Foreign Income Tax credit

[Information Consultant]

Dear Friend
Pls confirm the following working is correct or it require correction.


c) Example
Mr. As income for the tax year 2008 is as under
Pakistan source income
Taxable salary 800,000

Tax deducted from salary 60,000

Taxable capital gain 200,000

Foreign source business income not exempt under tax treaty 300,000

Foreign tax paid in the foreign country @ 10% 30,000

Solution
Taxable salary 800,000

Taxable capital gain 200,000

Foreign source income 300,000

Taxable income 1,300,000

Tax liability (salaried case)

Income tax on 1,300,000 @ 12.5% 162,500

Less Foreign tax credit

a) Pakistan average rate of tax applicable on foreign

source income 162,500/1,300,000 x 300,000 37,500

b) Foreign income tax paid 30,000

Whichever is lower 30,000

Total tax liability 132,500

Less Tax deducted from salary 60,000

Tax payable with return of income 72,500

[student_of_law]

In my opinion your working is in accordance with section 103 of ITO, 2001 and it is correct.

[Information Consultant]

Thanks
Same treatment in case if a business individual ,partner of firm and director of company earned foreign income apart of local income ?