months which means he has to pay royalty on full.
Assuming that he has no other income for the year, royalty income will be considered as his income
from other sources and taxed at the non-salaried rate.
Scenario 1 (C & D):
Ali leaves for Thailand on 7th July 2020 and comes back on 7th September 2020, he then goes back on
15th November 2020 and returns to Pakistan on 15th March 2020 for the remaining tax year. He
finishes his book before 1st November 2020 and takes lump sum amount of Rs.5 million. This amount
is paid by his publisher friend who is a resident and has a publishing outside of Pakistan or is a nonresident and has a publishing house outside of Pakistan.
In this case Ali is a resident of Pakistan and the royalty is his Foreign Source income, because the
income is generated by a an establishment outside of Pakistan as per Section 101 (8) which will be
taxed at the rate given in Division IIIB, which is 15% at source by the Publisher as per Section 153B
which will be adjustable. He has finished his book within 24 months which means he has to pay
royalty on full. Assuming that he has no other income for the year, royalty income will be considered
as his income from other sources and taxed at the non-salaried rate.
Tax Payable in Scenario 1: Rs.920,000
Scenario 2 (A & B):
Ali leaves for Thailand on 7th July 2020 and comes back on 7th September 2020, he then goes back on
15th November 2020 and returns to Pakistan on 15th March 2020 for the remaining tax year. He
finishes his book after 1st November 2020 and takes lump sum amount of Rs.5 million. This amount
is paid by his publisher friend who is a resident and has a publishing house in Pakistan.
Tax Year 2021:
1st July - 7th July 2020: 7 days
7th September – 30th September 2020: 24 days
October 2020: 31 days
1st November – 15th November 2020: 15 days
15th March – 31st March 2021: 16 days
April 2021: 30 days
May 2021:31 days
June 2021: 30 days
Total time spent in Pakistan = 184 days.
In this case Ali is a resident of Pakistan and the royalty is his Pakistan Source income, because the
income is generated by a an establishment in Pakistan as per Section 101 (8) which will be taxed at
the rate given in Division IIIB, which is 15% at source by the Publisher as per Section 153B which will
be adjustable. However he has finished his book after 24 months which means he has a choice to
pay royalty on full amount or take it on account of royalties in respect of the work as having been
received in that tax year and the preceding two tax years in equal proportions. Assuming that he has
no other income for the year, royalty income will be considered as his income from other sources
and taxed at the non-salaried rate.
Scenario 2 (C & D):
Ali leaves for Thailand on 7th July 2020 and comes back on 7th September 2020, he then goes back on
15th November 2020 and returns to Pakistan on 15th March 2020 for the remaining tax year. He
finishes his book after 1st November 2020 and takes lump sum amount of Rs.5 million. This amount
is paid by his publisher friend who is a resident and has a publishing outside of Pakistan or is a nonresident and has a publishing house outside of Pakistan.
In this case Ali is a resident of Pakistan and the royalty is his Foreign Source income, because the
income is generated by a an establishment outside of Pakistan as per Section 101 (8) which will be
taxed at the rate given in Division IIIB, which is 15% at source by the Publisher as per Section 153B
which will be adjustable. He has finished his book within 24 months which means he has to pay
royalty on full. Assuming that he has no other income for the year, royalty income will be considered
as his income from other sources and taxed at the non-salaried rate.
Tax Payable: Rs.750,000
Option 3:
(A)
Ali leaves for Thailand on 7th July 2020 and does not come back on 7th September 2020, he then
attends workshop on 15th November 2020 and returns to Pakistan on 15th March 2020 for the
remaining tax year. He finishes his book before 1st November 2020 and takes lump sum amount of
Rs.5 million. This amount is paid by his publisher friend who is a resident and has a publishing in
Pakistan.
Tax Year 2021:
1st July - 7th July 2020: 7 days
15th March – 31st March 2021: 16 days
April 2021: 30 days
May 2021:31 days
June 2021: 30 days
Total time spent in Pakistan = 114 days.
In this case Ali is a non-resident of Pakistan and the royalty is his Pakistan Source income, because
the income is generated by a an establishment in Pakistan as per Section 101 (8) which will be taxed
at the rate given in Division IV, which is 15% at source by the Publisher. He has finished his book
within 24 months which means he has to pay royalty on full. Assuming that he has no other income
for the year, royalty income will be considered as his income from other sources and taxed at the
non-salaried rate.
Tax Payable: 920,000
Double Taxation
(B)
Ali leaves for Thailand on 7th July 2020 and does not come back on 7th September 2020, he then
attends workshop on 15th November 2020 and returns to Pakistan on 15th March 2020 for the
remaining tax year. He finishes his book after 1st November 2020 and takes lump sum amount of
Rs.5 million. This amount is paid by his publisher friend who is a resident and has a publishing in
Pakistan.
Tax Year 2021:
1st July - 7th July 2020: 7 days
15th March – 31st March 2021: 16 days
April 2021: 30 days
May 2021:31 days
June 2021: 30 days
Total time spent in Pakistan = 114 days.
In this case Ali is a non-resident of Pakistan and the royalty is his Pakistan Source income, which
will be taxed at the rate given in Division IV, which is 15% at source by the Publisher. However he has
finished his book after 24 months which means he has a choice to pay royalty on full amount or take
it on account of royalties in respect of the work as having been received in that tax year and the
preceding two tax years in equal proportions. Assuming that he has no other income for the year,
royalty income will be considered as his income from other sources and taxed at the non-salaried
rate.
Tax Payable: Rs.750,000
C)
Ali leaves for Thailand on 7th July 2020 and does not come back on 7th September 2020, he then
attends workshop on 15th November 2020 and returns to Pakistan on 15th March 2020 for the
remaining tax year. He finishes his book after 1st November 2020 and takes lump sum amount of
Rs.5 million. This amount is paid by his publisher friend who is non-resident and has a publishing in
outside of Pakistan or a resident and has a publishing house outside of Pakistan.
Takes full amount in Tax year 2021:
In this case Ali is a non-resident of Pakistan and the royalty is his Foreign Source Income, this
income is not taxable in Pakistan for Tax Year 2021.
Tax is payable in Thailand
Takes royalty in three equal periods:
In this case Ali is a non-resident of Pakistan for 2021 and resident for previous years and the
royalty is his Foreign Source Income. The previous incomes are not taxable in Pakistan at Rs.140,00/year.
Option 4:
(A)
Ali leaves for Thailand on 7th July 2020 and does not come back for the remaining tax year. He
finishes his book before 1st November 2020 and takes lump sum amount of Rs.5 million. This amount
is paid by his publisher friend who is resident and has a publishing in Pakistan or non-resident and
has a publishing house in Pakistan.
In this case Ali is a non-resident of Pakistan and the royalty is his Pakistan Source income, which
will be taxed at the rate given in Division IV, which is 15% at source by the Publisher. He has finished
his book within 24 months which means he to pay royalty on full amount. Assuming that he has no
other income for the year, royalty income will be considered as his income from other sources and
taxed at the non-salaried rate.
Tax Payable: Rs.920,000
Ali leaves for Thailand on 7th July 2020 and does not come back for the remaining tax year. He
finishes his book before 1st November 2020 and takes lump sum amount of Rs.5 million. This amount
is paid by his publisher friend who is resident and has a publishing outside of Pakistan or nonresident and has a publishing house outside of Pakistan.
In this case Ali is a non-resident of Pakistan and the royalty is his Foreign Source income, so it will
not be taxable in Pakistan.
(B)
Ali leaves for Thailand on 7th July 2020 and does not come back for the remaining tax year. He
finishes his book after 1st November 2020 and takes lump sum amount of Rs.5 million. This amount
is paid by his publisher friend who is resident and has a publishing in Pakistan or non-resident and
has a publishing house in Pakistan.
In this case Ali is a non-resident of Pakistan and the royalty is his Pakistan Source income, which
will be taxed at the rate given in Division IV, which is 15% at source by the Publisher. However he has
finished his book after 24 months which means he has a choice to pay royalty on full amount or take
it on account of royalties in respect of the work as having been received in that tax year and the
preceding two tax years in equal proportions. Assuming that he has no other income for the year,
royalty income will be considered as his income from other sources and taxed at the non-salaried
rate
Tax Payable: Rs.750,000
Ali leaves for Thailand on 7th July 2020 and does not come back for the remaining tax year. He
finishes his book after 1st November 2020 and takes lump sum amount of Rs.5 million. This amount
is paid by his publisher friend who is resident and has a publishing outside of Pakistan or nonresident and has a publishing house outside of Pakistan.
In this case Ali is a non-resident of Pakistan and the royalty is his Foreign Source income, so it will
not be taxable in Pakistan.
Option 5:
Ali leaves for Thailand on 7th July 2020 and comes back on 7th September 2020 and remains in
Pakistan for the remaining tax year.
Days in Pakistan: 304 days
Option 6:
Ali leaves for Thailand 15th November 2020 and returns on 15th March 2021 and remains in Pakistan
for the remaining tax year.
Days in Pakistan: 245 days
Resident of Pakistan in both options so will be treated accordingly as done before.
Takes 15% of Gross Sales
Option 1:
Resident of Pakistan and Pakistan Source Income/Foreign Source Income and book is published in
September or Non-Resident of Pakistan and Pakistan Source Income and book is published in
September:
October
1350000
November
750000
December
450000
January
450000
February
450000
March
450000
April
300000
May
300000
June
300000
Taxable Amount 4800000
Tax on 4,000,000
620,000
On 80,000 – 30%
240,000
Tax Liability 860,500
Less: Tax deducted at source- 15% (720,000)
Tax Payable
140,500 - Tax amount is Rs.860,500
Option 2:
Resident of Pakistan and Pakistan Source Income/Foreign Source Income and book is published in
March or Non-Resident of Pakistan and Pakistan Source Income and book is published in March:
April
1350000
May
750000
June
450000
Taxable Amount 2250000
Tax on 2,000,000
250,000
On 250,000 – 20%
30,000
Tax Liability 280,000
Less: Tax deducted at source – 15% (382,500)
Tax Refundable
102,500 - Tax amount is Rs.382,500