Section:C-1/B-1

Total marks: 33
Subject: CAF-06
Time allowed: 55 Mints.
Teacher: Mr. Sir Adnan Rauf
Assessment-1 Date: 28Oct, 2019

Name: _________________________________ Rise ID:______________

Question-1
Mr. Creative provided following details during the latest tax year:
(a) Salary earned is Rs. 4,000,000.
(b) 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.
(c) He sold jewellery at a loss of Rs. 50,000.
(d) 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.
(e) He received a cash loan of Rs. 50,000 from his friend.
(f) He earned business income of Rs. 700,000 from Japan where he paid foreign tax of Rs. 120,000.
(g) 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.
(h) He sold a plot for Rs.3,500,000 which was inherited from his father 8 months back. Fair market value
of the plot at the time of inheritance was Rs.1,500,000.
(i) He redeemed 4,000 units of an open-end mutual fund at Rs. 58.60 per unit on 31 March. These units
were purchased 15 months back at Rs. 50 per unit and Mr. Creative had claimed a tax credit of Rs.
40,000 on this investment.
(j) Donation of Rs. 70,000 was paid to an approved organization.
(k) Creative contributed Rs. 890,000 in an approved pension fund under the Voluntary Pension System
Rules, 2005.
(l) Donations of Rs. 50,000 were paid to charitable institutions listed in the Second Schedule of the
Income Tax Ordinance, 2001.
(m) He paid Rs. 105,000 as zakat under the Zakat and Ushr Ordinance, 1980.
(n) He also earned Rs.150,000 as dividend.

Required:
Compute the taxable income, tax liability and tax payable for the latest tax year.
(20)

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Question-2
Usman Shinwari is a UK national who stayed in Pakistan from November 1, 2017 to June 30, 2018. He
has provided you the following information for TY 2018.

1. He sold a rare manuscript in Karachi at a gain of Rs. 3,000,000. Holding period is less than 12
months.
2. Usman lent out a building with machinery installed to Hasan on November 1, 2017. Hasan pays a
monthly rent of Rs. 80,000. The depreciation of building and plant and machinery during this period
with Rs. 200,000. A repair expense of Rs. 20,000 is also incurred.
3. Usman vacated his house in Karachi in TY 2018 and received Rs. 50,000 as consideration to vacate
the property. Earlier, in TY 2005, he had paid Hafeez Rs. 20,000 when Hafeez had vacated the
property.
4. Usman received a gift of Rs. 100,000 through cross cheque on his birthday, by his father.
5. A loan was received by Usman of Rs. 200,000 in TY 2018 from his friend, in cash.
6. A loan of Rs. 60,000 was received by Usman in TY 2018 from a bank in cash for the purchase of a
new laptop.
7. A loan of Rs. 45,000 was received by him from his brother in cash to pay of an earlier debt owed to a
bank.
8. Payment of Rs. 20,000 was made as health insurance premium to ABC Insurance Company, which
was registered by the SECP.

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 Usman during the tax year 2018
Note: Give notes of those items which are not included in calculation. (10)

Question-3
Define the term “legal representatives” in the light of Income Tax Ordinance, 2001. (3)

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 THE FIRST SCHEDULE

Division I
Rates of Tax for Individuals and
Association of Persons
(1) Subject to clause (2), the rates of tax imposed on income of every individual and association of
persons except a salaried individual shall be as set out in the following Table, namely:—

TABLE

S. No Taxable Income Rate of Tax

1. Where taxable income does not exceed Rs. 0%
400,000
2. Where taxable income exceeds 5% of the amount exceeding Rs. 400,000
Rs. 400,000 but does not exceed
Rs. 600,000
3. Where taxable income exceeds Rs. 10,000 plus 10% of the amount
Rs. 600,000 but does not exceed exceeding Rs. 600,000
Rs. 1,200,000
4. Where taxable Income exceeds Rs. 70,000 plus 15% of the amount
Rs. 1,200,000 but does not exceed exceeding Rs. 1,200,000
Rs. 2,400,000
5 Where taxable Income exceeds Rs. 250,000 plus 20% of the amount
Rs. 2,400,000 but does not exceed exceeding Rs. 2,400,000
Rs. 3,000,000
6 Where taxable Income exceeds Rs. 370,000 plus 25% of the amount
Rs. 3,000,000 but does not exceed exceeding Rs. 3,000,000
Rs. 4,000,000
7. Where taxable Income exceeds Rs. 620,000 plus 30% of the amount
Rs. 4,000,000 but does not exceed exceeding Rs. 4,000,000
Rs. 6,000,000
8. Where taxable Income exceeds Rs. 1,220,000 plus 35% of the amount
Rs. 6,000,000 exceeding Rs. 6,000,000

(2) Where the income of an individual chargeable under the head “„salary” exceeds seventy-five per cent of his
taxable income, the rates of tax to be applied shall be as set out in the following Table, namely:—

S. No Taxable Income Rate of Tax

(1) (2) (3)
1. Where taxable income does not exceed Rs. 0%
600,000
2. Where taxable income exceeds 5% of the amount exceeding
Rs. 600,000 but does not exceed Rs. 600,000
Rs. 1,200,000
3. Where taxable income exceeds Rs. 30,000 plus 10% of the
Rs. 1,200,000 but does not exceed amount exceeding Rs. 1,200,000
Rs. 1,800,000

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 4. Where taxable income exceeds Rs. 90,000 plus 15% of the
Rs. 1,800,000 but does not exceed amount exceeding Rs. 1,800,000
Rs. 2,500,000
5. Where taxable income exceeds Rs. 195,000 plus 17.5% of the
Rs. 2,500,000 but does not exceed amount exceeding Rs. 2,500,000
Rs. 3,500,000
6. Where taxable income exceeds Rs. 370,000 plus 20% of the
Rs. 3,500,000 but does not exceed amount exceeding Rs. 3,500,000
Rs. 5,000,000
7. Rs. 670,000 plus 22.5% of the
Where taxable income exceeds
amount exceeding Rs. 5,000,000
Rs. 5,000,000 but does not exceed
Rs. 8,000,000
8. Where taxable income exceeds Rs. 1,345,000 plus 25% of the
Rs. 8,000,000 but does not exceed amount exceeding Rs. 8,000,000
Rs. 12,000,000
9. Where taxable income exceeds Rs. 2,345,000 plus 27.5% of the Amount
Rs. 12,000,000 but does not exceed exceeding Rs. 12,000,000
Rs.30,000,000
10. Where taxable income exceeds Rs. 7,295,000 plus 30% of the
Rs. 30,000,000 but does not exceed amount exceeding Rs. 30,000,000
Rs.50,000,000
11. Where taxable income exceeds Rs. 13,295,000 plus 32.5% of the amount
Rs. 50,000,000 but does not exceed exceeding Rs. 50,000,000
Rs.75,000,000
12. Where taxable income exceeds Rs. 21,420,000 plus 35% of the
Rs.75,000,000 amount exceeding Rs. 75,000,000

The rate of tax to be paid under section 15, in the case of individual and association of person shall be as follows:-

S. No. Gross amount of rent Rate of tax

1. Where the gross amount of rent does not exceed Nil
Rs. 200,000.
2. Where the gross amount of rent exceeds Rs. 5% of the gross amount exceeding
200,000 but does not exceed Rs. 600,000. Rs.200,000.
3. Where the gross amount of rent exceeds Rs. Rs. 20,000 + 10% of the gross amount
600,000 but does not exceed Rs. 1,000,000. exceeding Rs. 600,000
4. Where the gross amount of rent exceeds Rs. Rs. 60,000 + 15% of the gross amount
1,000,000 but does not exceed Rs. 2,000,000. exceeding Rs. 1,000,000.
5. Where the gross amount of rent exceeds Rs. 210,000 + 20% of the gross amount
Rs.2,000,000 exceeding Rs. 2,000,000.
6. Where the gross amount of rent exceeds Rs. Rs. 610,000 + 25% of the gross amount
4,000,000 but does not exceed Rs. 6,000,000. exceeding Rs. 4,000,000
7. Where the gross amount of rent exceeds Rs. Rs. 1,110,000 + 30% of the gross amount
6,000,000 but does not exceed Rs. 8,000,000 exceeding Rs. 6,000,000
8. Where the gross amount of rent exceeds Rs. Rs. 1,710,000 + 35% of the gross amount
8,000,000 exceeding Rs. 8,000,000

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(3A) The amount of any gain arising on disposal of immovable property being an open plot shall be computed
in accordance with the formula specified in the Table below:

S.No. Holding Period Gain

1. Where holding period of open plot does not exceed one year A
2. Where holding period of open plot exceeds one year but does not exceed A x 3/4
eight years
3. Where holding period of open plot exceeds eight years 0
Where A is the amount of gain on disposal of open plot.

(3B) the amount of any gain arising on disposal of immovable property being a constructed property shall be
computed in accordance with the formula specified in the Table below:

S. No. Holding Period Gain

1. Where holding period of constructed property does not exceed one year A
2. Where holding period of constructed property exceeds one year but does A x 3/4
not exceed four years
3. Where holding period of constructed property exceeds four years 0
Where A is the amount of gain on disposal of constructed property.

The tax will be calculated on open plot and constructed property at the following rates:

S. No. Amount of gain Rate of tax

1. Where the gain does not exceed Rs. 5 million 5%

2. Where the gain exceeds Rs. 5 million but does not exceed Rs. 10 million 10%

3. Where the gain exceeds Rs. 10 million but does not exceed Rs. 15 million 15%

4. Where the gain exceeds Rs. 15 million 20%

Rates of tax for securities

TY 2018, TY 2019& TY 2020

Securities acquired Securities acquired

S. No. Period
before 01.07.2016 after 01.07.2016

1. 15%
Where holding period of a security is less than 12 months
2. Where holding period of a security is 12 months or more 12.5% 15%
but less than 24 months
3. Where holding period of a security is 24 months or more 7.5%
but the security was acquired on or after 1.7.2013
4. 0% 0%
Where the security was acquired before 1st July, 2013

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