Professional Documents
Culture Documents
1. Salary 2. Employee share scheme 3. Income from property 4. Capital Gains 5. Final Tax Regime 6. Tax Credit 7. Income From Business 8. Tax on Tax 9. Losses 10. Minimum Tax 11. AOP
PREFACE
Al-Hamd-O-Lillah, the 2nd addition of Short Notes on Income Tax has been completed. These notes have been prepared under the senior guidance of my dearest teacher Mr. Imran Shehzad (ACA) sb, who guided me through the way in the preparation of such quality notes for the students of Module-C. In these note, I covered almost all the material areas covering upto 50 to 60 marks in the paper including numerical calculations and fair presentations of the conceptual queries frequently asked by the ICAP-Examiner. These notes include: a) Salary b) Income from property c) Income from business d) Capital Gain (37 & 37A) e) Income from other sources f) Final Tax Regime I try to retain the focus of the ICAP-examiner in paper construction relative to the marks allocation as: Topics Individual or AOP Conceptual queries Marks 20-25 30-35
I recommend to study these notes with reference to INCOME TAX & SALES TAX Khalid Petiwalas Notes.
I hope my efforts will help you to retain maximum marks in your examination. Utmost efforts have been made to make these notes free from errors, yet there is always a room for improvement. Any suggestion from you will highly be appreciated. Kashif Nawaz
Page 2
TABLE OF CONTENTS
Sr. no. Topics
1 2 3
Page no.
36 37 39
12
15
40
13
16
43
15
17
45
19
18
22
19
25
20
Tax on Tax
57
10
27
21
59
11
Amortization
35
22
Page 3
Part A Profile of Assessee Name: NTN : (1) Personal Status I. II. III. IV. Salaried Non-Salaried AOP Company
Part B Computation of Income Salary ( U/S 12 ) Income From Business a) Speculative b) Non-Speculative Capital Gain ( U/S 37 ) Income From Other Sources Less: WWF WWPF Zakat Donations U/S 61 Add: Income from property Capital gain ( U/S ) 37 A Total Income ( excluding share from AOP ) Add: Share from AOP Total Taxable Income
Part C Computation of Tax Liability Rs. Tax on Tax Able Income Tax on person Add : Income Prom Property Capital Gain ( U/S ) 37A Tax Credits: Less: Allowances (xxx) (xxx) (xxx) xxx xxx xxx
(2) Residential Status I. II. III. IV. Resident Non-Resident Pakistan source Foreign Source
Senior Citizen Allowances (xxx) Full time Teacher Allowances (xxx) Foreign Tax credit (xxx) (xxx) Less : Average Relief xxx xxx xxx Investment in shares Contribution to PF Donation Profit On debt Less; Advance Tax xxx XXX Collection of Tax Deduction of Tax Advance Tax ( u/s 147 ) Tax Payable /Refundable
(3) Tax Year I. Normal tax Year II. Special Tax Year
III. Transitional Tax Year
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Ordinance
Schedule
Explanation
STATUS
Personal Status
Residential Status
Individual
AOP ( 25%)
Company ( 35%)
Resident
Non Resident
Salaried
Non Salaried
Salaried Person :
Total Salary Income . X 100=If answer is >50%,then salaried person. Total Taxable Income
Company incorporated in Pakistan , provincial govt. , and local govt. are resident Other companies are resident if control and management affairs are situated wholly in Pakistan.
Resident :
183 or more days Half day consider full day NOTE: Only transit days are excluded.
SCOPE OF TAXABLE INCOME 1. Resident Both incomes are taxable 2. Non resident Only Pakistan source income is taxable
Page 6
TAX YEAR
1-10-2008-to 30-09-2009
Whenever there is a change in tax year the period in between the normal tax year and special tax year is treat as transitional tax year
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Page 8
SALARY
Any kind of benefit transfer or given by employer to employee will be taxed and it will be add in the salary income of the employee.
Components of salary
Basic Salary
Perquisites
Allowances
Others benefits
Terminal benefits
T.T
H.R.Allowance ( T.T ) Conveyance allowance ( T.T ) Medical allowance (exempt upto 10% of B.S)
Perquisites
1) ACCOMMODATION :
45% of BS or Actual Expense of employer(rent) ( whichever is higher = add in salary )
2) Conveyance: Only for office use Owned ( cost ) I. Personal II. Personal + Business use Leased ( FMV ) I. Personal II. Personal + Business use 3) Medical Facility : a) Facility Given
i. ii.
( T.E ) (T.T )
b) Re-imbursement c) Insurance
Amount contributed by employer will be added in salary
By : Kashif Nawaz Jakhar Page 9
FMV of Asset payment by employee = add in salary Nothing will be added in salary, if no additional cost incurred by the employer
Note : unapproved conditions or exemptions will be not applied on the following Cases.
i. ii. iii. Non employee Non resident Not received in Pakistan Re-employment
iv.
Page 10
Note:
Employer contribution (p.a) 10% X ( BS + DA ) Whichever Or 100,000 is lower Interest on Acc. Balance (p.a ) 1/3 X ( BS + DA ) Whichever Or 16% X Acc.Balance is lower
Rs.
XXX (xxx) XXX (XXX)
Rs.
XXX
add in salary
XXX
add in salary
Note : Acc. Balance = Employee cont. + Employer Cont. + interest Formula ::: ( For calculate missing figure ) Interest = Acc. Balance X Rate If any figure missing we can calculate with the help of above formula .
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Example : Persons
Kashif Rameez Farhan
2010
Option sale = Rs.5000 Option sale of 200 shares @ sale price Rs. 3000
2011
Acquisition of shares Balance(300) Acquisition Sale Rs.60/ share
2012
Sale = Rs. 70
On march 2010. FMV = Rs. 50/share Offer value = Rs. 30/share No. of share = 500 shares Advance = 2 per share On march 2011 FMV= Rs.40/ share
SOLUTON:
Persons Kashif Rameez
2010 4000 X X X
Farhan
2600
{3000-(200 X 2 )
SP-FMV=70-40=30 X X
CAPITAL GAINS
Definition : The Gain from Disposal of Capital Assets. C A B
Explanation:
a) Gain
b) Disposal
c) Capital Assets
Sale price/FMV --- cost of disposal I. Sale with in one year ,100% add in taxable income II. Disposal after one year ,75% add in salary
Capital Assets : are not capital assets Immovable Intangible Depreciable Stock-in-trade Other movables ( cars )
These o o o o o
So, After one year 25% of gain is Exempt. & 75% of gain is taxable
These are Capital Assets o Shares o Debentures o Shares of Private company o Shares of AOP o Membership cards of stock exchange
Capital Gains
37
37 A
Shares of public limited company Redeemable debentures Modaraba certificates PTC vouchers Derivatives
Gain/Loss
Gain
Taxable income in case of Gain I. Disposal within year, 100% add in taxable income. II. Disposal after one year , 75% add in taxable income.
If these assets sold With in 6 months = 10% of gain is taxable With in one year = 7.5% of gain is taxable After one year = No tax
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Non recognition rule: under the following conditions income is not taxed. 1) Inheritance 2) Gift 3) To transfer to a spouse 4) In case of dissolution of a company
1) 2) 3) 4) 5)
etc
Page 14
1. NTR :
Just add the income on the basis of persons and applied tax.
PERSONS I. Individual Salaried Non Salaried II. AOP 25% III. Company 35% Incomes should be under there related head of incomes Revenue Expense = Income Sale price purchase price = income Return file in case of NTR. 2. FTR :
No expenses are allowed e.g. Revenue = income No heads of incomes Tax rates are independents for persons No loss Income is Tax on gross basis Statement file in case of FTR.
Note
i.
Dividend for o Individual o AOP Shall be considered under FTR Dividend for o Company Shall be considered under NTR. So for companies the dividend shall be recorded under the head of Income from business in case of banking business.
ii.
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e.g.
Net dividend after deducting Tax and Zakat is Rs. 875 Calculate gross dividend . Solution : Formula : 875 . X 100 = 1000 87.5
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Important Terms
Deduction Of Tax Collection Of Tax Advance Tax Final Tax 1. Deduction Of Tax:
Deduct from Income Payer will deduct the Tax in case of deducting authority Income over which Deduction of Tax Applied Supply of Goods , Dividend , Services , Price winning , Salary , Export
2. Collection Of Tax :
Collect from expense Services provider will collect the tax Expenses over which Collection of tax applied Cell phone payment , imports D I C E = = = = Deduction from Income Collection from Expense
Formula to Remember
The items which fall under NTR ( according to law ). So the tax deduct or collect on such items is Advance tax
The items which fall under FTR ( according to law ). So the tax deduct or collect on such items is Final tax.
4. Final Tax :
( FTR )
Withholding TAX
Aisa tax jo kisi bhi source say collect ya deduct hova hoo.
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Option to pay tax @ 1% of Sale as Final Tax. Compulsory to pay as final tax
Condition
Turnover > 5 m but < 10 m Turnover > 10 m
Rate of Tax
Rs.25000 + 0.5% of Turnover > 5 m Rs.25000 + 0.75% of Turnover > 10 m
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TAX CREDIT
Tax liability Less: Senior citizen allowance Less: Full time teacher allowance Less: Foreign Tax Credit Less: Less: Less: Less: Investment in shares Pension fund Donation Profit on debt Rs. XXXX (xxx) (xxx) (xxx) . A . (xxx) (xxx) (xxx) (xxx) XXXX (xxx) XXXX (XXXX)
Invest. In shares
Actual Amount Lower 15 % 500,000
Pension Fund
Actual Amount 20 % ------
Donation
Actual Amount 30 % ------
Profit on debt
Actual Amount 50 % 750,000 % of taxable income
FORMULA :
A X Lower = Tax credit Taxable Income
.
.
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Eligibility amount
Then his tax liability shall be reduced by 50%. Then his tax payable shall be reduce by 75%.
A full time teacher ; or A researcher of a recognized non-profit educational or research institution including government training and research institution .
then the taxpayer shall be allowed tax credit in respect of foreign income tax paid by him as lower of:
Foreign income tax paid; and Pakistan tax payable in respect of foreign source income at average rate of tax. actual 15 % of T.I Rs.500,000 actual 20% of T.I
Investment in shares
o o o
Shares must be of listed Comp. Must be original allottee Did not dispose in one year Approves Institution Govt. hospital Not trough CASH May be direct or by cheque. Eligible person (u/s 19A ) PF must be approved Loan for house build. Loan from bank or financial institution
o o o
Lower
Contribution fund
to
pension
Lower
Donation
Lower
Profit on debt
Lower
Note 1 :
Tax Payable xxxxx Less: Senior citizen allowance (xxxxx) Less: Full time Teacher allowance (xxxxx) Tax Payable ( Note 1 ) xxxxxx
Lower will be deducted from tax payable
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Income
( 5 % discussion)
Deduction
( 95 % Discussion )
Exempt
Non speculative
Special
(Separate Calculation)
Depreciation
Amortization
Pre-commencement
Conditionally e.g. * salary in certain condition paid through cash * Tax is deducted
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Rs.
1000 50 20
1070
1070
Rs.
300 100 40 70 30 510
Particulars
Sales Closing Stock
Rs.
1000 50
1050
Rs.
500
100
(90)
Taxable Income
510
Page 23
Common Expenses
NTR
Income under FTR ( no expenses allowed ) = Rs. 500,000 Income under NTR ( expenses are allowed ) = Rs. 337,778 Formula for calculate Expense: Sale(under NTR) Total Turnover
X Expense = xxxx
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In-Admissible Expenses
Not Allowed Expenses:
Following expenses are not allowed TAX : Income Tax Sales Tax Advance Tax Violation Of Law ( Penalty )
Salary or other benefit by AOP to its members are not allowed. Salary Paid Notes : o Salary , commission o Deducting the authority but did not deduct tax o Then the tax expense not allowed. TRADING LIABILITY Those liabilities which effect the P & L A/C e.g. a. Cash To Loan XXX XXX XXX XXX ( Capital Liability ) . ( Trading Liability ) . ( Trading Liability ) .
AOP
Page 25
DONATION
INCOME U/S 61 of 2nd Schedule Less: ( as Zakat ) Rate: 30 % TAX Donation to approved institution. e.g. Govt. hospital ( Chapter #2) Rate: 30 % Conditions: o Do not pay in cash o By cheque o In any kind
Preliminary Expenses:
Trading Liability:
Page 26
DEPRECIATION
Depreciation shall be charged on depreciable assets. Depreciation shall be charged after deducting initial
allowance . FORMULA : ( cost initial allowance ) X Rate of depreciation e.g. ( 100 50 ) X 10% = 5 INITIAL ALLOWANCE ( Rate 50% )
All depreciable assets are also eligible depreciable assets except the following : 1. Furniture and Fixture 2. Transport vehicle not plying(use) for hire e.g. business or rent a car 3. Second time used plant and machinery Note: In Pakistan one asset is : Depreciable + eligible depreciable asset Only for 1st user . For all other users that asset will be only a depreciable asset.
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IMPORTANT NOTES
Initial allowance @ 50% shall be charged on the eligible depreciable assets in the 1st year only. Depreciation shall be charged on reducing balance method.
Depreciation Rates
Depreciation rates are as follows. Rates 10 % 30 % 15 % Assets Building Computer and related equipment All other assets
HINT
Try to compute depreciation in the examination / prepare the depreciation schedule on written down value bases.
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60 %
5,00,000 . 30,000. 5,30,000
NOTE
Full year depreciation charge in the year of
purchase.
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NOTE
Full year depreciation charge in the year of
purchase.
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a(I)
Computation of Depreciation
e.g. numerical example Year
2007 cost Initial allowance(50%) Depreciation(15%) 2008 2009 Depreciation(15%) Depreciation(15%)
Plant
10,00,000
Tax allowance
500,000
b(II)
Computation of Gain or Loss
Assume the plant sold for Rs.500,000 in 2009. now compute the gain or loss. = sale price tax WDV = 500,000 361250 Gain = 138750
its the income from business in 2009. now less depreciation Rs. 54188 of this year from this income .
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a(II)
Asset Partially Used For Business
(assume 60% for business use )
Year
2007 Cost Initial allowance Depreciation(15%) 2008 2009 Depreciation(15%) Depreciation(15%)
Plant
10,00,000 (500,000) 500,000 (75000) 425,000 (63750) 361,250 (54188) 307,062
b(II)
!!!! Calculation of Profit or Loss !!!!!!!!! when !!!!!Asset partially used for business !!!!!
Assume the plant sold for Rs.500,000 .
= sale price Tax WDV = Sale price - ( cost depreciation allowances ) = Sale price [ cost ( initial allowance + depreciation)] = 500,000 [ 10,00,000 583250 ] = 83250 income from business
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( three cases )
Building ( Case 1 )
= sale price Tax WDV = Sale Price ( cost tax Depreciation )
NOTE:
NOTE:
If sale price is above the cost price If a used asset sold, out of Pakistan , then the cost shall be consider as sale price sale price will be consider as cost. So, So, =Sale Price ( sale price tax Depreciation ) = cost ( cost tax Depreciation ) =Sale Price - sale price + tax Depreciation = cost cost + tax Depreciation = Tax depreciation = Tax depreciation It means that the INCOME will be equal to the TAX DEPRECIATION . e.g. Tax depreciation = Gain 500,000 = 500,000
NOTE:
It is assume that the asset , sold at price , at which that was purchased.
Case 3:
CAR
Maximum cost of car is Rs. 1500,000
its not about vehicle . because all cars are vehicle but all vehicles are not cars.
NOTE
Even it is purchased above the Rs. 1500,000 , we will consider Rs. 1500,000 and the depreciation will be calculated on this amount. e.g. Year
2010 Cost Depreciation ( 15 % )
X car
Y car
1200,000 ( 180,000 ) 1200,000 X 15 % 1020,000
20,00,000 ( 225,000 ) 1500,000 X 15 % Written Down Value *1275,000 *Where 1500,000 225,000 = 1275,000
Page 33
NOTE: sale price ki amount utni laini hai , jitni cost ki %age allow ki gai thi FORMULA : n= 1500,000 X 100 cost
So, = sale price Tax WDV and , sale price = 1500,000 X 75% = 1125,000 1500,000 . X 100 20,00,000 Y car
= sale price Tax WDV = 1500,000 10,20,000 Gain = 480,000
X car
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AMORTIZATION
NOTE amortization is allowed on intangible assets. intangible asset--------definition . amortization shall be charged on per day used method. no amortization in the year of disposal the maximum life of a intangible asset is 10 years.
if life exceeds 10 years or unknown , in this case, 10 years will be consider as the life of intangible asset.
e.g. Year Copy Right Purchase price= Rs. 200,000 Life = 7 years Date of purchase . 1-1-2011 Year end = 30 June, 2011 Solution, 2011 = useful life
cost . x days used
Patent Purchase price= Rs. 300,000 Life = 15 years Date of purchase . 1-1-2011 Year end = 30 June, 2011 Solution, =
cost . useful life x days used
= 200,000 . x 181
7 X 365
= 300,000 .
10 X 365
x 181
= 14876 = 300,000 .
10 X 365 x 365
= 28571
= 30,000
BAD DEBTS
Sale to Mr. A for Rs. 100,000 on credit in 2009. it will the income for 2009 under NTR. 2010 : Mr. A didnt pay back. we claim Rs. 100,000 in Tax` Department for allowing us expense.( bad debts ). but tax department allow expense to us Rs. 50,000.
2011:
No. A B C D Situations. (Receipts)
100,000 50,000 Nothing 80,0000
Tax Treatment
50,000 ---Income No treatment 50,000 --- expense allowed 30,000 ---income
Ways of asking question about Bad Debts in exam. 1) Conditions of Bad Debts :
how to claim bad debts in the department.
Formula :
Allowed Actual = + or
NOTE If answer is + then = add in income from business If answer is - then = less from income from business
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Depreciation ( 10,000 )
Capital
Interest ( 1000 )
Insurance ( 500 )
Expense claim in accounting : depreciation Interest Insurance Expense claim in Tax : The amount which paid against lease that amount will be allowed. ( Rs. 50,000 ) 10,000 1,000 500 11,500
Page 37
!!!!!!!!!
ALLOWED EXPENSE debt is utilized for business .its not the part of cost.
SPV
.5 interest Itefaq ( IT ) Investment .5 interest 5 m loan
NOTE NOTE
loan from subsidiary is not allowed . Loan & lease are both allowed to SPV.
BANK
NOTE
If any Income earned by SPV . That income will be exempt because income earning is not its objective.
Originator
6 million
SPV Bank
METHODS OF ACCOUNTING
Company
e.g.
Factor of Production
Material Labour FOH Variable Fixed
Absorptional Costing
50 10 20 10 90
Factor of Production
Material Labour FOH Variable
Marginal Costing
50 10 20 80
Rate : 25 %
Page 39
MINIMUM TAX
Rate :
1 % of Turnover Or Actual Tax Liability income is exempt .
Higher
Turnover :
means,
Sale
Provisions :
1st Year
forward
2nd Year
HINT
Excess of 1 % of T.O from Actual Tax Liability will be advance tax and that excess amount will be deduct in the next year from actual tax liability. And then the remaining of actual tax liability will be compare with 1 % of turn over. Higher of : Actual Tax liability & 1 % of Turnover will be payable. By : Kashif Nawaz Jakhar Page 40
o o o
Hospital or educational institution for the benefit of employees. For the training of industrial workers run by federal or Provincial Government Training of citizen of Pakistan . e.g. PHD
TAX deduct from services as minimum Tax : 6 % at source from gross income. no adjustment or refund shall be allowed.
NOTE :
HINT
Services provided to a person , who is not Tax deducting authority then the said services income is not subject to minimum Tax.
This provision of minimum tax is not applicable for a company , receiving income from services.
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Amount
Monthly bill exceeds Rs.400 but does not exceeds Rs. 2000
Rate
10 % 5%
Page 42
CH # 15 :
LOSSES
in urdu
General concepts :
ENGINE 1
Categories of tickets :
A type ticket B type ticket C type ticket Usage of tickets : explanation in Urdu.
A type ticket:
A type ticket say ap train k box 1 & 2 main baith sakty hain. ager in boxes main jaga na hoo tu ap next any wali 6 ( six ) trains main bhe ap un k box no. 1 & 2 main baith sakty hain. laiken in boxes k elawa ap kisi bhi aor box main nai baith sakty.
B type ticket:
B type ticket say ap mojoda train k kisi bhi box main baith sakty hain. aor ager is train main jaga nai hai tu ap any wali kisi bhi train main nai baith sakty.
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C type ticket:
C type ticket ki madad say ap mojoda train k to kisi bhi box main baith sakty hain laiken ager mojoda train main jaga na hoo to ap next any wali 6 ( six ) trains main un k box no. 3 main hii baith sakain gay.
HINT
for understanding
mojoda train main bathny say morad hai ==== next train main bathny say morad hai
set off
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LOSSES
under NTR. because under FTR losses and expenses are not allowed. HEADS OF INCOMES UNDER NTR
capital gain
other losses.
EXPLANATION:
A type:
B type
can be carry forward but they can by set off only against the incomes of their heads. B type: can be set off only C type: can be carry forward and set off. but they can be set off only in 1st year.
Set off :
other head . Inter head adjustment: adjustment in the same head. Carry forward: Transfer to next year.
By : Kashif Nawaz Jakhar Page 45
Example : 1
Case 1 Rs.(000)
Salary Non-speculative business Speculative Capital gain Other Losses 500 (800) (400) 700 (300)
Case 2 Rs.(000)
500 (900) (400) 700 (300)
Total Income 1200 1200 Requirement : I. Compute taxable income II. amount of loss to be carry forward Solution: I. Case 1 Rs.(000)
Total Income Other losses Non-speculative business 1200 (300) 900 (800)
Case 2 Rs.(000)
1200 (300) 900 (900)
100 ( 400 )
-----( 400 )
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Example : 2
Case 1 Rs.(000)
Salary Non-speculative business Speculative Capital gain Other Losses or Gain 500 (1000) (400) 700 (300)
Case 2 Rs.(000)
500 (1000) (400) 700 300
Total Income 1200 1500 Requirement : III. Compute taxable income IV. amount of loss to be carry forward Solution: I. Case 1 Rs.(000)
Total Income Other losses Non-speculative business 1200 (300) 900 (900)
Case 2 Rs.(000)
1500 (1000)
-------
500 .
------( 400 )
Page 47
If there is gain in 2012 , then use FIFO method of adjustment of losses. 2012 2009 2010 2011 10000 ( 100 ) ( 200 ) ( 500 ) 200 .
Page 48
GROUP TAXATION
as a single fiscal unit. Features of group taxation:
100% owned group of companies locally incorporated under companies ordinance 1984. Loss of any group will be set-off against income of any other group. consolidated group accounts as required under companies ordinance , 1984 will form. I. Basis of computation of income II. tax payable by the person GT relief will not be available to losses prior to the formation of the group. Inter corporate dividend income with in the group companies entitled to group taxation shall be exempt .
Note
GROUP RELIEF
{ surrender of tax loss by a subsidiary company } a subsidiary company may surrender its assessed loss ( excluding b/f loss and capital loss ) for the tax year in favor of its holding company or any subsidiary of the holding company. The holding company shall directly hold , share capital of the subsidiary company as under, 55% or more 75% or more in case of listed companies. in case of non-listed companies.
Note
NOTE
The loss surrender by 1 subsidiary company may be adjusted by the holding company or subsidiary company against its business income in the tax year and the following two tax year. Any un-adjusted loss shall be revert back to the subsidiary company and shall be carry forward in the normal manner.
Page 49
2nd year = 40
S-2
H
LOSS = 100 (surrender)
Listed Company
S-1
loss incurred in 2006 (adjusted in next 6 tax years) 2012.
Assume :
Page 50
Page 51
S H
1st year = 30
2nd year = 40
Benefit
= Rs15
S-2
H
LOSS = 100 (surrender)
Cash Rs.10
S-1
This Cash of RS.10 received by Loss surrendering company will be not treated as income of this company.
shareholder , in one direction , would not be taxable capital gain provided the transfer is , to acquire share capital for the formation of the SECP or STATE BANK has been obtained in this effect.
Page 52
Important Notes
2. In case of income:
partners . 3. If any partner have no income other than the share from AOP ( income from AOP ) then his , this income ( share from AOP ) shall be exempt. 4. if any partner have income other than the share from AOP ( income from AOP ) then his , this income ( share from AOP ) shall be included only for tax purpose. 5. For checking individual status share from AOP shall be excluded. 6. For calculating full time teacher allowance share from AOP shall be excluded. 7. For average relief share from AOP shall be included.
Rules For
1. Investment in shares 2. Donations 3. Contribution in
pension fund 4. profit on debt
Assume for Investment in shares : 10% of Taxable income 300,0000 Actual And :
Lower
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Rate of share
20% 30% 50%
Business Income
500,000 ------------500,000
Requirement : compute taxable income of AOP and its members. Also compute tax payable .
Solution :
(i) Mr. A Rs. business income Add: share from AOP Total Taxable Income Tax Liability Tax on Rs. 650,000 @ 10% Less: 500,000 150,000 650,000 65000
Tax ( individual) . X share form AOP Taxable Income ( individual ) 65000 . 650,000 X 150,000 Tax Payable ( 15000 ) 50,000 .
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( 93750) 212500
Page 55
General Format of
RS
XXXX XXXX XXXX XXXX XXXX ( XXX ) ( XXX ) XXXXX ( XXXX ) XXXX .
RS
XXXXX
: : : :
XXXXX XXXXX XXXXX (XXXX) (XXXX) (XXXX) XXXXX (XXXX) (XXXX) (XXXX) (XXXX) XXXXX (XXXX) XXXXX
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TAX ON TAX
Tax of employee paid by the employer.
Impacts:
Tax Born by Employer
Compute:
Cases
Example
Case 1: Total salary = 500,000 Tax employee paid by employer = 10,000 Explanation : According to Tax department the tax paid by the employer , will be income of the employee because , it was basically the expense of employee . So now the Total salary of the employee will be Rs.510,000 instead of Rs.500,000. Assume Tax on Rs. 510,000 is Rs. 12,000. and paid by the employer. so now Total salary = 500,000 Tax employee paid by employer = 12,000 According to Tax department the tax paid by the employer , will be income of the employee because , it was basically the expense of employee . So now the Total salary of the employee will be Rs.512,000 instead of Rs.500,000.
By : Kashif Nawaz Jakhar Page 57
NOTE
the same calculation should be repeated for minimum 3 times Maximum 5 times After the repeated calculations now the individual will calculate tax as below. The following figures are assumed figures. Taxable Income = 500,000 Tax paid by employer = 13050 Total taxable Income Tax on Rs. 513050 @ 2.544% Advance Tax ( paid by employer ) 513050 13050 13050 ------
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Mr. Y ( 50% )
10 40 200
Total
60 40 400
250
This amount will be added in the income from other sources of the Mr. X only for Rate purpose
250
If we assume that Mr. Y have no any source of income other than share from AOP. So in this condition the share from AOP for Mr. Y will be exempt
500
Distributable Income
Calculation of distributable income taxable Income ( AOP ) Less: Tax liability Distributable income 1200 (700) 500
THE END
By : Kashif Nawaz Jakhar Page 59