THE PROFESSIONALS ACADEMY OF COMMERCE

1st TERM EXAM

TAXATION MODULE : C (Marks: 66) (TIME : 2 HOURS)

Q.1

Mr. Ali-ud-Din is working as a Senior Manager in DD Pvt. Limited. The details of his income/receipts during the tax year 2010 are as follows: y y y y He received basic salary of Rs. 50,000 per month. He was provided with furnished accommodation for which DD Pvt. Limited paid a rent of Rs. 25,000 per month. Medical allowance of Rs.100,000 was paid to him during the year. Bonus for the year Rs.100,000

In addition to the above, he was provided with a Honda Civic car, exclusively for official use. The cost of car to the Company was Rs.1,000,000. As per Companys policy, the car was sold to Mr. Ali-ud-Din in June 30, 2010 at the written down value of Rs.150,000 whereas the fair market value of the same at the time of sale was Rs. 200,000. On June 30, 2010 he retired and got golden handshake amounting Rs. 2,000,000. Where the average rate of tax for last three tax years is 11%. Required: Compute his tax liability. Q.2 Mr. Shehzad acquired 1000 shares each of Rs. 25 on the date of issuance of share i.e. July 1, 2009 under the employee share scheme on which there was restriction not to transfer shares within 6 months of issuance of shares. He disposed of 600 shares at Rs. 40 per share in the month of October. FMV on January 1, 2010 is Rs. 35 per share. Required: Compute his taxable income if his basic salary is Rs. 600,000. Q.3 Umer is carrying out a business of trade by the name of Umer Traders. The firm disclosed net profit of Rs. 500,000 for the year ended June 30, 2010 after accounting for the following items: (i) He paid rent Rs 160,000 on which he has not deducted tax. (ii) i. Utility bills Rs 60,000. (iii) ii. Salary paid in cash to an employee Rs 14,000. (iv) iii. Entertainment expenses on refreshment of employees Rs 30,000. (v) A printer purchased and its cost is treated as expense Rs 10,000. You are required to compute his business income under the provisions of Income Tax Ordinance, 2001. Q.4 (a) What are the situations in which payment to an employee in respect of gratuity will not be exempt from tax while computing salary income?

(14)

(08)

(08)

(06)

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(b) Briefly explain the taxability or exemption of the following allowances or perquisites: (i) (ii) (iii) Q.5 (a) Free passage provided by a transporter to its employees; Leased motor vehicle provided to an employee, exclusively for his personal use. Running and maintenance cost and drivers salary is also borne by the employer. Medical allowance paid at 10 percent of basic salary.

(06)

Mr. Khaleel has rented out his house to an AOP in the month of July. Compute his tax liability for the tax year 2010 from the following information: Monthly rent Non adjustable advance received Property tax Charges on registering the contract and other legal charges Rs.20,000 Rs.500,000 Rs.8,000 Rs.1,000

(04)

(b) Define Rent and specify under which head of income, following amounts of rent would be chargeable to tax: (i) (ii) (iii) (iv) Q.6 (a) Rent in respect of lease of a building together with plant and machinery. Amount included in the rent of a building for the provision of amenities, utilities or any other service connected with the renting of such building. Rent in respect of sub letting of a building by the tenant. Rent not in respect of land or building.

(06) (06) (05)

What is meant by speculation business under the provisions of Income Tax Ordinance, 2001.

(b) Explain the provisions of section 29 with regard to the recovery of bad debts in subsequent years. (c) Describe the expenses which are allowable as a deduction on account of employees training and facilities?

(03)

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Tax Rates
Salaried Tax Payer
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. Where the taxable income does not exceed Rs. 180,000, Where the taxable income exceeds Rs. 180,000 but does not exceed Rs. 250,000, Where the taxable income exceeds Rs. 250,000 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. 450,000, Where the taxable income exceeds Rs. 450,000 but does not exceed Rs. 550,000, Where the taxable income exceeds Rs. 550,000 but does not exceed Rs. 650,000, Where the taxable income exceeds Rs. 650,000 but does not exceed Rs. 750,000, Where the taxable income exceeds Rs. 750,000 but does not exceed Rs. 900,000, Where the taxable income exceeds Rs. 900,000 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. 1,450,000, Where the taxable income exceeds Rs. 1,450,000 but does not exceed Rs. 1,700,000, Where the taxable income exceeds Rs. 1,700,000 but does not exceed Rs. 1,950,000, Where the taxable income exceeds Rs. 1,950,000 but does not exceed Rs. 2,250,000, Where the taxable income exceeds Rs. 2,250,000 but does not exceed Rs. 2,850,000, Where the taxable income exceeds Rs. 2,850,000 but does not exceed Rs. 3,550,000, Where the taxable income exceeds Rs. 3,550,000 but does not exceed Rs. 4,550,000, Where the taxable income exceeds Rs. 4,550,000 but does not exceed Rs. 8,650,000, Where the taxable income exceeds Rs. 8,650,000. 0% 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%

1. 2. 3. 4. 5.

20% of the amount by which the total income exceeds the said limit where the total income does not exceed Rs.500,000. 30% of the amount by which the total income exceeds in each slab but total income does not exceed Rs.1,050,000. 40% of the amount by which the total income exceeds in each slab but total income does not exceed Rs.2,000,000. 50% of the amount by which the total income exceeds in each slab but total income does not exceed Rs.4,450,000. 60% of the amount by which the total income exceeds in each slab but the total income exceeds Rs.4,450,000.

Tax on property Income

Gross amount of rent Not exceeding Rs. 150,00 Exceeding 150,000 but no exceeding 400,000 Exceeding 400,000 but not exceeding 1,000,000 Exceeding Rs. 1,000,000 Rate of Tax -5% of the gross amount exceeding 150,000 Rs. 12,500 plus 7.5% of gross amount exceeding 400,000 57,500 plus 10% of the gross amount exceeding 1,000,000

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