ICAP Income Tax Numericals Regards Awais Ali PDF

NUMERICALS
INCOME TAX
ICAP PAST PAPER
QUESTIONS
From September 2004 to March 2020
Regards:Awais Ali
Regards:Awais Ali
NUMERICALS INCOME TAX
NUMERICALS INCOME TAX

ICAP PAST PAPER QUESTIONS
Question-1
Mr. A is the Chief Executive of a multinational private company. Details of his emoluments are as follows:
Rs.
a) Basic salary 4,004,520
b) Bonus 1,980,642
c) Utility allowance 400,452
d) Leave encashment 538,083
e) Other allowance 90,000
f) House rent allowance 1,802,040
Apart from the above he has received Director’s Fee amounting to Rs.52,000
During the year he has sold shares that were acquired through exercise of a `Stock Option’ (being the shares of a UK
company) two years ago. The gain on sale amounts to Rs.4,206,000.
He also owns a property which has been let out on rent. The details of rent received and expenses incurred are as
follows:
(a) Rent Rs.10,000 per month. The property was let out on rent for the whole year.
(b) He has paid property tax amounting to Rs.11,500.
(c) During the year he has paid Rs.6,000 for repairs and maintenance.
During the year the tax withheld at source from salary income is Rs.3,600,000
Required: You required to compute the taxable income and tax liability for the tax year. (17)
(Q.15 September 2004)
Question-2
Mr. “B’’ is the Chief Executive of a Multinational Company. Details of his emoluments are as follows:
Rs.
(a) Basic Salary 8,800,000
(b) Bonus 5,000,000
(c) Utility allowance 880,000
(d) Relocation allowance 200,000
Apart from the above he is provided with the following perquisites / benefits:
(i) A free unfurnished accommodation by the employer with land area of 2100 sq. yds.
(ii) Motor vehicle for both private and official use, cost of acquisition of which was Rs.2,000,000.
(iii) Children education fees for the year Rs.105,000
(iv) House servant salaries for the year Rs.230,000
According to the terms of employment the tax liability of Mr. ``B’’ amounting to Rs. 2,976,000. Tax liability on
other remuneration is borne by himself.
Mr. “B’’ also owns a property which was let out on rent for a part of the year details of income and expenses
incurred are as follows:
(a) Rent Rs.50,000 per month.
(b) The property was let out on rent from December 2011 to June, 2012.
(c) Property tax paid Rs.35,000.
During the year the following information was also provided:
Rs.
(a) Tax deducted from salary income 4,541,250
(b) Tax paid by the employer 2,976,000
Required: You are required to compute the taxable income and tax liability for the tax year 2012. (22)
(Q.15 March 2005)
Question-3
Mr. Imran is a citizen of Pakistan. During the first nine months of the tax year, he worked as financial controller of a
Pakistan based subsidiary of a multinational group. After that he was transferred and employed as Head of Finance
of the UAE based subsidiary of the Group. Mr. Imran’s family stayed in Dubai throughout the year. The detail of
income earned by him during the year is given below:
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Regards:Awais Ali
Numericals Income Tax
From the UAE company

Mr. Imran earned US $ 30,000 during the three-month’s employment in the UAE. No tax is deducted from salary
earned and paid in the UAE.
To relocate Mr. Imran in UAE, the UAE Company incurred one time miscellaneous cost of Rs.100,000 to move the
household items of Mr. Imran from Pakistan to Dubai.
From Pakistan subsidiary
a) Basic salary Rs.500,000 p.m.
b) Medical allowance Rs.45,000 p.m. (no free medical or hospitalization facility is given to Mr. Imran under the
terms of employment).
c) The company has provided Mr. Imran a TV and VCR costing Rs.40,000 on which the company charges
depreciation @ 20% in its books of accounts.
d) Company has provided interest free loan to Mr. Imran amounting to Rs.5 million which remained outstanding
throughout his employment with the company (Pakistan subsidiary).
e) His family’s housing cost in Dubai, borne by the company amounts to Rs.30,000 p.m.
f) Mr. Imran’s travelling and related cost borne by the Pakistan subsidiary to meet his family, amounts to
Rs.30,000 p.m.
g) During the employment with the Pakistan subsidiary, Mr. Imran had exercised option to acquire 300 shares of
the parent company @ US $ 8 per share. At the time when the option was exercised, the value of the
share was US $ 10 (Rs.580) per share. Furthermore, during the year Mr. Imran sold 200 options previously
received by him at a price of US $ 3 per option (Rs.171) after holding it for more than a year. Neither the
Pakistan subsidiary nor Mr. Imran incurred any cost in this regard.
Required: Compute the taxable income of Mr. Imran for the tax year 2012 based on the data provided above.(16)
Question-4
Ms. Fatima Hassan was working as a Marketing Head with Consumer Products Ltd (CPL) at following emoluments:
(i) Basic Salary Rs.100,000 per month
(ii) House rent allowance Rs.40,000 per month
(iii) Utilities allowance Rs.15,000 per month
In addition to the above cash emoluments, she 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 company’s policy, the car was sold to Fatima in January
2012 at the WDV of Rs.100,000 whereas the FMV of the same at the time of sale was Rs.300,000.
In May 2012, Ms. Fatima Hassan was approached by Pharma Industries (Pvt.) Ltd (PIL). They offered her
employment at a higher salary and some extra benefits, along with a one time payment of Rs.200,000 as an
inducement to accept their offer. Fatima accepted PIL’s offer by resigning from CPL w.e.f. June 1, 2012. She joined
PIL from July 1, 2012. The amount of Rs. 200,000 was, however paid to her on June 29, 2012.
During the year, Ms. Fatima Hassan has also undertaken the following transactions:
(i) Shares in Queens Pakistan (Pvt.) Ltd were sold for Rs.500,000. These shares were acquired in the year
2006 at a cost of Rs.200,000.
(ii) A residential plot inherited in the year 2001 was sold for Rs.1,000,000. The FMV of the plot at the time of
inheritance was Rs. 200,000.
(iii) A painting purchased at a cost of Rs.100,000 was sold for Rs.75,000.
(iv) An amount of Rs.50,000 was donated to an approved charitable institution.
Required: In the light of above information, compute the taxable income of Ms. Fatima for tax year 2012 by giving
brief explanation for the items not included in the taxable income. (15)
(Q.1 March 2006)
Question-5
Mr. Dollar has been working as a senior engineer in a local company. The detail of his monthly emoluments is as
under:
Rs.
Basic salary 100,000
Medical allowance 15,000
Utilities allowance 10,000
In addition to the above cash emoluments, he is entitled to the following perquisites:
(i) A car for his personal and official use, having cost of Rs.700,000 to the employer.
(ii) Rent free accommodation having monthly rent of Rs.20,000 or cash in lieu thereof. However he has opted
to take rent free accommodation.
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Regards:Awais Ali
(iii) Special allowance of Rs.15,000 to meet traveling, boarding and lodging expenses to be incurred by him in
the normal course of his employment duties.
Required: Compute the tax to be deducted each month, from his salary for tax year. (10)
(Q.2 (b) September 2006)
Question-6
Mr. Ayub, after retirement from a multinational company as a senior executive, was rehired on contract for a period
of three years. However, due to certain reasons, the contract was prematurely terminated six months earlier i.e. on
31.12.2011.
The details of emoluments received by him during TY 2012 are given below:
Rs.
Basic salary (per month) 70,500
Rent of furnished accommodation (per month) 30,000
Utilities allowance (per month) 12,000
Medical benefits reimbursed during the year 25,000
House rent was paid by the company directly to the landlord. Medical benefits were reimbursed against bills
submitted by Mr. Ayub.
On his retirement as a permanent employee, he had been paid gratuity from the approved fund. According to the
rules of the fund, he was also entitled to a special gratuity in lieu of his services rendered under the contract.
Accordingly, an amount of Rs.120,000 was also paid out of the fund, on termination of the contract.
In lieu of premature termination, the following additional benefits were allowed to Mr. Ayub:
(i) A compensation for early termination of Rs.150,000 was paid.
(ii) Mr. Ayub had obtained an interest free loan of Rs.200,000 on July 1, 2011 which was payable in lump sum
on March 31, 2012. 25% of the outstanding balance was waived and remaining amount of loan was
deducted from his final settlement.
(iii) He was allowed to retain a 1600cc car which was in his use at accounting book value of the car was
Rs.650,000. The FMV of the car at the time of settlement was Rs.700,000.
Required: Compute the taxable income and tax liability for TY 2012. (14)
Question-7
Mr. Ali Raza is working as a senior Executive in DD Pakistan Ltd. The detail of his income / receipts during the
year is as follows:
(i) He received basic salary of Rs.65,000 per month.
(ii) He was provided with furnished accommodation for which DD Pakistan Ltd paid a rent of Rs.25,000 per
month.
(iii) A company owned car was provided to him which was used partly for official and partly for private
purpose. The car was purchased at a cost of Rs.500,000 but had a fair market value of Rs.520,000.
(iv) Medical allowance of Rs.150,000 was paid to him during the year. The actual medical expenses incurred by
him amounted to Rs.40,000.
(v) He earned an income of Rs.45,000 on the sale of jewelery but incurred a loss of Rs.28,000 on sale of an
antique. Holding period of jewellery is less than 1 year.
(vi) An apartment owned by him was rented on July 1, 2007 at a monthly rent of Rs.30,000. He received a non-
adjustable security deposit of Rs.100,000 which was partly used to repay the non-adjustable security
deposit received from the previous tenant in July 2005, amounting to Rs.70,000.
(vii) He incurred the following expenses on the apartment:
Rs.
- Repairs 8,000
- Share of rent to House Building Finance Corporation 15,000
(viii) Provident fund was deducted @ 12% of his basic salary. An equal amount was contributed by the
company.
(ix) Tax deducted by the company amounted to Rs.170,000.
Required: Compute his taxable income, total tax payable and tax payable with the return. (15)
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Regards:Awais Ali
Question-8
Mr. Manto worked as an employee in Berlin Hotel, Germany for a period of five years. During the said period he
did not visit Pakistan for a single day. He returned to Pakistan on July 1, 2008 and immediately joined as a General
Manager in a well-reputed hotel, based in Karachi.
Assume that the details of his income for the tax year 2009 are as follows:
(i) Basic salary (per month) 100,000
(ii) House rent allowance (per month) 30,000
(iii) Medical allowance (per month) 10,000
(iv) Besides medical allowance, he is also entitled to free medical treatment at approved hospital.
(v) He has been provided a company maintained 1600cc car which was used partly for official and partly for
personal purposes. The hotel has leased the car from a bank. The gross lease rentals payable over the period
of lease amount to Rs.2,700,000. The fair market value of the car at the time of lease was Rs.2,000,000.
The total lease rentals paid by the hotel during the year amounted to Rs.800,000.
(vi) He is entitled to lunch at the hotel’s restaurants where the usual charges are Rs.400 per person. He is
entitled to concessional rate of Rs. 40 per day which is deducted from his salary. Assume that there are 300
working days in the year.
(vii) He went for a training course to Islamabad where boarding and lodging cost amounting to Rs.150,000 was
borne by the hotel. He incurred a further expense of Rs.125,000 which was reimbursed by the hotel.
(viii) Provident fund was deducted @ 10% of his basic salary. An equal amount was contributed by the hotel.
Interest credited to his provident fund account amounted to Rs.48,000.
(ix) As per terms of employment agreed with Mr. Manto, tax payable on salary will be borne by the hotel.
(x) During the year, he earned income from other source of Rs. 100,000.
(xi) On July 15, 2008, he received a lump sum amount of Rs.4,000,000 through a normal banking channel as
final settlement from Berlin Hotel.
(xii) On August 1, 2008, he inherited 25,000 shares of a private limited company. The estimated fair market
value of the share, on the date of inheritance, was Rs. 42 per share. He sold all the shares on February 28,
2009 at Rs. 62 per share.
(xiii) He paid Zakat amounting Rs.200,000 to an approved organization, through cross cheque.
Required:
(a) Compute Mr. Manto’s taxable income and tax payable for the tax year 2009.
(b) Briefly explain the treatment of items which are not considered in the above computation. (18)
(Q.1 March 2009)
Question-9
Mr. Zulfiqar, a senior executive of Mirza Petroleum Ltd (MPL), retired on March 31, 2009 after completion of 19
years of dedicated service. The details of Mr. Zulfiqar’s income for TY 2009 are given below:
Income from MPL
(i) Monthly remuneration:
Rs.
Cost of living allowance 25,000
Total monthly salary 395,000
Market value of rent free accommodation provided 120,000
(ii) As per terms of employment, tax liability of Mr. Zulfiqar to the extent of Rs.200,000 is to be borne by
MPL.
(iii) On his retirement, he received gratuity of Rs.2,660,000 from an unrecognized gratuity fund maintained by
MPL.
(iv) He is receiving pension amounting to Rs.50,000 per month from the date of his retirement.
Other Information
(v) He is also receiving pension amounting to Rs.12,000 per month from a multinational company where he
worked from 1975 to 1990.
(vi) A plot inherited in 1998 from his father was sold for Rs.5,000,000. Fair market value of the plot at the time
of inheritance was Rs.1,000,000.
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Regards:Awais Ali
(vii) On January 1, 2009, he rented out one of his residential bungalows to a private school for Rs.100,000 per
month and received advance rent for two years.
(viii) Rs.500,000 were invested in new shares offered by a listed company.
(ix) He paid mark up amounting to Rs.250,000 on a house loan obtained from a scheduled bank.
(x) He incurred a loss of Rs.20,000 on sale of a painting.
Required:
(a) Compute taxable income and tax liability of Mr. Zulfiqar for the TY 2009.
(b) Briefly comment on the items which are not considered in the above computation. (21)
Question-10
Mr. Zameer Ansari is working as a Chief Executive Officer in Wimpy (Private) Limited (WPL). Following are the
details of his income / receipts during the tax year 2010:
(a) His monthly cash remuneration in WPL is as follows:
Rupees
(b) In addition to the above, he was also provided the following benefits in accordance with his terms of
employment:
(i) Medical insurance for hospitalization and surgery, limited to Rs. 1,500,000 per annum.
(ii) Payment of his children’s school fees of Rs. 15,000 per month. The fee is deposited directly into
the school’s bank account.
(iii) Rent free furnished accommodation on 1000 square yards. The accommodation is located within
the municipal limits of Karachi.
(iv) Two company-maintained cars. One of the cars was purchased by WPL for Rs. 3,000,000 and is
exclusively for his business use. The second car was obtained on lease on February 1, 2009 and is
used partly for official and partly for personal purposes. The fair market value of the leased
vehicle at the time of lease was Rs. 1,800,000.
(v) Leave encashment amounting to Rs. 100,000 was paid to Mr. Zameer on July 5, 2010.
(vi) An amount equal to one basic salary was paid by WPL to an approved pension fund.
(c) Mr. Zameer had received 15,000 shares of WPL on December 1, 2006 under an employee share scheme.
He had the option to transfer the shares on or after January 1, 2009. However, he sold all the shares on
April 1, 2010.
Fair value of the shares was as follows:
o Rs. 35 per share on December 1, 2006
o Rs. 42 per share on January 1, 2009
o Rs. 48 per share on April 1, 2010
(d) An apartment owned by Mr. Zameer was rented on July 1, 2009 to Mr. Abdul Ghaffar at a monthly rent of
Rs. 22,000. He received a non-adjustable security deposit of Rs. 150,000 which was partly used to repay
the non-adjustable security deposit amounting to Rs. 90,000 received from the previous tenant in July 2007.
He also incurred Rs. 20,000 on account of repairs to the apartment.
(e) The bank withheld Zakat amounting to Rs. 250,000.
(f) Tax deducted at source from his salary, amounted to Rs. 650,000.
Required:
Compute the taxable income, tax liability and tax payable by Mr. Zameer Ansari for the tax year 2010. (21)
Question-11
Mr. Mateen was employed with Melody Limited (ML) as an event organizer. On June 30, 20X1 he resigned from
his employment without completion of notice period. On July 01, 20X1 he joined another company Rock Star
Limited (RSL) as a senior event organizer. Following information is available relating to his assessment for the tax
year 20X2:
(a) On July 01, 20X1 RSL paid Rs. 280,000 to ML as compensation in lieu of un-served notice period by Mr.
Mateen.
(b) On July 15, 20X1 Mr. Mateen received a gratuity of Rs. 350,000 from an unrecognized gratuity fund
maintained by ML. He also received Rs. 150,000 as leave encashment.
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Regards:Awais Ali
(c) In accordance with the terms of his employment with RSL, Mr. Mateen was provided with the following
emoluments / benefits during the tax year 20X2:
(i) Basic salary of Rs. 245,000 per month and utility allowance of Rs. 21,000 per month.
(ii) A reimbursement of personal medical expenses up to 15 % of the annual basic salary and Rs.
250,000 on account of hospitalization charges of his daughter were made after procuring hospital
bills showing the national tax number of the hospital. These bills were also attested and certified
by RSL.
(iii) For the first two months of his employment, a pick and drop facility was provided to Mr. Mateen
at a monthly rent of Rs. 25,000. On September 01, 20X1 RSL provided a company maintained
1300 cc car which was partly used for private purposes. The cost of the car was Rs. 1,500,000.
(iv) Monthly salary of Rs. 6,000 was paid to Mr. Mateen’s house keeper. Mr. Mateen however,
reimbursed 20% of the house keeper’s salary to RSL.
(v) A special allowance of Rs. 50,000 was paid to meet expenses necessarily to be incurred in the
performance of his official duties. Actual expenditure was Rs. 40,000.
(vi) On January 01, 20X2, he was provided an interest free loan of Rs. 1,500,000. The prescribed
benchmark rate is 10% per annum.
(vii) A commission of Rs. 500,000 was paid for introducing new clients to the company. Withholding
tax was deducted by RSL at the rate of 10% from such payments.
(viii) The tax deducted at source from his salary by RSL for the tax year 20X2 amounted to Rs.
550,000.
(d) Apart from his employment with RSL, Mr. Mateen also organized events for private clients. He received a
total of Rs. 1,000,000 from such clients. However, he incurred an overall loss of Rs. 350,000 on organizing
these events.
(e) On May 31, 20X2 he received Rs. 180,000 from Mr. Ali as consideration for vacating his bungalow.
(f) He also received a share of profit from a business in Malaysia equivalent to Pak. Rs. 535,000. He paid Rs.
130,000 in taxes in Malaysia on such income.
(g) Mr. Mateen acquired 10,000 shares of a listed company from the Privatization Commission of Pakistan at
a price of Rs. 100 per share on May 31, 20X1. He was allowed a tax credit of Rs. 100,000 in tax year 20X1
against this investment. On May 20, 20X2 he sold all the shares for Rs. 1,000,000.
(h) He paid Zakat of Rs. 250,000 to an approved organization, through cross cheque.
Required:
Compute the taxable income, tax liability and tax payable / refundable, if any, by Mr. Mateen for the tax
year 20X2. (20)
(Q.1 March 2011)
Question-12
Mr. Khursheed, a Pakistani national, was employed as the chief financial officer in Zulfiqar Gas
Company (ZGC), since 1992. Following information pertains to his income for the tax year 2018:
(i) Income from ZGC
Khursheed was employed with ZGC up to 31 December 2017. During this period he received the
following emoluments:
 Basic salary of Rs. 400,000 per month, medical allowance of Rs. 75,000 per month and utility allowance
equivalent to 10% of basic salary
 A company-maintained car for official and private use. The car was purchased two years ago at a cost of
Rs. 5 million According to the company's policy; ZGC deducted Rs. 10,000 per month from his salary,
for private use of the car.
On 31 July 2017, Khursheed had undergone a major surgery and incurred an expenditure of Rs.
1,500,000. ZGC reimbursed the entire amount as a special case as it was not covered under the
terms of employment .
Due to poor health, Khursheed opted for early retirement on 31 December 2017 under the company's
voluntary retirement scheme. He received the following benefits on his retirement:
 Rs. 7,500,000 as a golden handshake under the voluntary retirement scheme.
 Rs. 9,100,000 from an unapproved gratuity fund maintained by ZGC.
 Transfer of company's car for Rs. 2,600,000. The amount was deducted from his final settlement. The
fair market value of the car as of 31 December 2017 was Rs. 2,800,000.
The tax deducted at source for the tax year 2018 amounted to Rs. 3,750,000.
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Regards:Awais Ali
(ii) Other Information

 On 1 January 2018, Khursheed commenced business of marketing of horticultural plants and related
items. However, due to intense competition, he had to wind-up this venture on 31 May 2018. During this
period, he had incurred a loss of Rs. 750,000.
 He purchased 5,000 shares for Rs. 500,000 from initial public offering of a new listed company on 1 June
2017. He claimed a tax credit of Rs. 60,000 on such investment, against the tax payable for the tax year
2017. On 15 June 2018, he sold these shares for Rs. 700,000.
 He incurred a loss of Rs. 500,000 on the sale of his shareholdings in a private limited company.
 He sold his personal car at a profit of Rs. 300,000.
 On 1 March 2018, he purchased an apartment for Rs. 5,000,000. 60% of this amount was financed by a
scheduled bank. During the tax year 2018, he paid markup amounting to Rs. 127,500. On 1 April 2018,
he rented out the flat to Mr. Abdul Sattar at a monthly rent of Rs. 25,000 and received advance rent for
eight months.
 His average tax rate for the preceding three years is 5%
Required:
(a) Compute the amount of taxable income, tax liability and tax payable / (refundable), if any, for the tax year
2018. (13)
(b) Briefly comment on the items which are not considered by you in the above computation. (6)
Question-13
Dr. Sona is a leading Eye Specialist. He manages a private clinic. A summary of his receipts and payments for the
latest tax year is as follows:
Receipts Note Rs. Payments Note Rs.
Consultation fees 4,400,000 Rent of clinic 300,000
Income from surgery 3,950,000 Household expenses 1,960,000
Purchase of motor car 640,000
Property income (i) 1,062,000 Surgical equipment 500,000
Other income (ii) 75,000 Salary to assistant 180,000
Clinic running expenses 240,000
Car expenses (iii) 200,000
Donation (iv) 300,000
Notes to the receipts and payments are presented below:

(i) Dr. Sona owns a commercial building which he has rented out. Details of net receipts is as follows:
Rs.
Rent for the year 870,000
Non-adjustable security deposit:
- received from a new tenant 700,000
- paid to old tenant (received three years ago) (500,000)
Property tax on building (8,000)
Net receipts 1,062,000
(ii) The amount was received for writing an article in an international magazine on World Health Day.
(iii) 60% of the motor car expenses were incurred in connection with his personal use.
(iv) Donation was given to a Government medical college for upgrading its library.
(v) Depreciation on motor car and surgical equipment, under the 3 rd Schedule of the Income Tax Ordinance,
2001 is Rs. 96,000 and Rs. 75,000 respectively.
Required:
Compute the taxable income, tax liability and tax payable by Dr. Sona for the latest tax year. Provide appropriate
comments on the items which are not relevant for your computations. (20)
(Q.1 March 2012)
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Regards:Awais Ali
Question-14
Beena Sikandar is a lawyer and owns a law firm under the name Beena & Co. She is also Director Legal Affairs at
Ayesha Foods Limited. Details of her income for the tax year 2012 are as follows:
(A) INCOME FROM BEENA & CO.

Income Statement
Note Rupees
Revenue (i) 8,500,000
Less: Expenses
Salaries (ii) 2,000,000
Gifts and donations (iii) 400,000
Lease charges (iv) 900,000
Professional fee (v) 400,000
Property expenses (vi) 350,000
Travel expenses 150,000
Other expenses (vii) 600,000
Income tax 200,000
5,000,000
Net profit 3,500,000
Notes to the Income Statement

(i) Revenue includes Rs. 750,000 recovered from Rafia in respect of bad debts that had been written
off while calculating the taxable income for the tax year 2010. The amount was receivable against
professional services rendered to Rafia.
(ii) Salary expenses include amounts of Rs. 50,000 and Rs. 75,000 per month paid to Beena and her
brother respectively. Her brother looks after administration and financial matters of the firm.
(iii) Gifts and donations include gifts to clients, gift to her son and donation to approved non-profit
organization amounting to Rs. 100,000, Rs. 50,000 and Rs. 250,000 respectively.
(iv) A vehicle was obtained solely for official purposes on lease, from a bank. The lease commenced
on 1 March 2012. Lease charges include Rs. 500,000 paid as security deposit to the bank.
(v) The professional fee includes an amount of Rs. 150,000 paid to a legal firm for defending a law
suit filed against Beena, in a family court.
(vi) Beena lives in an apartment situated above her office, and two-fifths of the total property expenses
relates to this apartment.
(vii) Other expenses include an amount of Rs. 150,000 paid for Beena’s Golf Club membership which
she exclusively used to promote her business interests. The payment to the club was made in cash.
(B) DIRECTOR’S REMUNERATION FROM AYESHA FOOD LIMITED (AFL)

(i) Beena received monthly remuneration of Rs. 100,000 from AFL.
(ii) During the year, she also received two bonus payments of Rs. 100,000 each. One of the bonus
pertains to tax year 2011. It was announced last year but disbursed to her in the current year.
(iii) Beena has also been provided a vehicle, by AFL, for her personal as well as business use. The car
was acquired by AFL in May 2007 at a cost of Rs. 2,000,000. The fair market value of the car as
at 30 June 2012 was Rs. 1,500,000.
(iv) She received a fee of Rs. 150,000 from AFL for attending the meetings of the Board of Directors
(BOD).
(v) Details of tax deducted by AFL are as follows:
Rupees
From salaries 390,000
From fee received for attending the meetings of BOD 9,000
Required:
Compute the taxable income, tax liability and tax payable by Beena Sikandar for the tax year 2012. Provide
appropriate comments on the items appearing in the notes which are not considered by you in your computations.
(17)
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Regards:Awais Ali
Question-15
On 1 July 2010, Kashmala and Shumaila formed an Association of Persons (AOP) with the objective of providing
information technology support services. They contributed Rs. 1.2 million and Rs. 0.8 million respectively in their
capital accounts and agreed to share profits and losses in the ratio of their capitals.
For the year ended 30 June 2011, business loss and unabsorbed depreciation of Rs. 0.4 million and Rs. 0.3 million
respectively were assessed and carried forward.
During the year ended 30 June 2012, the AOP incurred a net loss of Rs. 0.8 million. The cost for the year was
arrived after adjustment of the following:
(i) Salaries amounting to Rs. 0.5 million and Rs. 0.3 million were paid to Kashmala and Shumaila respectively.
(ii) Accounting depreciation on office assets amounted to Rs. 0.3 million.
AOP is entitled to claim tax depreciation of Rs. 0.25 million in respect of the office assets.
Required:
Calculate the taxable income, net tax payable and unabsorbed losses (including unabsorbed depreciation), if any, to
be carried forward by the AOP for the year ended 30 June 2012. (8)
Question-16
Mr. Creative is working as Director Human Resources at Artistic Technologies Limited (ATL). Following are the
details of his income/receipts during the latest tax year:
(a) Monthly cash remuneration from ATL:
Basic salary Rs. 300,000

Utility allowance 15% of basic salary
Medical allowance 12% of basic salary
(b) In addition to above, he was also provided with the following benefits in accordance with his terms of
employment:
(i) Rent-free furnished accommodation in a bungalow situated on a 500 square yard plot of land. Rent for
a comparable accommodation facility in the vicinity is Rs. 150,000 per month.
(j) An 1800cc company-maintained car. The car was purchased two years ago at a cost of Rs. 1,600,000
and is used both for official and personal purposes.
(c) A house owned by Mr. Creative had been leased-out by him at a monthly rent of Rs. 50,000. The lease expired
on 31 December. Mr. Creative refused to renew the lease in spite of the tenant’s offer to renew the lease after
increasing the rent by 10%. He returned the non-adjustable deposit of Rs. 300,000 to the tenant, which was
received two years ago.
The house was immediately leased to his cousin without any security deposit on a monthly rent of Rs. 48,000.
(d) Five years ago, Mr. Creative had purchased 20,000 shares of Rs. 10 each, of an unlisted public company at the
rate of Rs. 140 per share. After one year of acquisition, he received 8,000 bonus shares from the company
having fair market value of Rs. 142 per share. During the latest tax year, he sold 75% of the bonus shares at a
price of Rs. 145 per share.
(e) During the latest tax year, following investments were made:
Rupees
Approved voluntary pension fund 600,000
Open-end mutual fund 1,100,000
(f) During the latest tax year, he redeemed 4,000 units of an open-end mutual fund at Rs. 58.60 per unit. These
units were purchased three years back at Rs. 50 per unit and Mr. Creative had claimed a tax credit of Rs. 40,000
on this investment.
(g) Donations of Rs. 50,000 were paid to charitable institutions listed in the Second Schedule of the Income Tax
Ordinance, 2001.
(h) Tax deducted at source from his salary was Rs. 737,000.
Required:
Compute the taxable income, tax liability and tax payable for the latest tax year. (20)
(Q.1 March 2013)
10
Regards:Awais Ali
Question-17
Mrs. Aslam was employed with Sahal Limited (SL) as a Marketing Manager. On 30 June 2017 she resigned from
her employment with SL. On 1 July 2017, she joined Hassan Pakistan Limited (HPL), a quoted company, as a
Marketing Director. She has provided you the following information in respect of the tax year 2018:
(i) In July 2017, she received following amounts from SL in final settlement:
 Leave encashment amounting to Rs. 95,000.
 Gratuity of Rs. 500,000 from an unrecognized gratuity fund maintained by SL.
 Reimbursement of Rs.100,000 against a health insurance policy. The insurance claim was lodged by
SL on behalf of Mrs. Aslam in January 2017.
(ii) In accordance with the terms of her employment, income tax related to her salary and benefits is to be
borne by HPL. Her emoluments/benefits during the tax year were as follows:
 Basic salary of Rs. 200,000 per month.
 Medical allowance of Rs. 60,000 per month.
 Rent free accommodation with annual letting value of Rs. 480,000.
 Travelling allowance of Rs. 50,000 per month. 60% of the amount was spent in the performance of
official duties.
 Provident fund @10% of basic salary. An equal amount was contributed by HPL.
(iii) Under an employee share scheme, Mrs. Aslam was awarded 5,000 shares in HPL on 1 January 2018. Under
the scheme she was not allowed to sell the shares up to 31 March 2018. She sold all the shares in HPL on
1 May 2018. Fair value of the shares on the above dates was as follows:
 Rs. 20 per share on 1 January 2018
 Rs. 28 per share on 31 March 2018
 Rs. 32 per share on 1 May 2018
(iv) On 31 December 2017, she received a loan of Rs. 400,000 from HPL. The loan carries a mark-up of 4% per
annum. The prescribed benchmark rate is 10%.
(v) She won the best executive employee award of HPL and received a laptop having a fair market value of
Rs. 150,000.
(vi) An amount of Rs. 355,000 was received from her spouse as support payment, under an agreement to live
apart.
(vii) She paid Rs. 105,000 as zakat under the Zakat and Ushr Ordinance, 1980.
(viii) Donation of Rs. 70,000 was paid to an approved organization.
Required:
Compute the taxable income, tax liability and tax payable for the tax year 2018. (21)
Question-18
Qamar is engaged in the business of manufacturing and repair of electric motors. His accountant has prepared the
following tax computation for the tax year 20X4:
----- Rs. -----
Sale of manufactured motors 45,000
Less: Cost of sales and administrative expenses
(excluding depreciation for the year) (33,000)
Income before depreciation 12,000
Less: Tax depreciation for the year (9,000)
3,000
Less: Brought forward business loss from tax year 20X3
(Total business loss was Rs. 4,000) (3,000)
Taxable Income -
Computation of tax
Tax liability -
11
Regards:Awais Ali
Following expenses are included in the cost of sales and administrative expenses:
Description Rs.
Travelling expenses include travel and hotel expenses of Qamar’s visit to Malaysia for attending a 100
trade fair
Electricity charges paid for Qamar’s residence 150
Damages paid to a distributor for delayed supplies 200
Donations to a non-profit organization 300
Salary paid to Bari who is Qamar’s brother. Advance tax has been deducted from the salary 720
Fine paid to the Ministry of Environment for infringement of environmental and safety laws 200
Unabsorbed depreciation brought forward from previous tax year 500
Qamar is not satisfied with the tax return prepared by his accountant and has requested you to review the return.
Required:
(a) Compute the revised taxable income of Qamar and tax payable by or refundable to him for the tax year
20X4. (11)
(b) Briefly comment on treatment of the above items of expenses in your tax computation. (6)
(Q.1 March 2014)
Question-19
Sultan is working as electronic engineer with Ansari Electrical Company Limited (AECL).
He has provided you with the following information for the tax year ended 30 June 2014:
(a) His monthly cash remuneration in AECL is as follows:
Rupees
Market value of rent free accommodation 75,000

(b) He was also provided the following benefits in accordance with the terms of his employment:
(i) Leave encashment amounting to Rs. 300,000.
(ii) Hospitalization cost is covered by an insurance policy upto the amount of Rs. 1.5 million. The
insurance premium relating to this benefit amounted to Rs. 55,000.
(iii) He is allowed to use his personal car for office use. Reimbursement of car running and
maintenance expenses amounted to Rs. 550,000. 15% of these expenses pertain to personal use.
(c) Rs. 200,000 were received from a private limited company for attending board meetings.
(d) A lump sum amount of Rs. 1.2 million was received as the author of a literary work. Sultan took three years
to complete this literary work.
(e) Sultan is also a part time singer and owns a studio. He sold the premises in which the studio was situated
for Rs. 10 million and shifted his musical instruments to new premises which he purchased for Rs. 35.25
million. He received Rs. 2.5 million from his father in cash as loan to pay for his new studio. The previous
premises was purchased several years ago for Rs. 1.4 million and had a tax written down value of Rs.
600,000 at the time of disposal.
(f) The net income from the studio for tax year 2014 was Rs. 990,000. The expenses include salaries of two
workers at Rs. 15,000 and Rs. 18,000 per month and utility bills amounting to Rs. 110,000. All expenses
were paid in cash.
(g) He won a car, in a competition held by Star Motor Limited for promotion of its sales. The fair market value
of the car was Rs. 850,000.
(h) He gifted 40 fans having a fair market value of Rs. 100,000 to an approved charitable organisation.
(i) An amount of Rs. 500,000 was paid by him as contribution to an approved pension fund.
Required:
Under the provisions of the Income Tax Ordinance, 2001 compute the taxable income and tax thereon for the tax
year 2014. (20)
12
Regards:Awais Ali
Question-20
On 1 July 20X4, Tahir commenced business of manufacturing garments. Income statement of the business for the
year ended 30 June 20X5 is as follows:
Notes Rs. in 000
Sales 49,330
Less: Cost of sales (i) (39,150)
Gross profit 10,180
Less: Administrative and selling expenses (ii) (9,140)
Financial charges (iii) (2,500)
Other charges (iv) (1,358)
(12,998)
Add: Other income 3,875
Profit before taxation 1,057
Notes to the income statement:

(i) On 15 July 20X4, used machinery was imported from China valuing Rs.1,500,000. Depreciation @ 15%
was charged on machinery for the whole year and is included in cost of sales.
(ii) Administrative and selling expenses include:
 Rs.975,000 paid for the purchase of computer software. The software is likely to be used for ten years.
 Cost of preparation of a feasibility study amounting to Rs.250,000 which was issued prior to the
commencement of business.
 Salary of Rs.50,000 per month was paid to Tahir’s brother who handles the financial matters of the
business.
(iii) Financial charges include Rs.80,000 pertaining to a vehicle obtained on lease from a leasing company. The
cost of vehicle was Rs.1,300,000. Depreciation of Rs.260,000 has been included in administrative and
selling expenses. Lease rentals paid during the year amounted to Rs.300,000.
(iv) Other charges include:
 running and maintenance expenses of vehicle amounting to Rs.295,450. Use of vehicle for personal
purposes was approximately 20%.
 provision for bad debts amounting to Rs.25,000.
Other information:
(i) Tahir was working in UAE for the past five years and had come back to Pakistan in April 20X4. He
received an amount equivalent to Rs.150,000 from his ex-employer as differential amount on his final
settlement in August 20X4.
(ii) He sold a plot for Rs.3,500,000 which was inherited from his father in 20X3. Fair market value of the plot
at the time of inheritance was Rs.1,500,000.
(iii) 5,000 shares were purchased for Rs. 600,000 from initial public offering of a new listed company.
(iv) Premium of Rs.300,000 was paid on Tahir’s life insurance policy.
Required:
Under the provisions of the Income Tax Ordinance, 2001 compute the taxable income and tax liability of Tahir for
the tax year 20X5. Provide comments in respect of items which do not appear in your computation. (18)
(Q.1 March 2015)
13
Regards:Awais Ali
Question-21
Mukarram is working as a Commercial Manager in Airmen Engineering Limited (AEL), an unlisted public company,
for the past many years. He derived following emoluments during the tax year ended 30June 20X5:
Rupees
Basic salary (per month) 250,000
Medical allowance(per month) 37,500
Housing allowance(per month) 25,000
Travel allowance(per month) 11,500
In addition to above, Mukarram was also provided the following:
(i) A used company maintained car for both business and personal use. This car was provided to him on
1 July 20X4 in replacement of his previous car. This car was purchased three years ago at a price of
Rs.1,000,000. However, the fair market value of the car on 1 July 20X4 was Rs.800,000. On
1 September 20X4 , in accordance with the terms of his employment, AEL transferred the previous car to
Mukarram free of cost. The market value of the car at the time of transfer was Rs.400,000 where as its book
value was Rs.200,000. On 1 June 20X5, Mukarram sold this car to his neighbor at a price of
Rs. 350,000.
(ii) Performance related bonus of Rs.500,000. The bonus was however, paid to him on 5 July 20X5.
(iii) Two free buffet dinner coupons per month, one each for Mukarram and his wife in a five star hotel. The
coupons were provided in line with AEL’s policy for its management employees. The dinner costs AEL
Rs.2,000 per person.
(iv) Reimbursement of Rs.20,000 in respect of telephone and internet charges. 20% of this amount was spent by
Mukarram in performance of his official duties.
(v) Two air-conditioners and a washing machine for use at home. The combined book value of these appliances
was Rs.300,000. The appliances are returnable to AEL after three years’ time. AEL charged 10% depreciation
on these appliances.
(vi) An option to purchase 20,000 shares in AEL on 1 May 20X5 at Rs.25 per share. The break-up value of AEL
on that date was Rs.85 per share.
Other information relevant to tax year20X5 is as under:

(a) On 1 April 20X5, Mukarram sold a diamond ring to his brother Zohaib for Rs.250,000. The ring was
purchased on 1 January 20X3 at a price of Rs. 280,000.
(b) Mukarram has 65 acres of agricultural land in Badin and a building in immediate vicinity of the land.
Mukarram rented out 30 acres of his land along with the building to Dino who is a cultivator. Dino uses the
building as a store house. Mukarram received annual rents of Rs.750,000 and Rs.325,000 in respect of the
land and building respectively.
Mukarram is also running a small rice husking unit in Badin. He uses entire agricultural produce in the
husking unit which is grown on the remaining portion of his land. During the year he brought 5,000
kilograms of raw rice from his land to the unit for husking. He would have earned Rs.2,500 per
40 kilogram of raw rice had he sold it directly to the market. His sales from rice husking unit stood at Rs.
860,000 where as other operating expenses were of Rs. 10,000.
(c) On 31 May 20X5 a painting was destroyed by heavy rains. Mukarram had purchased the painting on
30 June 20X2 for Rs.100,000. However, due to constant increase in the value of the painting, he had
insured it at a premium of Rs.15,000. He received insurance claim of Rs.275,000 on 15 June 20X5.
Required:
Under the provisions of the Income Tax Ordinance, 2001 and Rules made thereunder, compute the taxable income
of Mukarram for tax year 20X5. (20)
Note: show all relevant exemptions, exclusions and disallowance. (Q.1 September 2015)
14
Regards:Awais Ali
Question -22
Wajahat, aged 48 years, is a marketing manager in Nayaab (Pvt.) Limited (NPL), a company engaged in the
manufacture and supply of tissue papers. The details of his monthly emoluments during the year ended 30 June
20X6 are as under:
Rupees
Basic salary 70,000
Dearness allowance 10,000
Conveyance allowance 8,000
In addition to the above, Wajahat was also provided the following:

(i) Provident fund (PF) contribution of Rs. 8,400 per month. An equal amount per month was contributed by
Wajahat to the fund. Interest income of Rs.391,000 at the rate of 20% of accumulated balance of PF was
credited to his PF account.
(ii) Reimbursement of electricity bills during the year amounting to Rs.60,000.
Following further information is also available:

(i) Wajahat received net dividend of Rs.78,200 from BEE Limited, a company listed on Pakistan Stock
Exchange Limited. Withholding tax and zakat deducted from dividend amounted to Rs.9,200 and Rs.4,600
respectively. He also received dividend of Rs.65,000 from a company in U.A.E through normal banking
channels. However, no tax was withheld either in Pakistan or U.A.E.
(ii) Wajahat contributed Rs.890,000 in an approved pension fund under the Voluntary Pension System Rules,
2005.
(iii) On 1 September 20X5, Wajahat started a tuition centre for the students of finance in a posh locality. He
received tuition fees of Rs.2,198,000 and incurred following expenses:
 Monthly salary of Rs.50,000 paid to himself and Rs.35,000 to his friend Yousuf who taught financial
accounting at the centre.
 Travelling, boarding and lodging expenses of Rs.300,000. These expenses were incurred by Wajahat in
Sri Lanka for attending teachers training workshop.
 Rs. 250,000 against purchase of computers for the centre.
 Other miscellaneous expenses amounting to Rs.195,000.
(iv) Wajahat’s total taxable income during the previous tax year was Rs.1,850,000.
Required:
Under the provisions of the Income Tax Ordinance, 2001 and Rules made thereunder, compute the total income,
taxable income and net tax payable by/refundable to Wajahat during the tax year 20X6.
(16)
Note: Show all relevant exemptions, exclusions and disallowances.
(Q.1, March 2016)
15
Regards:Awais Ali
Question –23
Bader is working as General Manager Finance with HiFi Limited (HFL) for the past two years. The details of his
monthly emoluments during the year ended 30 June 2016 are as under:
Rupees
House rent allowance 120,000
In addition to above, Bader was also provided the following:

(i) Rs. 900,000 for signing a bond with HFL. According to the bond Bader would not resign from his
employment before the expiry of 30 June 2019.
(ii) Company maintained car for both official and private use. The car was purchased on 1 August 2015 at a
fair market value of Rs. 1,500,000.
(iii) On 1 January 2016 HFL sold an item of inventory to Bader for Rs. 12,000. The net realizable value of the
item of inventory at the end of 31 December 2015 and 30 June 2016 was Rs. 22,000 and Rs. 24,000
respectively. HFL had acquired it in July 2014 at a cost of Rs. 35,000.
(iv) An option was granted to Bader in August 2014 to acquire 2,500 shares in HFL’s parent company, Mamoo
plc. (MP), listed on Hong Kong stock exchange. However, the option was exercisable after completion of
one year of service with HFL. Bader paid an amount equivalent to PKR 200,000 to acquire the option when
the fair market value of the option was PKR 250,000.
On 1 September 2015 he paid an amount equivalent to PKR 300,000 to acquire the shares in MP. The
shares were issued to him on 15 September 2015 when the market value of each share was equivalent to
PKR 375.
On 15 June 2016 Bader sold 2,000 shares in MP and received net proceeds equivalent to PKR 875,000 in
his bank account in Pakistan. This amount was received after deduction of bank charges of PKR 5,000 and
brokerage commission equivalent to PKR 10,000.
Other information relevant to tax year 2016 is as under:

(i) On 1 July 2015 Bader received following payments from his previous employer Sultan Hospital Limited
 Rs. 600,000 in respect of termination benefits under an agreement.
 Rs. 485,000 against gratuity under an unapproved scheme.
(ii) On 1 November 2015 Bader fell ill and was admitted to Sultan Hospital Limited. The hospital incurred
Rs. 65,000 on his treatment but did not charge anything to Bader.
(iii) On 1 December 2015 he paid a premium of Rs. 300,000 on a life insurance policy.
(iv) On 1 January 2016 Bader purchased 35,000 listed shares in Muft Limited (ML) at a price of Rs. 25 per
share. On 20 March 2016 he fully subscribed 15% right shares offered by ML to its existing shareholders at
a price of Rs. 20 per share.
(v) Withholding tax deducted from Bader’s salary during tax year 2016 amounted to Rs. 1,105,000.
(vi) His total assessed taxable income and total taxes paid thereon during the three preceding tax years
amounted to Rs. 10,500,000 and Rs. 1,260,000 respectively.
Required:
Under the provisions of the Income Tax Ordinance, 2001 and Rules made thereunder, compute the taxable
income and net tax payable by or refundable to Bader for tax year 2016. (15)
Note: Show all relevant exemptions, exclusions and disallowances.
(Q.1, September 2016)
16
Regards:Awais Ali
Question-24
Mushtaq is a sole proprietor of Mushtaq Enterprises (ME) engaged in the business of manufacturing of different
products. ME’s profit and loss account shows profit before taxation of Rs. 1.8 million for the year ended 30 June
20X7. A review of ME’s records has revealed the following information.
(i) ME employs five salesmen. Rs. 22,000 per month were paid to each salesman in cash which includes
reimbursement of Rs. 6,000 per month incurred on entertainment of customers at the business premises.
(ii) Administrative expenses include Rs. 150,000 which were paid to a research institute in China for the
purpose of developing a new product.
(iii) Accounting loss on the sale of patents was Rs. 65,000. The tax written down value of these patents at the
beginning of the year was Rs. 430,000 and these were sold for Rs. 524,000. Amortization charged to the
profit and loss account on these patents for the current year was Rs. 25,000.
(iv) Receivables from Atif and Aslam which had been written off in the previous year were recovered. Details
are as follows:
Atif Aslam
-----Rupees-----
Claimed bad debts in last tax return 800,000 1,200,000
Allowed by tax authorities last year 550,000 600,000
Amount recovered during the year 700,000 400,000
(v) ME has opened a sales office in Dubai. In this respect, furniture costing Rs. 850,000 with written down
value (WDV) of Rs. 650,000 was shifted to Dubai office. The tax WDV of the furniture at the beginning of
the year was Rs. 610,000.
(vi) Accounting depreciation for the year is Rs. 580,450. However, no depreciation has been provided on the
following fixed assets purchased on 1 March 20X7:
Rupees
Furniture 200,000
Used machinery imported from Germany 500,000
(vii) Tax depreciation for the year, prior to the adjustments mentioned in (vi) above, amounted to
Rs. 456,400.
(viii) Advance tax paid u/s 147 was Rs. 200,000.
(ix) The assessed business losses of tax year 20X1 brought forward in year 20X7 are Rs. 830,000. These
include unabsorbed tax depreciation amounting to Rs. 705,000.
Other transaction of Mushtaq

On 1 June 20X7, he sold 6,000 shares for Rs. 432,000 out of 15,000 shares which he received on 1 May 20X4, on
the death of his father. The fair market value of shares on the date of transfer to Mushtaq was Rs. 25 per share.
Required:
Under the provisions of Income Tax Ordinance, 2001 and rules made thereunder, compute taxable income and net
tax payable by or refundable to Mushtaq for the year ended 30 June 20X7. (16)
(Q.1, March 2017)
17
Regards:Awais Ali
Question-25
Taqi Ahmed is working as Director Marketing with Zee Textiles Limited (ZTL) for the last twenty five years.
Details of his monthly emoluments during the year ended 30 June 20X7 are as under:
Rupees
Conveyance allowance 44,000
In addition to the above, Taqi Ahmed has provided the following information:
(i) He and his family members are covered under the health insurance policy in accordance with the terms of
employment. The amount of annual premium paid by ZTL was Rs.200,000.
(ii) During the year, daily allowance of Rs.400,000 was received to meet the expenses for working on
assignments at ZTL’s factories located in Lahore and Multan.
(iii) On 31 July 20X7, the HR Committee approved a performance bonus for all employees for the year ended
30 June 20X7. Taqi received Rs.1,200,000 as performance bonus on 15 August 20X7.
(iv) On 31 March 20X7, in recognition of completion of twenty five years of his service with ZTL, the board of
directors approved to waive the outstanding amount of loan taken by Taqi Ahmed. This loan of
Rs.2,500,000 was taken on 1 January 20X5 and was repayable in fifty equal monthly instalments
commencing from May 20X5. The prescribed benchmark rate is 10% per annum and employer also
charged interest at 10%.
(v) During the year, he received Rs.100,000 for attending board meetings of ZTL. No tax was withheld from
this amount.
(vi) Amount of tax withheld by ZTL from his salary amounted to Rs.2,000,000.
Other information relevant to tax year 20X7 is as under:
(i) Salary is transferred to the bank account on 10th of the following month.
(ii) 10% annual increase was given to him effective 1st July in each of the last three years.
(iii) Taqi has given his house on rent to his cousin at annual rent of Rs.1,500,000. The rent was inclusive of
amenities and utilities of Rs.25,000 per month. However, annual rent for a similar house with same
amenities and utilities, in the vicinity, is Rs.1,800,000.
(iv) He acquired 15,000 shares of a listed company from Privatization Commission of Pakistan at a price of
Rs.60 per share on 15 January 20X6. He claimed tax credit of Rs.90,000 on such investment, against the
tax payable for the tax year 20X6. On 15 June 20X7 he sold all the shares at the rate of Rs.85 each.
(v) On 31 August 20X6, he won a prize bond amounting to Rs. 110,000.
(vi) He also received Rs.159,375 as cash dividend declared by AL. The share registrar correctly deducted
withholding tax accordingly.
Required:
Under the provisions of the Income Tax Ordinance, 2001 and Rules made thereunder, compute under correct head of
income, the total income, the taxable income and net tax payable by or refundable to Taqi Ahmed for the year ended
30 June 20X7. (16)
(Q.1, September 2017)
18
Regards:Awais Ali
Question-26
Mr. Qateel, a resident individual, is engaged in the manufacture of various consumer goods under the name and style
Qateel Enterprises (QE). The following information has been extracted from the records of QE for the financial year
ended 30 June 20X8.
Rupees
Total turnover 28,500,000
Cost of sales (26,155,000)
Gross profit 2,345,000
Operating expenses (4,500,000)
Operating loss (2,155,000)
Finance charges on lease of machinery (35,703)
Other income 5,000,000
Profit before tax 2,809,297
Additional information:
(i) Cost of sales includes:
 Rs. 45,000 paid as fine for violation of contract with a customer for delay in supply of goods.
 accounting depreciation of Rs. 1,900,000 (including depreciation on leased assets).
(ii) Operating expenses include:
 Rs. 450,000 paid for renewal of a manufacturing licence for fifteen years.
 vehicle tax paid in cash amounting to Rs. 55,000 for eight office cars.
 Rs. 185,000 paid as security deposit to K-Electric (KE) for replacement of transformer at the factory.
 Rs. 300,000 collected by KE as advance tax through monthly electricity bills.
 cash donation to poor families amounting to Rs. 64,600 and donation of Rs. 2,000,000 paid through
cheque to Edhi Foundation, which is listed in Part 1 of the Second Schedule of the Income Tax
Ordinance, 2001.
 penalty of Rs. 25,000 imposed by the Commissioner Inland Revenue for late filing of annual return of
income for the tax year 20X7.
 entertainment expenditure of Rs. 128,000 incurred on arrival of foreign customers for business
purposes.
(iii) Other income includes:
 dividend of Rs. 580,000 received from listed companies. The amount is net of income tax at the rate of
15% and Zakat of Rs. 100,000 deducted under the Zakat and Usher Ordinance, 1980.
 Capital gain of Rs. 1,200,000 from sale of shares of a private limited company. Shares were acquired
on 1 August 20X3.
(iv) On 30 June 20X8, leased machinery was transferred to Qateel on maturity of lease. The leasing company
was asked to adjust the amount of security deposit against the residual value of Rs. 100,000. The date of
commencement of lease was 1 July 20X3.
Lease rentals paid during the year amounted to Rs. 270,000.
On the date of maturity, the accounting written down value and market value of the machinery was Rs.
590,490 and Rs. 800,000 respectively.
(v) During the year, a warehouse was constructed for storage of goods at a cost of Rs. 2,444,000. No
accounting depreciation has been recorded on it.
(vi) Tax depreciation for the tax year 20X8 without considering the effect of para (iv) and (v) above, amounted
to Rs. 1,560,000.
(vii) Advance income tax paid during the year amounted to Rs. 480,000.
Required:
Under the provisions of the Income Tax Ordinance, 2001 and Rules made thereunder, compute the total income,
taxable income and net tax payable by or refundable to QE for the year ended 30 June 20X8.(18)
Note:
 Ignore minimum tax under section 113
 Show all the relevant exemptions, exclusions and disallowances
19
Regards:Awais Ali
Question-27
Ahmer Ghazi has been working as director production in Delta Pakistan Limited (DPL) for last three years. He
received following monthly emoluments from DPL during the year ended 30 June 20X8:
Rupees
House rent allowance 95,000
In addition to the above, the employer also provided following to Ahmer Ghazi:
(i) Health insurance for him and his family members. The amount of annual premium paid by DPL was Rs.
50,000.
(ii) Return air ticket for Dubai worth Rs. 180,000 for him and his family as a reward for achieving the production
target.
(iii) Loan of Rs. 5 million was given to him on 1 August 20X7 at 6% per annum.
(iv) Withholding tax of Rs. 1,500,000 deducted from his salary was reimbursed to him.
Other information relevant to the tax year 20X8 is as under:
(i) Under an employee share scheme 10,000 shares of DPL were allotted to Ahmer Ghazi on 1 January 20X6.
According to the scheme, he was not allowed to sell/transfer the shares up to 31 December 20X6. On 1 April
20X8. he sold 6,000 shares of DPL for Rs. 33 per share. The face value of each share is Rs. 10. Fair market
values of each share on different dates were as follows:
 Rs. 20 per share on 1 January 20X6
 Rs. 23 per share on 1 January 20X7
 Rs. 29 per share on 30 June 20X8
(ii) On 30 October 20X7 Ahmer Ghazi let out his apartment at a monthly rent of Rs. 30,000 to his friend. The fair
market rent of the apartment is Rs. 40,000 per month.
(iii) He is a part time singer and earned Rs. 225,000 by allowing a private TV channel to use his song in a TV
drama.
(iv) He purchased Sukuks of a listed company amounting to Rs. 1,400,000 as an original allottee, on 30 June
20X8.
Required:
Under the provisions of the Income Tax Ordinance, 2001 and Rules made thereunder, compute the following for the
year ended 30 June 20X8:
(a) Total income (10)
(b) Taxable income (01)
(c) Net tax payable or refundable (05)
Note: ■ Ignore minimum tax under section 113.
■ Show all the relevant exemptions, exclusions and disallowances.
20
Regards:Awais Ali
Question-28
Saleem is a resident taxpayer and runs a fitness centre in DHA Karachi. He files his return of income regularly.
Following information pertains to his business for the tax year 20X8:
(i) Accounting profit before tax amounted to Rs. 2,350,000.
(ii) Administrative expenses include annual rent of the premises used for fitness centre amounting to Rs.
1,560,000. Withholding tax of Rs. 144,000 was deducted from the rent payment but was not deposited in the
government treasury.
(iii) A passenger transport vehicle used for pick and drop of employees of fitness centre was disposed of for Rs.
3,500,000. The vehicle was purchased for Rs. 4,500,000 in tax year 20X7. No accounting depreciation was
provided during the year 20X8. Accounting gain of Rs. 200,000 has been recorded in the profit or loss
account.
(iv) On 1 July 20X7, a car was acquired on finance lease for Rs. 3,000,000. The vehicle has been used 70% for
business purposes and 30% for Saleem’s personal use.
Accounting depreciation of Rs. 600,000 and financial charges of Rs. 462,000 were recorded in the profit or
loss account. Lease rentals paid during the year amounted to Rs. 857,000.
(v) During the year, Saleem recorded gain of Rs. 50,000 on disposal of shares. Details are asunder:
Purchased Gain/(loss) on
Name of investee company Sold on On disposal (Rs.)
Sun (Private) Limited 1 Aug 20X7 1 Sep 20X3 500,000
Moon Limited – a listed company 15 Sep 20X7 1 Jan 20X5 (700,000)
Planet Limited - a listed company 1 Feb 20X8 1 Jan 20X6 250,000
50,000
Required:
Compute Saleem’s taxable income under appropriate head of income and tax liability for the tax year 20X8. (12)
Question-29
Saeed, a citizen of Pakistan, was working on a foreign vessel belonging to Delta Shipping Company (DSL) based in
Spain for the past three years. His monthly salary was USD 15,000 which was remitted to his Pakistani bank account
through normal banking channel. The amount received during the tax year 20X9 was converted to Pak Rupees at an
average exchange rate of USD 1 = PKR 131.
On 1 October 20X8, he resigned from DSL and joined Haris Pharma Limited (HPL) in Pakistan as a General
Manager. He was offered following monthly salary and allowance in HPL:
Rupees
In addition to the above, he was also provided the following:
(i) Bonus equal to two monthly basic salaries. However, bonus amount was adjusted in proportion to the duration
of his stay in the company. The bonus amount was paid to him on 5 July 20X9.
(ii) Two company maintained cars. Both cars were purchased on 1 October 20X8. The car costing Rs. 3,500,000
was used for official purposes whereas the car costing Rs. 1,900,000 was used for personal purposes.
(iii) Free lunch from the restaurant owned by one of HPL’s directors. The fair market value of food provided to
him during the year was Rs. 125,000.
(iv) A special allowance of Rs. 20,000 per month to meet expenses wholly and necessarily incurred in the
performance of his official duties. Actual expenses incurred by him during the year were Rs. 150,000.
(v) Provident fund contribution of Rs. 60,000 per month. An equal amount per month was also contributed by
Saeed to the fund.
21
Regards:Awais Ali
Other information relevant to tax year 20X9 is as under:

(i) On 1 December 20X8, Saeed obtained a loan of Rs. 25 million from a scheduled bank at 15% mark-up per
annum to acquire a residential house.
(ii) During the year, he received dividends of Rs. 575,000 from a listed company. The amount was net of
withholding income tax at the rate of 15% and Zakat of Rs. 62,500 deducted under the Zakat and Usher
Ordinance, 1980.
(iii) Withholding tax deducted by HPL from Saeed’s salary during the tax year 20X9 amounted to Rs. 1,300,000.
Required:
Under the provisions of the Income Tax Ordinance, 2001 and Rules made thereunder, compute under the
appropriate head of income, the total income, taxable income and net tax payable by or refundable to Saeed for the
tax year 20X9. (17)
Question-30
During the tax year 20X9, Amjad carried out the following transactions in respect of his properties:
(i) On 1 July 20X8, Amjad purchased a factory building in Sukkur along with the installed machinery at the price
of Rs. 9 million and Rs. 3 million respectively. To manage the shortage of funds of Rs. 2,000,000, he borrowed
the same on 1 July 20X8 from his friend Shamshad through a crossed cheque. The loan carries interest at the
rate of 18% per annum.
On 1 January 20X9, he let out this building along with the machinery to Basit at a monthly rent of Rs. 500,000
payable in advance.
(ii) On 1 July 20X8, Amjad let out his residential property situated in DHA Karachi to Mirza Limited at a monthly
rent of Rs. 300,000. Rent for the two years was received in advance on 1 August 20X8.
(iii) On 1 July 20X8, Amjad also entered into an agreement with Zeeshan for the sale of his plot situated in Quetta
for Rs. 50 million. The plot had been purchased for Rs. 40 million in 20X4. Under the terms of sale agreement,
he received Rs. 5 million at the time of signing the agreement and the balance was to be received on 30
September 20X8. However, due to financial difficulties, Zeeshan failed to pay the balance amount on the due
date and consequently, Amjad forfeited the advance in accordance with the terms of the agreement.
On 10 April 20X9, he finally sold the plot to Jamshed for Rs. 65 million.
(iv) Following expenditures were incurred by Amjad in respect of his properties in Sukkur and Karachi:
Property situated in
Details of expenditures
Sukkur Karachi
Repair & maintenance – building 270,000 70,000
– machinery 50,000 -
Ground rent 50,000 10,000
Insurance – building 150,000 20,000
Total 520,000 100,000
Required:
In view of the provisions of the Income Tax Ordinance, 2001 compute under appropriate head of income, taxable
income of Amjad for the tax year 20X9. (10)
22
Regards:Awais Ali
Question-31
For the purpose of this question, assume that the date today is 31 August 2020.
Shahid is engaged in the business of manufacturing and supplying of auto parts. Following is the extract of his profit
or loss statement for the tax year 2020:
Rs. in ’000
Sales 29,058
Cost of goods sold (18,724)
Gross profit 10,334
Operating expenses (3,137)
Financial charges (2,030)
Other income 1,260
Profit before tax 6,427
Additional information:
(i) The above accounts have been prepared on cash basis and stock-in-trade has been valued on prime cost
method. However, Shahid wants to change the method of accounting from cash basis to accrual basis. In
this respect, following information has been gathered:
Opening balances Closing balances
-----------Rs. in ’000-----------
Stock-in-trade using prime cost method 1,800 2,800
Stock-in-trade using absorption cost method 2,300 3,200
(ii) Cost of goods sold includes:
▪ purchase of packing material of Rs. 440,000 from Nasir Traders. No withholding tax was deducted
at the time of payment.
▪ freight charges of Rs. 85,000. These were paid in cash for transporting goods from suppliers.
(iii) Operating expenses include:
▪ salary of Rs. 80,000 per month paid to Shahid's brother who handles administrative matters of the
business.
▪ expenditure of Rs. 950,000 incurred on the development of a product which is expected to
generate revenue for five years.
▪ penalty of Rs. 15,000 for late filing of income tax return.
(iv) Zakat paid under Zakat & Ushr Ordinance is Rs. 93,750.
(v) Other income includes:
▪ capital gain of Rs. 45,000 received, net of withholding tax of Rs. 6,750 on sale of 20,000 shares in
Metal Limited (ML) in November 2019. ML is listed on PSX. On 1 January 2018, Shahid
purchased these shares for Rs. 200,000 at initial public offering. He had claimed a tax credit of Rs.
15,000 on such investment in tax year 2018.
▪ rent of Rs. 980,000 received from an agriculture land in Badin. No withholding tax was deducted
at the time of receipt.
(vi) Tax depreciation for the year amounts to Rs. 680,000.
(vii) Tax deducted at source by customers amounts to Rs. 875,000.
(viii) The unabsorbed tax depreciation brought forward from tax year 2019 amounts to Rs.568,000.
Required:
Under the provisions of the Income Tax Ordinance, 2001 and Rules made thereunder, compute total income, taxable
income and net tax payable by or refundable to Shahid for the tax year 2020. (Use accrual basis of accounting)
Note: ▪ Your computation should commence with profit before tax figure.
▪ Ignore minimum tax under section 113.
▪ Show all relevant exemptions, exclusions and disallowances.
▪ Tax rates are given on the last page. (18)
(Q.1 March 2020)
23
Regards:Awais Ali
ICAP PAST PAPER SOLUTIONS

Answer-1
Mr. A
Computation of income and tax thereon
For TY 2xxx
Income from salary (W-1) 8,867,737

Income from capital gain [S.37(3)] (4,206,000 x 75%) 3,154,500
Taxable income 12,022,237
Tax liability (1,220,000 + 6,022,237 x 35%) (1) 3,327,783

Add: Tax on property income ((W-2)120,000 x 0%) -
Less: Tax deducted u/s 149-Salary (3,600,000)
Tax Refundable (272,217)
Workings
(W-1) Income from salary
Basic Salary [S.12(2)(a)] 4,004,520
Bonus [S.12(2)(a)] 1,980,642
Utility allowance [S.12(2)(c)] 400,452
Leave Encashment [S.12(2)(a)] 538,083
Other allowance [S.12(2)(c) ] 90,000
House rent allowance [S.12(2)(c)] 1,802,040
Director’s fee [S.12(2)(a)] 52,000
8,867,737
(W-2) Income from property
Rental Income (10,000 x 12m) 120,000
Answer-2
Mr. B
For TY 2012

Tax liability on income under NTR (2,345,000 + 10,251,000 x 27.5%) (2) 5,164,025
Add: Tax on income from property ((W-2)350,000-200,000) x 5% 7,500
Less: Tax deducted on Salary (4,541,250)
Less: Tax paid by employer on employee behalf (2,976,000)
(7,517,250)
Refundable from Government (2,345,725)
Workings
Basic Salary [S.12(2)(a)] 8,800,000
Bonus [S.12(2)(a)] 5,000,000
Utility allowance [S.12(2)(c)] 880,000
Relocation allowance [S.12(2)(c)] 200,000
Accommodation provided (45% of basic salary) [S.13(12)] N-1 (8,800,000 x 45%) 3,960,000
Motor vehicle provided [S.13(3)] (2,000,000 x 5%) 100,000
Children education fees [S.12(2)(d)] 105,000
House servant salaries [S.13(5)] 230,000
Tax of employee paid by employer [S.12(3)] 2,976,000
22,251,000
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Regards:Awais Ali
(N-1) As amount that would have been paid had no accommodation been provided is not given in question, therefore
comparison of this amount cannot be made with 45% of basic salary. Therefore only 45% of basic salary is added in
the income in respect of accommodation provided.
(W-2) Property Income [Sec. 15]
Rental Income (50,000 x 7m) 350,000
Answer-3
Mr. Imran
Computation of taxable income
For TY 2012
Income from salary

Income from UAE Company Rs.
Salary Income [S.51(2)] Note – 1 -
Income from Pakistan subsidiary
Basic Salary [S.12(2)(a)] (500,000 x 9) 4,500,000
Medical allowance (45,000 x 9) 405,000
Less: Exempt up to 10% of basic salary (4,500,000 x 10%)
[2nd Sch. Clause 139] (450,000) -
Benefit provided in respect of TV and VCR (40,000 x 20% x 9/12) 6,000
[S.13(11)]
Interest fee loan [S.13(7)] (5,000,000 x 10% x 9/12) 375,000
Family’s housing cost in Dubai [S.12(2)(d)] (30,000 x 9) 270,000
Travelling and related cost [S.12(2)(d)] (30,000 x 9) 270,000
Exercise of right [S.14(2)] (300 shares x (10$ – 8$) x 58) 34,800
Disposal of options [S.14(5)] (200 x 171) 34,200
Note 1 - Where a citizen of Pakistan leaves Pakistan during a tax year and remains abroad during that tax year, any
income chargeable under the head “Salary” earned by him outside Pakistan during that year shall be
exempt from tax under ITO, 2001 [S.51(2)]. Therefore, salary income earned in UAE will be exempt from
tax.
Answer-4
Note: Calculation of tax liability is not a requirement of question; it is only calculated for understanding of students.
Ms. Fatima Hassan
Computation of taxable income and tax liability
For TY 2012

Income from capital gain (W-2) 225,000
Tax liability on income under NTR (90,000 + 530,000 x 15%) (2) 169,500
Less: Tax credit on charitable donation u/s 61 (169,500/2,330,000) x 50,000 (3,637)
(C is lower of Rs. 50,000 or 30% of 2,330,000)
Tax Payable to Government 165,863
It is assumed that charitable donation is paid through crossed cheque.
Items not included in calculation
- Where car is used solely for official purpose nothing will be added in the salary income of employee.[S.13(3)]
- Disposal of residential plot is not chargeable to tax as holding period exceeds 8 years. [S.37(3A)]
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Regards:Awais Ali
Workings
Basic Salary [S.12 (2)(a)] (100,000 x 11m) 1,100,000
House rent allowance [S.12(2)(c)] (40,000 x 11m) 440,000
Utilities allowance [S. 12(2)(c)] (15,000 x 11m) 165,000
Motor vehicle transferred [S.13(11)]
Fair market value of car at time of transfer 300,000
Less: Cost paid by employee (100,000) 200,000
Consideration to enter into an employment [S.12(2)(e)(i)] 200,000
2,105,000
(W-2) Income from capital gain
Shares in Queen Ltd.[S.37(3)] (500,000-200,000)x75% 225,000
Painting [S.38(5)] Loss in not to be recognized -
225,000
Answer-5
Mr. Dollar
For TY 2xxx

Tax to be deducted by employer each month (113,250/12) 9,438
Workings
Basic Salary [S.12(2)(a)] (100,000 x 12M) 1,200,000
Medical allowance (15,000 x 12M) 180,000
Less: Exempt up to 10% of basic salary (1,200,000 x 10%) (120,000) 60,000
(assuming as per terms of employment)
[2nd Sch. Clause 139]
Utility allowance [S. 12(2)(c)] (10,000 x 12M) 120,000
Conveyance provided [S.13(3)] (700,000 x 5%) 35,000
Accommodation provided [S.13(12)]
Higher of:
- 45% of basic salary or (1,200,000 x 45%) 540,000
- Amount that would have been paid had no
accommodation been provided (20,000 x 12M) 240,000 540,000
1,955,000
Answer-6
Mr. Ayub
For TY 2012
Income from salary

Basic Salary [S.12(2)(a)] (70,500 x 6) 423,000
Accommodation provided (45% of basic salary) N-1 (423,000 x 45%) 190,350
[S.13(12)]
Utilities allowance [S.12(2)(c)] (12,000 x 6) 72,000
Medical reimbursement (assumed to be as per terms) [2nd Sch. Clause 139] -
Gratuity [2nd Sch. Clause 13 (ii)] N-2 -
Compensation for early retirement [S.12(2) (e)(iii) ] 150,000
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Interest fee loan (not chargeable as loan is below Rs. 1,000,000) [S.13(7)] -
Waiver of loan (200,000 x 25%) [S.13(9)] 50,000
Car transferred FMV at the time of transfer [S.13(11)] 700,000
Less: Cost paid by employee (650,000) 50,000
Taxable income 935,350
Tax liability on income under NTR (335,350 x 5%) (2) 16,768
the income in respect of accommodation provided. The amount of actual rental paid is not considered in calculation.
[S.13(12)]
(N-2) As the gratuity fund is approved so both (special and general) amounts received from the fund are
exempt.[Exemptions in Second Schedule Part 1(13)]
Answer-7
Mr. Ali Raza
For TY 2008

Income from capital gain – Gain on sale of jewelry 45,000
Total income 1,288,600
Less: Share of rent to HBFC [S. 60C] (15,000)
Lower of:
(15,000 or 50% of 1,288,600 or 2,000,000)
Tax liability [30,000 + 73,600 x 10%] (2) 37,360
Add: Tax on Property Income ((W-2) 368,600-200,000) x 5% 8,430
Less: Tax deducted u/s 149-Salary (170,000)
Refundable from Government (124,210)
Workings
Basic Salary [S.12(2)(a)] (65,000 x 12) 780,000
Accommodation provided (45% of basic salary)N-1 (780,000 x 45%) 351,000
[S.13(12)]
Conveyance provided [S.13(3)] (500,000 x 5%) 25,000
Less: Exempt up to 10% of basic salary [2nd Sch. Clause 139] (780,000 x 10%) (78,000) 72,000
(assuming as per terms of employment)
Employer contribution to provident fund (780,000 x 12%) 93,600
Less: Exempt up to lower of:
- 10% of basic salary and dearness all. (10% of 780,000 = 78,000) or
- 150,000 (78,000) 15,600
1,243,600
the income in respect of accommodation provided. The amount of actual rental paid by employer is not considered
in calculation. [S.13(12)]
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Regards:Awais Ali
(W-2) Property Income

Rental Income
Rental from July 2007 to June 2008 (30,000 x 12) 360,000
Non-adjustable amount received [S.16(3)] 100,000
Less: Already taxed
In TY 2007 (7,000)
In TY 2006 (7,000)
86,000
Amounted to be taxed (86,000/10) 8,600
368,600
Answer-8
a)
Mr. Manto
For TY 2009

Income from other source 100,000
Income from capital gain – Gain on sale of shares 25,000 x (62-42) 500,000
(holding period is less than one year)
Less: Tax paid by employer [S.12(3)] (102,030)
Payable to Government 90,275
Items which are not considered
(N-1) Lease rentals are not considered when car is acquired on lease, rather fair market value is considered.
(N-2) Interest credited is exempt up to higher of interest calculated @ 16% or 1/3 of salary. Since the rate at
which interest has been credited is not given therefore it cannot be compared with 1/3rd of salary.
(N-3) As Mr. Manto is returning expatriate as per section 51(1), therefore Rs. 4,000,000 is exempt.
Workings
Basic Salary [S.12(2)(a)] (100,000 x 12) 1,200,000
House rent allowance [S.12(2)(c)] (30,000 x 12) 360,000
Medical allowance (Fully taxable)[S.12(2)(c)] (10,000 x 12) 120,000
Medical facility (Fully exempt because as per terms) [2nd Sch. Clause 139] -
Conveyance provided [S.13(3)] (2,000,000x5%) 100,000
Concessional lunch facility (Exempt because Manto is employee of a hotel)[2 nd Sch. Clause 53A(ii)] -
Training course (Not chargeable because for official purpose) [S.12(2)(d)] -
Employer contribution to provident fund (1,200,000 x 10%) 120,000
- 10% of basic salary and dearness all. (10% of 1,200,000 = 120,000) or
- 150,000 (120,000) -
Interest credited 48,000
Less: Exempt up to 1/3rd of (basic salary+dearness allowance) (1/3 x 1,200,000) (400,000) -
1,780,000
Add: Tax borne by employer [S.12(3)] (W-2) 102,030
1,882,030
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Regards:Awais Ali
(W-2) Tax borne by employer

Step 1
Salary income 1,780,000
Tax thereon (30,000 + 580,000 x 10%) 88,000
Step 2
Salary income (1,780,000 + 88,000) 1,868,000
Tax thereon (90,000 + 68,000 x 15%) 100,200
Step 3
Salary income (1,780,000 + 100,200) 1,880,200
Tax thereon (90,000 + 80,200 x 15%) 102,030
Answer-9
a)
Mr. Zulfiqar
For TY 2009

Income from capital gain – Loss on sale of painting is not allowed as deduction [S.38(5)] -
Less: Markup paid on house loan to a scheduled bank: [S. 60C] (250,000)
lower of 250,000 or 50% of 7,366,000 or 2,000,000
Taxable Income 7,116,000
Tax liability on income under NTR (670,000 + 2,116,000 x 22.5%) (2) 1,146,100
Less: Tax credit on investment in new shares u/s 62 (1,146,100 / 7,116,000) x 500,000
C is lower of: 500,000 or 20% of 7,116,000 or 2,000,000 (80,530)
Add: Tax on property income { (100,000 x 6) – 200,000}x 5% 20,000
Total tax liability 1,085,570
Less: Tax paid by employer u/s 149 (200,000)
b) Items not included

(N-1) As the amount that would have been paid had no accommodation been provided is not given in question,
therefore comparison of this amount cannot be made with 45% of basic salary. Therefore only 45% of basic
salary is added in the income in respect of accommodation provided. The fair market value is not to be
considered while calculating the value of perquisite. [S.13(12)]
(N-2) Disposal of plot is not chargeable to tax as holding period exceeds 8 years. [S.37(1A)]
(N-3) Rent received relating to relevant tax year is chargeable only.
Workings
Basic Salary [S.12(2)(a)] (280,000x9) 2,520,000
Medical allowance (45,000x9) 405,000
Less: Exempt up to 10% of basic salary (2,520,000x10%) (252,000) 153,000
Utilities allowance [S.12(2)(c)] (45,000x9) 405,000
Cost of living allowance [S.12(2)(c)] (25,000x9) 225,000
Accommodation provided [S.13(12)] (2,520,000x45%) 1,134,000
Tax borne by employer [S.12(3)] 200,000
Gratuity [2nd Sch. Clause 13(iv)] 2,660,000
- 50% of 2,660,000 = 1,330,000
- 75,000 (75,000) 2,585,000
Pension: Lower of the following [2nd Sch. Clause 8]
From Mirza Petroleum Limited (50,000x3) 150,000
From Multinational company (12,000x12) 144,000 144,000
7,366,000
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Regards:Awais Ali
Answer-10
Mr. Zameer Ansari
For TY 2010

Capital gain [S.37(3)] 15,000 x (48 – 42) x 75% 67,500
Total Income 4,297,500
Less: Zakat (250,000)
Add: Tax on Property Income {(W-2) 277,200 – 200,000} x 5% 3,860
Less: Tax deducted on salary (650,000)
Refundable from Government (166,640)
Workings
Basic Salary [S.12(2)(a)] (200,000x12) 2,400,000
Medical allowance (fully taxable) [2nd Sch. Clause 139] (30,000x12) 360,000
Utility allowance [S.12(2)(c)] (10,000x12) 120,000
School fee of children [S.12(2)(d)] (15,000x12) 180,000
Accommodation provided [S.13(12)] (2,400,000x45%) 1,080,000
Car for business use [S.13(3)] (not chargeable to tax) -
Car partly for personal use [S.13(3)] (1,800,000x5%) 90,000
Leave encashment [S.12(2)(a)] (taxable in next year) -
Contribution to approved pension fund (Its chargeability will be decided at the of receipt) -
4,230,000
(W-2) Income from property
Rental (22,000x12) 264,000
Add: Non-adjustable amount received [S.16(3)] 150,000
Less: Already taxed
In TY 2008 (9,000)
In TY 2009 (9,000)
132,000
Amount to be taxed (132,000/10) 13,200
277,200
Answer-11
Tutorial note: Loss of Pakistan source income cannot be adjusted against foreign source income.
Mr. Mateen
For TY 20X2
Income from business – FSI 535,000

Income from salary – PSI (W-1) 4,592,100
Income from other source - PSI [S.39(1)(k)] (180,000/10) 18,000
Loss from business – PSI [S.56] (350,000) -
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Regards:Awais Ali
Tax liability on income under NTR (670,000 + 127,100 x 22.5%) (2) 698,598
Less: Foreign tax credit (lower of) [S.103]
– Actual foreign tax paid 130,000
– Pakistan tax (698,598/5,127,100) x 535,000 72,897 (72,897)
625,701
Add: Tax credit disallowed [S.62] 100,000
Total tax liability 725,701
Less: Tax deducted on salary u/s 147 550,000
Less: Tax deducted on commission (500,000 x 10%) 50,000
(600,000)
Business loss to be c/f [S.57(1)(2)] (350,000 – 18,000) 332,000
Items not included in calculation
- There is no gain loss on sale of securities because cost and sale proceeds are same.
- As Zakat is not paid under Zakat and Ushr Ordinance so it will not be allowed as deduction.
Workings
Income from ML
Gratuity [2nd Sch. Clause 13(iv)] 350,000
Less: exempt up to lower of - 50% of 350,000 175,000
Or 75,000 (75,000) 275,000
Leave encashment [S.12(2)(a)] 150,000
Income from RSL
Compensation in respect of un-served notice period [S.13(10)] 280,000
Basic Salary [S.12(2)(a)] (245,000x12) 2,940,000
Utility allowance [S.12(2)(c) ] (21,000x12) 252,000
Reimbursement of personal medical expenses (exempt being as per terms) [2 nd Sch. Clause 139] -
Reimbursement of hospitalization charges (exempt being as per terms) [2nd Sch. Clause 139] -
Pick and drop facility (not chargeable) -
Conveyance provided [S.13(3)] (1,500,000x5%x10/12) 62,500
House keeper services [S.13(5)] (6,000-20% of 6,000) x 12) 57,600
Special allowance [S.12(2)(c)] (exempt) -
Interest fee loan [S.13(7)] (1,500,000x 10%x6/12) 75,000
Commission [S.12(2)(a)] 500,000
4,592,100
31
Regards:Awais Ali
Answer-12 a)
Mr. Khursheed
For TY 2018
Income from salary (W-l) 13,700,000
Total income excluding golden hand shake 13,700,000
Less: Mark up to scheduled bank (lower of: ) [S.60C] (127,500)
127,500 or 50% of 21,200,000 or 2,000,000
Taxable income excluding golden hand shake 13,572,500
Tax liability on income excluding golden hand shake (2,345,000 + 1,572,500 x 27.5%) (2) 2,777,438
Add: Tax on golden hand shake [S.12(6)] (7,500,000 x 5%) 375,000
(assuming Khursheed, by notice in writing to commissioner would elect to be taxed on the basis of
average rate of tax of last three year)
Add: Tax on securities [S.37A(1)] (acquired after 1.7.16) (700,000 – 500,000) x 15% 30,000
Tax on income from property (25,000 x 3) = 75,000 x 0% -
3,182,438
Less: Tax deducted at source (3,750,000)
Add: Tax credit disallowed [S.62] 60,000
Payable to government/Refundable from government (507,562)
Workings
(W-l) Income from salary
Basic Salary [S.12(2)(a)] (400,000 x 6) 2,400,000
Less: Exempt up to 10% of basic salary (2,400,000 x 10%) (240,000) 210,000
Utility allowance [S.12(2)(c)] (2,400,000 x 10%) 240,000
Car provided [S.13(3)] (5,000,000 x 5% x 6/12) 125,000
Reimbursement of surgery cost (taxable because not as per terms) [2 nd Sch. Clause 139] 1,500,000
Gratuity [2nd Sch. Clause 13(iv)] 9,100,000
- 50% of 9,100,000 = 4,550,000
- 75,000 (75,000) 9,025,000
Car transferred [S.13(11)] (2,800,000 - 2,600,000) 200,000
13,700,000
Golden hand shake 7,500,000
b) Items not included

- Rs. 10,000/month deducted from his salary will have no impact because it is no where provided in law to deduct
this amount.
- Business loss of Rs. 750,000 cannot be adjusted against salary during the year, so it will be carried forward.
[S.56(1)]
- Capital loss of Rs. 500,000 cannot be adjusted against any other head during the year, so it will be carried
forward.[S.56(1)]
- Sale of personal car has no impact because as per the definition of capital asset personal moveable property is not a
capital asset. [S.37(5)]
32
Regards:Awais Ali
Answer-13
Dr. Sona
Revenues
Income from clinic
Consultation fees [S.18(1)(a)] 4,400,000
Income from surgery [S.18(1)(a)] 3,950,000
8,350,000
Less: Expenses
Rent of clinic [S.20(1)] 300,000
Depreciation motor car (96,000 x 40%) 38,400
Depreciation surgical equipment 75,000
Salary to assistant [S.20(1)] 180,000
Clinic running expenses [S.20(1)] 240,000
Car expenses [S.20(1)] (200,000 x 40%) 80,000
(913,400) 7,436,600
Income from other sources
Article writing [S.39] 75,000
Tax liability under NTR (1,220,000 + 1,511,600 x 35%) (1) 1,749,060
Less: Tax credit on donation [S.61] (1,749,060/7,511,600) x 300,000 (69,854)
C is lower of: 300,000 or 30% of 7,511,600
Add: Tax on property income [20,000 + {(W-1) 925,000 – 600,000} x 10%] 52,500
Tax payable to Government 1,731,706

Income
Rentals 870,000
Non- adjustable amount received [S.16(3)] 700,000
Less: Already taxed
In TY - - (50,000)
In TY - - (50,000)
In TY - - (50,000)
550,000
Amount to be taxed (550,000/10) 55,000
925,000
Items not included:
- House hold expense is not an allowable deduction.[S.21(h)]
- Cost of car and surgical equipment is not an allowable deduction, rather their depreciation will be allowed as
deduction.
33
Regards:Awais Ali
Answer -14
Beena Sikandar
For Tax Year 2012
Income from business (W-1) 5,540,000
Tax liability on income falling under NTR (1,220,000+ 1,190,000 x 35%) (1) 1,636,500
Less: Tax credit u/s 61 (1,636,500/7,190,000) x 250,000 (56,902)
C is lower of: 250,000 or 30% of 7,190,000
1,579,598
Less: Taxes deducted at source
From salaries 390,000
From fee received for attending the meetings of BOD 9,000
(399,000)
Tax payable to Government 1,180,598
(W-1) Income from business
Accounting profit 3,500,000
Add: Deductions not allowed
Salaries [S.21(h)] (50,000 x 12) 600,000
Gifts and donation [S.21(h)] (50,000 + 250,000) 300,000
Lease security deposit 500,000
Professional fees [S.21(h)] 150,000
Property expenses [S.21(h)] (350,000 x 40%) 140,000
Travel expenses -
Other expenses [S.21(l)] 150,000
Tax [S.21(a)] 200,000
2,040,000
5,540,000
Remuneration [S.12(2)(a)] (100,000 x 12) 1,200,000
Bonus (taxed on receipt basis) [S.12(2)(a)] (100,000 x 2) 200,000
Car benefit [S.13(3)] (2,000,000 x 5%) 100,000
Board meetings [S.12(2)(a)] 150,000
1,650,000
Notes:
1- It is assumed that bad debt was allowed as deduction by tax authorities.
2- Salary paid to her brother is a business expense so it is allowed as deduction.
3- Gifts to clients and lease rentals are allowed as an expense.
34
Regards:Awais Ali
Answer-15
Kashmala and Shumaila
Income and tax thereon
For TY 2012
Income from business
Accounting Profit/(Loss) (800,000)
Add: Salaries [S.21(h)] (500,000 + 300,000) 800,000
Add: Accounting depreciation 300,000
Profit before depreciation 300,000
Less: b/f business loss [S.57(1)(2)] (400,000)
Taxable income -
Actual tax liability (no taxable income, so zero) -
c/f - business loss (100,000)

- unabsorbed depreciation[S.57(4)] (300,000 + 250,000) (550,000)
Answer-16
Mr. Creative
For TY 20XX
Calculation of taxable income and tax liability
Income from capital gain (W-2) 13,500
Less: Donations allowed under 2nd Schedule Clause 61 (Lower of)
- 30% of 5,925,500 or
- 50,000 (50,000)
Tax liability (670,000 + 875,500 x 22.5%) (2) 866,988
Less: Tax credit on approved pension fund [S.63] 866,988/5,875,500 x 600,000 (88,536)
C is lower of: 600,000 or 20% of 5,875,500
Less: Tax credit on purchase of listed shares [S.62] 866,988/5,875,500 x 1,100,000 (162,316)
C is lower of: 1,100,000 or 20% of 5,875,500 or 2,000,000
Tax liability of income falling under normal tax regime 616,136
Add: Tax on security -Open Ended Mutual Fund [(4,000x58.6) - (4,000x50)] x15% 5,160
(assuming securities acquired after 1.7.16)
Add: Tax on property income [20,000 + {(W-4) 630,000 – 600,000}x10%] 23,000
644,296
Less: Tax deducted u/s 149 (737,000)
Tax Payable to /Refundable from Government (92,704)
Workings
Basic salary [S.12(2)(a)] (300,000 x 12) 3,600,000
Utilities [S.12(2)(c)] (15% x 3600,000) 540,000
Medical [2nd Sch. Clause 139] (12% of 3600,000) 432,000
Less: Exempt upto 10% of basic salary (10% of 3600,000) (360,000) 72,000
Accommodation [S.13(12)] (N-1) (45% of 3600,000) 1,620,000
Car for business & personal use[S.13(3)] (5% of 1,600,000) 80,000
5,912,000
35
Regards:Awais Ali
(W-2) Income from capital gain

Consideration received (8,000 x 75%) = 6,000 x Rs. 145/share 870,000
Less: Cost of shares (6,000 x 142) (852,000)
18,000
Chargeable gain [S.37(3)] (18,000 x 75%) 13,500

Income
Rental from July to December (50,000 x 6) 300,000
Rental from January to June (higher of) [S.15(4)]
- Actual (48,000 x 6) 288,000
- Fair market rent (50,000 x 6 x 110%) 330,000 330,000
630,000
Items not included
the income in respect of accommodation provided. The amount of fair market rent is not considered in calculation.
[S.13(12)]
(N-2) Where an amount an amount which is not adjustable against the rent is refunded by the owner to the tenant on
termination of the tenancy before the expiry of 10 years, no portion of the amount shall be allocated to the tax year
in which it is refunded or to any subsequent tax year. Therefore Rs. 300,000 is ignored.[S.16(2)]
(N-3) Tax credit of 40,000 will not be disallowed as holding period is more than 24 months.[S.62]
Answer-17
Income from salary
From SL
Gratuity [2nd Sch. Clause 13(iv)] 500,000
Less: Exempt (lower of:)
- 50 % of 500,000
-or 75,000 (75,000) 425,000
Reimbursement (Exempt assuming as per terms) [2nd Sch. Clause 139] -
520,000
From HPL
Basic Salary [S.12(2)(a)] (200,000 x 12) 2,400,000
Medical allowance [S.12(2)(c)] (60,000 x 12) 720,000
Less: Exempt upto 10% of basic salary (10% of 2,400,000) (240,000) 480,000
Rent free accommodation [S.13(12)] (45% of 2,400,000) 1,080,000
Travelling allowance [S.12(2)(c)] (50,000 x 12 x 40%) 240,000
Employer contribution - Provident fund (10% of 2,400,000) 240,000
Less: Exempt (lower of:)
- 10% of 2,400,000
- 150,000 (150,000) 90,000
Employee contribution (Ignored being already part of salary) _
Shares acquired under scheme [S.14(2)]
Fair market on date restriction released (5,000 x28) 140,000
Less: Cost of shares - 140,000
Interest benefit [S.13(7)] (Exempt because loan less than Rs. 1,000,000) _
Laptop transferred [S.13(11)] 150,000
4,580,000
Tax to be borne [S.12(3)] (W-2) 734,654
Less: Zakat [Sec. 60] (105,000)
36
Regards:Awais Ali
Tax liability on income falling under NTR (670,000 + 729,654 x 22.5%) 834,172
Less: Tax credit on charitable donation [S.61] (834,172/5,729,654) x 70,000 (10,191)
C is lower of - 70,000 or 30 % of 5,308,305 823,981
Tax on securities [S.37A] (acquired after 1.7.16) ((W-1)20,000 x 15%) 3,000
Less: Tax borne by employer (734,654)
Payable to Government/ (Refundable) 92,327
Workings
(W-1)Gain
Consideration received (5,000 x 32) 160,000
Less: Cost
Cost of shares -
Cost of right -
Amount charged under salary 140,000 (140,000)
20,000
(W-2) Tax borne by employer[S.12(3)]
Step 1
Tax there on (370,000 + 1,080,000 x 20%) 586,000
Step 2
Salary income (4,580,000 + 586,000) 5,166,000
Tax there on (670,000 + 166,000 x 22.5%) 707,350
Step 3
Salary income (4,580,000 + 707,350) 5,287,350
Tax there on (670,000 + 287,350 x 22.5%) 734,654
the income in respect of accommodation provided. Further annual letting value is not be considered as per any of the
provision of law. [S.13(12)]
Items not included
Any amount received from spouse under an agreement to live a part is exempt from tax. [S. 48]
37
Regards:Awais Ali
Answer-18
a) Rs.
Sale of manufactured motors 45,000
Less: Cost of sales and administrative expenses (W-1) (31,850)
Less: b/f business loss before depreciation [S.57(1)] (4,000)
9,150
Less: Tax depreciation current year and brought forward (500 + 9,000) (9,500)
Taxable income -
C/f – tax depreciation [S.57(4)] (9,500 – 9,150) 350
Tax liability -
Less: Tax credit on charitable donation [S.61] (-)
-
(W-1) Calculation of cost of sales and administrative expenses

Cost of sales and administrative expenses as per question 33,000
Less: Drawings (Electricity charges of residence) [S.21(h)] (150)
Donations to a non-profit organization [S.61] (300)
Fine paid to the Ministry of Environment [S.21(g)] (200)
Unabsorbed depreciation brought forward from previous tax year [S.57(4)] (500)
31,850
b)
- Travelling expense on Qamar's visit to Malaysia for attending trade fair is incurred wholly and exclusively for the
purpose of business, therefore it is allowed as deduction under the head income from business. [S.20 (1)]
- Electricity charges paid for Qamar’s residence is drawing, therefore it is not allowed as deduction. [S.21(h)]
- As per the provisions of law any fine, penalty paid for violation of law, rule or regulation is not allowed as
deduction. Damages paid to a distributor for delayed supplies is allowed as deduction because it is not a violation of
law, rule or regulation.[S.21(g)]
- A tax credit will be allowed for donation made to a non-profit organization [S.61] , therefore no deduction will be
allowed.
- Salary paid to Bari who is Qamar’s brother is incurred wholly and exclusively for the purpose of business and tax
has also been properly deducted, therefore it is allowed as deduction under the head income from business. [s.20 (1)]
- As per the provisions of law any fine, penalty paid for violation of law, rule or regulation is not allowed as
deduction. Fine paid to the Ministry of Environment for infringement of environmental and safety laws is therefore
not allowed as deduction. [S.21(g)]
- Brought forward unabsorbed depreciation will be treated as part of current year depreciation and will be adjusted
against profit before depreciation after adjustment of b/f business loss.
38
Regards:Awais Ali
Answer-19
Mr. Sultan
Income from other source (W-2) 3,950,000
Income from business (W-3) (1,519,000) 2,431,000
Tax liability on income falling under NTR (2,345,000 + 401,500 x 27.5%) (2) 2,455,413
Less: Tax credit on charitable donation u/s 61 (2,455,413 /12,401,500) x 100,000 (19,799)
C is lower of: 100,000 or 30% of 12,401,500
Less: Tax credit on contribution to pension fund u/s 63 (2,455,413 /12,401,500) x 500,000 (98,997)
C is lower of: 500,000 or 20% of 12,401,500
Payable to Government 2,336,617
Workings
(W-1)Income from salary
Basic Salary [S.12(2) (a)] (480,000 x 12m) 5,760,000
Medical allowance [S.12(2) (c)] (48,000 x 12m) 576,000
Utilities allowance [S.12(2) (c)] (55,000 x 12m) 660,000
Accommodation provided [S.13(12)] (5,760,000 x 45%) 2,592,000
Hospitalisation [2nd Sch. Clause 139] (Exempt being as per terms) -
Reimbursement of personal expenses[S.12(2)(d)] (550,000 x 15%) 82,500
9,970,500
(W-2)Income from other source
Receipt of board meeting [S.39(1)] 200,000
Car won in lottery [S.39(1)(h)] 850,000
Loan received from father in cash [S.39(3)] 2,500,000
Lit. work (Assuming that it is favourable for tax payer if spread over 3 Y) (1,200,000/3) [S.89] 400,000
3,950,000
(W-3)Income from Business
Net income 990,000
Add: Salary paid in cash (18,000 x 12) [S.21(m)] 216,000
Add: Gain on sale of immoveable property [S.22(13)(d)] 800,000
Less: Tax depreciation building 35,250,000 x 10% (3,525,000)
(1,519,000)
Gain on sale of immoveable property [S.22(13)(d)]

Consideration 10,000,000
Less: WDV
Cost 10,000,000
Less: Accumulated depreciation (1,400,000 - 600,000) (800,000) (9,200,000)
800,000
Items not included

- Salary of Rs. 15,000 or below can be paid in cash, so it is allowed as deduction.
- Utility bills can be paid in cash, so it is allowed as deduction.
39
Regards:Awais Ali
Answer-20
Mr. Tahir
TY 20X5
Add: Accounting depreciation (1,500,000 x 15%) 225,000

Computer software wrongly included in expenses 975,000
Cost of feasibility wrongly included in expense 250,000
Financial charges on leased asset 80,000
Depreciation on leased asset 260,000
Personal car expenses [S.21(h)] (295,450 x 20%) 59,090
Provision for bad debt [S.29 (1)] 25,000
1,874,090
Less: Initial allowance on machinery [S.23(1)] (1,500,000 x 25%) 375,000
Tax depreciation [S.22] (1,500,000 - 375,000) x 15% 168,750
Amortization on computer software [S.24(4)] (975,000/10 years) 97,500
Amortization on pre-commencement Exp. [S.25(2)] (250,000 x 20%) 50,000
Lease rentals paid [S.28 (1)(b)] 300,000
(991,250)
Tax liability on income falling under NTR (70,000 + 739,840 x 15%) 180,976
Less: Tax credit allowed (higher of) [S.62]
- On Purchase of shares (W-1) 36,195
- On insurance Premium paid (W-2) 27,988 (36,195)
Add: Tax on disposal of immoveable property (W-3) 75,000
(W-1) Tax credit on purchase of Shares [S.62] (180,976/1,939,840) x 387,968 36,195

C is lower of 600,000 or 20% of 1,939,840= 387,968 or 2,000,000
(W-2) Tax credit on amount of Premium paid [S.62] (180,976/1,939,840) x 300,000 27,988
C is lower of 300,000 or 20% of 1,939,840= 387,968 or 2,000,000
(W-3) Gain on disposal of immoveable property (3,500,000 – 1,500,000) x3/4 1,500,000
Tax on disposal of immoveable property (1,500,000 x 5%) 75,000
Items not included

1. Salary paid to Tahir's brother is an allowable expense as he is working as an employee in the business.
2. Any foreign- source income derived by a citizen of Pakistan in a tax year who was not a resident individual
in any of the 4 tax years preceding the tax year in which the individual became a resident shall be exempt
from tax in the tax year in which the individual became a resident and in the following tax year. Therefore
income of Tahir from UAE is exempt from tax.[S.51]
40
Regards:Awais Ali
Answer-21
Mr. Mukarram
Taxable Income for the
Tax Year 20X5
Income from salary Rs.
Basic salary [S.12 (2) (a)] (250,000 x 12) 3,000,000
Medical allowance [2nd Sch. clause 139] (37,500 x 12) 450,000
Less: Exempt 10% of basic salary (3,000,000 x 10%) (300,000) 150,000
Housing allowance [S.12(2) (c)] (25,000 x 12) 300,000

Travel allowance [S.12(2) (c)] (11,500 x 12) 138,000
Car provided [S.13(3)] (1,000,000 x 5%) 50,000
Car transferred [S.13(11)] (400,000-0) 400,000
Buffet Dinner coupons [S.13(11)] (2,000 x 2 x 12) 48,000
Telephone & Internet facility [S.12(2) (d)](20,000 x 80%) 16,000
Benefit of appliances [S.13(11)](300,000 x 10%) 30,000
4,132,000
Income from capital gain
Disposal of painting [S.37(3)] [S. 77(2)] (275,000 - 100,000 – 15,000) x 75% 120,000
Income from business[Rule 11 below S.41]
Sales/revenue 860,000
Less: Market value of produce used as raw material (2,500 x 5,000/40) (312,500)
Less: Other operating expenses (10,000) 537,500
Items not included:

i) As car is a personal moveable property therefore, it is not a capital asset as per S. 37, so gain on disposal of
car to his neighbor is ignored in calculation.
ii) Salary is taxed on receipt basis. Therefore bonus received on 5.7.20X5 will be taxed in next tax year.
[S.12(1)]
iii) As the option is yet not exercised in respect of employee share scheme, therefore nothing will be added in
salary income. [S.14]
iv) Loss on disposal of diamond (a jewelry) of Rs. 30,000 (280,000 – 250,000) is not allowed as deduction.
[s.38(5)]
v) Income from renting of agricultural land and building which is in immediate vicinity of the land i.e.
Rs.750,000 and Rs.325,000 respectively falls under the definition of agricultural income, therefore it is
exempt from tax. [S.41]
41
Regards:Awais Ali
Answer-22
Wajahat
Tax Year 20X6
Calculation of taxable income and tax liability Rs.
Foreign source dividend [S .39(1) (a)] 65,000
Income from business (W-2) 1,234,250
Less: Zakat (4,600)
Less: Tax credit under section 63 (59,662)
A/B x C 267,290/2,486,450 x 555,000
C is lower of :
- Actual contribution 890,000
- 36% of taxable income of current year (2,486,450 x 36%) 895,122
- 30% of taxable income of previous year (1,850,000 x 30%) 555,000
207,628
Add: Tax on FTR (Dividend) 9,200
Less: Tax on FTR (Dividend) (9,200)
Workings
(W-1) Income from salary Rs.
Basic Salary [S. 12 (2) (a)] (70,000 x 12) 840,000
Dearness allowance [S. 12 (2) (c)] (10,000 x 12) 120,000
Conveyance allowance [S. 12 (2) (c)] (8,000 x 12) 96,000
Employee contribution (ignored being already included in above salary) -
Employer contribution (8,400 x 12) 100,800
Less: Exempt upto lower of:
- 1/10th of (840,000 + 120,000) 96,000
or - 150,000 150,000 (96,000) 4,800
Interest on fund balance 391,000

Less: Exempt upto higher of:
- 1/3rd of (840,000 + 120,000) 320,000
or - 391,000 / 20% x 16% 312,800 (320,000) 71,000
Reimbursements of electricity bills[S. 12 (2) (d)] 60,000
1,191,800

Tuition Fee (Revenue) 2,198,000
Less: Deductions allowed
Salary to Yousaf [S.20 (1)] (35,000 x 10) (350,000)
Teacher training work shop [S.20 (1)] (300,000)
Initial allowance on computer [S.23] (250,000 x 25%) (62,500)
Tax depreciation on computer (250,000 - 62,500) x 30% (56,250)
Other miscellaneous expenses[S.20(1)] (195,000)
1,234,250
- Rs.50,000 paid to himself per month will not be allowed as deduction being personal expenditure in nature.
[S.21(h)]
42
Regards:Awais Ali
Answer-23
Mr. Bader
For TY 2016
Rs.
Income from Capital gain (W-2) 125,000
Tax liability on income under NTR (670,000 + 1,427,250 x 22.5%) (2) 991,131
Less: Tax credit u/s 62 (higher of:)
- investment in life insurance u/s 62 (W-3) 46,262
- purchase of shares u/s 62 (W-4) 16,192 (46,262)
944,869
Add: Tax on Separate block income
- termination benefit [S.12(6)]600,000 x (1,260,000 /10,500,000) 72,000
(assuming Bader, by notice in writing to commissioner would elect to be taxed on the
basis of average rate of tax of last three year)
Total tax payable 1,016,869
Less: Tax deducted on salary (1,105,000)
Tax payable to/refundable from Government (88,131)
Workings
Basic Salary [S. 12(2)(a)] (250,000 x 12) 3,000,000
Less: Exempt upto 10% of Basic Salary (3000,000 x 10%)
[2nd Sch. Cl. 139] (300,000) 36,000
House rent allowance [S. 12(2)(c)] (120,000 x 12) 1,440,000
Amount received for employment condition [S. 12 (2) (e) (ii)] 900,000
Benefit on purchase of inventory [S. 13(11)] (22,000-12,000) 10,000
Car for personal and official use [S. 13(3)] (1,500,000 x 5% x 11/12) 68,750
Purchase option exercised [S.14 (3)] (W-1.1) 437,500
Unapproved gratuity from previous employer 485,000
Less: exempt upto lower of - 75,000 OR
[2nd Sch Part1 Cl. 13 (iv)] - 50% 0f 485,000 = 242,500 (75,000) 410,000
Free medical facility of Rs. 65,000 [2nd Sch. clause 53A] ( Exempt as employee -
of hospital)
6,302,250
(W-1.1) Purchase option exercised

Fair market value of share on 15.9.2015 (2,500 x 375) 937,500
Less: Amount paid for option (200,000)
Less : Amount paid for shares (300,000)
437,500
(W-2) Income from Capital Gain – MP (Private) Company[S.14(4)]

Sale of 2,0000 share (875,000 + 5,000 + 10,000) 890,000
Less: Cost of share [S. 14(4)]
Cost of option (200,000/2,500) x 2,000 160,000
Consideration given at exercise of option (300,000/2,500) x 2,000 240,000
Amount chargeable under the head salary(W-1) (437,500/2,500) x 2,000 350,000 (750,000)
Less: Bank charges and brokerage commission (5,000 + 10,000) (15,000)
125,000
As MP is not listed in Pakistan Stock Exchange so it will be considered as private company.
43
Regards:Awais Ali
(W-3) Tax credit on investment in life insurance u/s 62

U/S 62 (A/B) x C
“A” is tax payable
“B” is taxable income (991,131/6,427,250) x 300,000 46,262
“C” is lower of:
 300,000
 20 % of 6,427,250 or
 2,000,000
(W-4) Tax credit on purchase of shares u/s 62

U/S 62 (A/B) x C
“A” is tax payable
“B” is taxable income (991,131/6,427,250) x 105,000 16,192
“C” is lower of:
 105,000 (35,000 x15%=5,250shares x Rs. 20/share)
 20 % of 6,427,250 or
 2,000,000
Items not included:

1. Value of right or option is not taxable so Rs 250,000 is ignored. [S. 14(1)]
2. In case of inventory sold we only need the FMV of inventory on the date it is transferred to employee and
amount paid by employee to employer. Therefore cost to employer of Rs.35,000 and NRV on June 30 th, 2016 are
ignored.
Answer-24
Notes for students:
Adj.(i) As reimbursement of Rs. 6,000 is for official purpose so it is not a part of salary, hence ignored.
Adj.(v) It is assumed in adjustment (v) that no accounting gain/loss is recorded on transfer of asset to Dubai.
Mr. Mushtaq
TY 20X7
Income from Business (W-1) 1,566,800

Capital gain (W-5) 211,500
Less: Advance Tax Paid u/s 147 (200,000)
Payable to Government / (Refundable) (43,255)
44
Regards:Awais Ali
(W-1)Income from business

Add: Salary paid in cash [S.21 (m)] (22,000- 6,000) x 12 months x 5 employees 960,000
Research paid outside Pakistan [S.26 (1)] 150,000
Accounting Loss on patent 65,000
Tax Gain on Patent [S. 24 (9)] (524,000 – 430,000) 94,000
Accounting amortization 25,000
Tax bad debt recovery – Atif[S.29 (3) (a)] (W-2.1) 450,000
Tax gain on disposal of furniture [S. 22 (14)] (W-3) 240,000
Accounting depreciation 580,450
2,564,450
Less: Accounting bad debt recovery – Atif 700,000
Accounting bad debt recovery – Aslam 400,000
Tax bad bedt – Aslam [S. 29 (3) (b)] (W-2.2) 200,000
(1,300,000)
Profit before Tax Depreciation, tax amortization and Initial Allowance 3,064,450
Less: Loss before depreciation ( -830,000 + 705,000) (125,000)
2,939,450
Less: Tax Depreciation, tax amortization and Initial Allowance (W-4) (1,372,650)
1,566,800
(W-2.1) Tax Bad debt Recovery-Atif

Amount Recovered 700,000
Less: Actual Bad debt 800,000
Less: Previously allowed as deduction (550,000) (250,000)
Tax Bad debt Recovery 450,000
(W-2.2)Tax Bad debt Recovery-Aslam

Amount Recovered 400,000
Less: Actual Bad debt 1,200,000
Less: Previously allowed as deduction (600,000) (600,000)
Tax Bad debt Recovery (200,000)
(W-3) Tax Gain on Disposal of Furniture
Consideration 850,000
Less: WDV (610,000)
240,000
(W-4) Tax Depreciation, amortization and Initial Allowance[S.22 & 23]
Tax Depreciation as per adjustment (vii) 456,400
Tax Depreciation on furniture (200,000 x 15%) 30,000
Initial allowance on machinery (500,000 x 25%) 125,000
Tax Depreciation on machinery (500,000 – 125,000) x 15% 56,250
b/f Depreciation 705,000
1,372,650
(W-5) Income from Capital Gain
Consideration Received 432,000
Less: Cost (6,000 x 25) (150,000)
282,000
Holding period more than 1 year (282,000 x 75%) 211,500
45
Regards:Awais Ali
Answer-25
Mr. Taqi Ahmed
For TY 20X7
Income from Other Source (W-3) 410,000
Tax liability - NTR (1,345,000 + 198,000 x 25%) (2) 1,394,500
Add: Tax on separate block
- Tax on income from property (W-2) 135,000
- Tax on disposal of securities (W-4) 46,875
Add: Tax on final tax regieme
- Tax on Dividend [(159,375 / 85) x 100] = 187,500 x 15% 28,125
Less: Tax deducted by ZTL on salary (2,000,000)
Tax wrongly deducted on Dividend (28,125)
(423,625)
Add: Tax credit disallowed [S. 62] 90,000
Tax Payable to/Refundable from Government (333,625)
(W-l) Income from salary

Basic Salary [S. 12 (2) (a)] (*400,000 + (440,000 x 11)) 5,240,000
Conveyance allowance [S. 12 (2) (c)] (40,000 + (44,000 x 11)) 524,000
Medical allowance (40,000 + (44,000 x 11)) 524,000
Health insurance – Exempt being as per terms [2nd. Sch Cl. 139] -
Daily allowance – Not chargeable because for official duty [S. 12 (2) (c)] -
Performance bonus (received in TY 20X8) -
Loan Waived by ZTL [S. 12 (9)] (50,000 x 28 installments) 1,400,000
Directors’ Fee [S. 12 (2) (a)] 100,000
7,788,000
*440,000/110 x 100 = 400,000
(W-2) Income from property [S. 15(1)]

Gross rental (1,800,000 – 25,000 x 12) 1,500,000
Tax (60,000 + 500,000 x 15%) 135,000
(W-3) Income from other sources

Rent of amenities and utilities connected with renting of building [S. 39 (1) (fa)]
Gross receipt (25,000 x 12) 300,000
Less: Expenses (not given) (0)
300,000
Prize bond [S. 39 (1) (h)] 110,000

410,000
(W-4) Tax on gain arose on disposal of securities[S. 37A]

Consideration on disposal (15,000 x 85) 1,275,000
Less: Cost of shares (15,000 x 60) (900,000)
Gain 375,000
Tax on securities (375,000 x 12.5%) 46,875
46
Regards:Awais Ali
Answer-26
Qateel Enterprises
TY 20X8
Income from Business
Add: Fine for violation of contract (allowed not being paid to Government) [S. 20(1)] -
Accounting depreciation (including on leased assets) 1,900,000
Renewal of Manufacturing license – intangible 450,000
Vehicle tax paid (allowed even if paid in cash) [S. 20(1)] [S. 21(l)(v)] -
Security deposit to KE 185,000
Advance tax collected by KE 300,000
Donation – poor families – not allowed 64,600
Donation – Edhi Foundation – not allowed 2,000,000
Penalty paid to Govt. [S. 21(g)] 25,000
Entertainment (allowed because wholly and exclusively for business) [S. 21(d)] -
Finance charges on lease 35,703
4,960,303
Less: Amortisation on license [S. 24(4)] (450,000/15 years) 30,000
Dividend Income – falling under FTR [S. 5] 580,000
Capital Gain on sale of shares 1,200,000
Lease Rentals [S. 28(1)(b)] 270,000
Tax depreciation [S. 22] (W-1) 1,819,400
(3,899,400)
3,870,200
Income from Capital Gain (1,200,000 x 75%) 900,000
Less: Zakat [S. 60] (100,000)
4,670,200
Less: Donation to institute mentioned in Second Schedule (lower of)
- Actual donation 2,000,000
- 30% of taxable income 30% of 4,670,200 = 1,401,060 (1,401,060)
Tax liability on income falling under NTR (370,000 + 269,140 x 25%) (1) 437,285
Add: Tax on Dividend ((W-2) 800,000 x 15%) 120,000
557,285
Less: Tax on Dividend ((W-2) 800,000 x 15%) (120,000)
Advance Tax paid to KE (300,000)
Advance tax paid (480,000)
Tax refundable to QE (342,715)
(W-1) Calculation of tax depreciation

Depreciation on ware house 2,444,000 x 10% 244,400
Depreciation on machine purchased (100,000 x 15%) 15,000
Tax Depreciation (given) 1,560,000
1,819,400
47
Regards:Awais Ali
(W-2) Calculation of gross amount of dividend

Gross Dividend = Dividend Paid + Tax Deducted + Zakat Paid
X = 580,000 + 15% of X + 100,000
X – 15% of X = 680,000
0.85 X = 680,000
X (Dividend) = 800,000
Answer-27
Mr. Ahmer Ghazi
For TY 20X8
Rupees
Income from capital gain – Disposal of shares [S.37(3)] [60,000(W-3) x 75%] 45,000
Income from Other sources – From TV Channel [S.39(1)(b)] 225,000
Taxable Income/Total income 11,913,333
Tax liability on income under NTR (1,345,000 + 3,913,333 x 25%) (2) 2,323,333
Less: Tax credit on investment in new sukuks u/s 62 (2,323,333/ 11,913,333) x 1,400,000
C is lower of: 1,400,000 or 20% of 11,913,333 or 2,000,000 (273,027)
2,050,306
Add: Tax on property income (W-4) 6,000
Less: Tax deducted by DPL (1,500,000)
Tax Payable 556,306

Basic salary [S.12 (2)(a)] (650,000 x 12) 7,800,000
House rent allowance [S.12 (2)(c)] (95,000 x 12) 1,140,000
Medical allowance Clause 139 (70,000 x 12) 840,000
Health insurance- Exempt being as per terms Clause 139 -
Production target reward S.12(2)(a)] 180,000
Interest on Loan outstanding [S.13 (7)] (5,000,000 x 4%x 11/12) 183,333
Withholding Tax reimbursed by employer [S.12 (2)(d)] 1,500,000
11,643,333
(W-2) Gain on release of restriction on shares already taken to income from salary on 31.12.x6 [S.14 (3)]
FMV shares (10,000 x 23) 230,000
Less:
Cost of shares -
Cost of right - -
230,000
(W-3)Income from Capital Gain[S.14 (4)]
Consideration received (6,000 x 33) 198,000
Less:
Cost of shares -
Cost of right -
230,000 (𝐖−𝟐) 138,000 (138,000)
Income from salary ( 𝑥 6,000)
10,000
60,000
(W-4)Income from Property
Rental received (40,000 x 8) 320,000
Tax (320,000 – 200,000) x 5% 6,000
48
Regards:Awais Ali
Answer-28
Mr. Saleem
Computation of taxable income and tax liability
TY 20X8
Rupees
Income from Business (W-1) 3,941,544
Income from Capital gain (W-2) 375,000
Add: Tax on Separate Block income-Securities [Note-1]
- Moon limited -
- Planet limited -
Tax payable to Government 714,963
Items not included in computation of taxable income

[Note-1] There is a net loss of Rs. 450,000 on the disposal of securities as computed below:
Loss on sale of shares of Moon Limited [S. 37A(5)] (700,000)
Gain on sale of shares of Planet limited [S. 37A(5)] 250,000
Loss (450,000)
Loss of Rs. 450,000 shall be carried forward to subsequent 3 tax years.
(W-1) Income from Business

Accounting profit 2,350,000
Add:
Annual rent [S.21(c)] 1,560,000
Accounting depreciation of car 600,000
Financial charges 462,000
2,622,000
Less:
Accounting gain on vehicle 200,000
Loss on disposal on vehicle 180,556
Lease rentals paid [S.28 (1)(b)] (857,000 x 70%) 599,900
Net accounting Gain on the sale of all shares 50,000
(1,030,456)
Income from business 3,941,544
(W-1.1) Disposal of passenger transport vehicle [S. 22(13)(a)]

Consideration on disposal [3,500,000 x (2,500,000/4,500,000)] 1,944,444
Less: Tax Written down value on Disposal (W-1.2) (2,125,000)
Tax Loss on disposal (180,556)
(W-1.2) Tax Written down value (WDV)

Restricted cost -TY 20X7 2,500,000
Less: Tax depreciation -TY 20X7 (2,500,000x 15%) (375,000)
Tax WDV 2,125,000
(W-2) Income from Capital gain

Sun (Private) Limited (500,000 x 75%) 375,000
49
Regards:Awais Ali
Answer -29
Saeed
Income & Tax thereon
For tax year 20X9
Rupees
Income from salary DSL (July 18 to Sep. 18) (US$ 15,000  3 = 45,000  Rs.131) = 5,895,000 -
[Exempt - Clause 4 Part 1 of 2nd Sch.]
Income from salary HPL (W-1) 6,111,500
Less: Deductible allowances:
Zakat paid [S.60] (62,500)
6,049,000
Less: Interest on loan from scheduled bank (lower of): [S.60C]
- 25,000,000 x 15% x 7/12 = 2,187,500
- 50% x 6,049,000 = 3,024,500
- 2,000,000 (2,000,000)
Tax liability (370,000 + 20% x 549,000) 479,800
Add: Tax on final tax regime
- Tax on dividend income (W-2) 112,500
Less: Tax already deducted
- Tax on dividend (112,500)
- Tax withheld on salary (1,300,000)
Net tax refundable (820,200)
Workings
(W-1) Income from salary - HPL
Rupees
Basic salary [S.12(2)(a)] (600,000  9) 5,400,000
Medical allowance [S.12(2)(c)] (66,000 x 9) 594,000
Less: Exempt upto 10% of basic salary [2nd Sch. Clause 139] (5,400,000 x 10%) (540,000) 54,000
Bonus (received after year end) [S.12(1)] -
Company maintained cars: [S.13(3)]
- For official use costing Rs. 3,500,000 -
- For personal use (1,900,000 x 10% x 9/12) 142,500
Free food provided in lunch [S.13(13)] 125,000
Special allowance of Rs. 20,000 p.m (for official duties) [S.12(2)(c)] (not chargeable as salary) -
Provident fund:
- Employee contribution -
- Employer contribution (60,000 x 9) 540,000
Less: Exempt upto lower of
- 1/10 x 5,400,000 = 540,000
- 150,000 (150,000) 390,000
6,111,500
(W-2) Tax on dividend income

Net dividend = Gross dividend – Zakat – income tax
575,000 = x – 62,500 – 0.15x
0.85x = 637,500
637,500
x =
0.85
Gross dividend = 750,000
Tax @ 15% = 750,000 x 15% = 112,500
50
Regards:Awais Ali
Answer-30
Mr. Amjad
Computation of taxable income
For tax year 20x9
Rupees
Income from other sources
Factory building at Sukkur – Basit (W-1) 950,000
Income from property

Residential property at DHA – Karachi (N-1) (300,000×12) 3,600,000
Amount forfeited from Zeeshan 5,000,000
Income from capital gain

Sale of plot in Quetta – Jamshed (Since the plot was bought in 20X4, therefore no tax is -
payable under the law on gain of 15,000,000 (65,000,000 – 40,000,000))
Total Taxable income 9,550,000
(W-1) Income from other sources (Sukkur Factory)

Rental Income (500,000×6) 3,000,000
Less: Admissible expenses
Repair to building [S.40(1)] 270,000
Repair to machinery [S.40(1)] 50,000
Ground rent [S.40(1)] 50,000
Insurance – Building [S.40(1)] 150,000
Tax Depreciation: Building – Normal dep. [S.40(3)] [Rs. 9mill. @ 10%] 900,000
Plant (N-2) – Normal dep. [S.40(3)] [Rs. 3mill. @ 15%] 450,000
Interest on loan from Shamshad [Rs. 2mill. @ 18% 6/12] 180,000
(2,050,000)
Net Income 950,000
Note-1:
No deductions are allowed while calculating income under the head income from property.
Note-2:
As plant is already installed so no initial allowance is calculated.
51
Regards:Awais Ali
Answer -31
Shahid Enterprises
For the tax year 30 June 2020
Rs. '000'
Income from business (W-1) 5,269
Total income 5,269
Less: Zakat [S.60] (93.75)
Taxable income 5,175.25
Tax liability [620,000 + 30% x (5,175,250 - 4,000,000)] 973.00
Add: Tax liability on separate block
Tax on disposal of securities [(45 + 6.75) = 51.75 x 15%] 7.76
Total tax liability 980.76
Less: Tax already deducted:
Tax deducted by customers (875.00)
Tax deducted on securities (6.75)
Net tax liability 99.01
Add: Tax credit disallowed [S.62] 15.00
Tax payable/(refundable) 114.01
Workings
Profit before tax 6,427
Add: Inadmissible deductions/Adjustments
Adjustment of closing stock (3,200 - 2,800) [S.35] 400
Payment without deduction of tax [S.21(c)] 440
Freight charges paid in cash of Rs. 85(Allowed) [S.21(l)] -
Salary paid to shahid brother of Rs. 80 p.m.(allowed) -
Capital expenditure [S.21(n)] 950
Penalty [S.21(g)] 15
1,805
Less: Admissible deductions/Adjustments

Adjustment of opening stock (2,300 - 1,800) [S.35] (500)
Amortization (950/5) [S.24] (190)
Capital gain (45)
Rent from agriculture land [S.41] (980)
(1,715)
Less: Tax depreciation (c/y + b/f) (680 + 568) [S.57] (1,248)
Income from business 5,269
52
Regards:Awais Ali

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NUMERICALS

NUMERICALS INCOME TAX

From the UAE company

(ii) Other Information

Notes to the receipts and payments are presented below:

(A) INCOME FROM BEENA & CO.

Notes to the Income Statement

(B) DIRECTOR’S REMUNERATION FROM AYESHA FOOD LIMITED (AFL)

Basic salary Rs. 300,000

Market value of rent free accommodation 75,000

Notes to the income statement:

Other information relevant to tax year20X5 is as under:

In addition to the above, Wajahat was also provided the following:

Following further information is also available:

In addition to above, Bader was also provided the following:

Other information relevant to tax year 2016 is as under:

Other transaction of Mushtaq

Other information relevant to the tax year 20X8 is as under:

Other information relevant to tax year 20X9 is as under:

ICAP PAST PAPER SOLUTIONS

Income from salary (W-1) 8,867,737

Tax liability (1,220,000 + 6,022,237 x 35%) (1) 3,327,783

Income from salary (W-1) 22,251,000

Income from salary

Income from salary (W-1) 2,105,000

Income from salary (W-1) 1,955,000

Income from salary

Tax liability on income under NTR (335,350 x 5%) (2) 16,768

Income from salary (W-1) 1,243,600

(W-2) Property Income

Income from salary (W-1) 1,882,030

(W-2) Tax borne by employer

Income from salary (W-1) 7,366,000

b) Items not included

Income from salary (W-1) 4,230,000

Income from business – FSI 535,000

b) Items not included

(W-1) Property Income

Actual tax liability (no taxable income, so zero) -

c/f - business loss (100,000)

Tax liability (670,000 + 875,500 x 22.5%) (2) 866,988

(W-2) Income from capital gain

(W-4) Property Income

C/f – tax depreciation [S.57(4)] (9,500 – 9,150) 350

(W-1) Calculation of cost of sales and administrative expenses

Gain on sale of immoveable property [S.22(13)(d)]

Items not included

Add: Accounting depreciation (1,500,000 x 15%) 225,000

(W-1) Tax credit on purchase of Shares [S.62] (180,976/1,939,840) x 387,968 36,195

Items not included

Housing allowance [S.12(2) (c)] (25,000 x 12) 300,000

Items not included:

Interest on fund balance 391,000

(W-2) Income from business

(W-1.1) Purchase option exercised

(W-2) Income from Capital Gain – MP (Private) Company[S.14(4)]

(W-3) Tax credit on investment in life insurance u/s 62

(W-4) Tax credit on purchase of shares u/s 62

Items not included: