Practical Example - 1

From the following information provided by Mr. Hamid, compute income

chargeable to tax under the head “capital gains”. (Ignore holding period of
the assets)

a. profit on sale of finished goods Rs. 100,000.

b. Gain on sale of jewellery Rs.50,000.
c. Gain on sale of personal car Rs. 350,000.
d. Gain on sale of Antique Rs.10,000
 Practical Solution - 1

Mr. Hamid
Computation of taxable income and tax liability:

Capital gains: Rs.

Gain on sale of jewellery 50,000
Gain on sale of antique 10,000
Taxable income 60,000
Note: Item (a) and (c) have not been considered, as the same are not
capital assets
 Practical Example – 2

Which of the following capital assets are securities?

1. Jewellery
2. Shares of private company
3. Shares of public company
4. Painting
5. Musharika certificates
6. Vouchers of Pakistan Telecommunication corporation
7. First day cover
 Practical Solution – 2

Item No. 3, 5 and 6 are securities, whereas the others fall in the definition
of capital assets u/s 37.
 Practical Example – 3

Following information has been provided by Mr Ali:

Rs.
Consideration received on sale of share of a private company 96,000
Purchase price of the shares 20,000
Expenses incurred on purchase of shares 2,000
Expenses incurred on sale of shares 3,000

Required: Compute income chargeable to tax under the head “capital

gains” assuming:
(a) Holding period of the shares is 8 months.
(b) Holding period of the shares is 15 months
 Practical Solution – 3

Solution (a) Rs.

Consideration received 96,000
Less: Cost of shares:
Purchase price 20,000
Expenses on purchase 2,000
Expenses on disposal 3,000
25,000
Gain on disposal of shares (totally chargeable to tax as sold 71,000
within one year)

Solution: (b) Rs.

Actual capital gain as above = 71,000
Taxable capital gain (71,000 x 3/4th) = 53,250
 Practical Example – 4
Mr Amir purchased 10,000 shares of a private limited company in tax year
2013 for Rs. 100,000 tax year 2019 he transferred 5,000 shares to his
wife under an agreement to live apart. Further he has gifted to his son
2,000 shares and sold remaining shares for Rs. 60,000. Compute taxable
income of Mr. Amir under the head capital gain for tax year 2019.
 Practical Solution – 4

Mr. Amir
Tax year 2019
Rs.
Capital gains:
3,000 shares sold for Rs. 60,000 60,000
Less: cost of 3,000 shares sold (100,000 x 3,000 / 10,000) (30,000)
Total capital gain 30,000
Taxable capital gain 3/4th of Rs.30,000 22,500

Note: No gain or loss has been recognised on disposal of 5,000 shares to

his wife under an agreement to live apart and gift of 2,000 shares to his son.
 Practical Example – 5
C Following information is related to Mr. K. (All amounts are in rupees).
Assuming he has no other taxable income, compute tax payable by Mr. K.
for tax year 2019.

Consideration
Purchase FMV at the Holding
Capital asset received on
price time of sale period
disposal
Shares of private 50,000 40,000 60,000 6 months
company

House 1 1,000,000 1,500,000 1,500,000 1.5 years

House 2 1,500,000 2,000,000 2,000,000 3 years
 Practical Solution– 5
Mr. K
Computation of taxable income and tax liability:
Shares of private company: Rs.
Consideration on disposal (higher of FMV or actual amount) 60,000
Purchase price (50,000)
10,000
House 1:
Consideration on disposal (higher of FMV or actual amount) 1,500,000
Purchase price (1,000,000)
500,000
House 2:
(Holding period is more than 3 years,
hence nothing is taxable in case of house 2 ____-_____
Income taxable under NTR 510,000
Less: chargeable to tax under SBI 500,000
10,000
Tax liability (Income is below taxable limit),
hence tax liability is zero -
Tax liability under SBI (500,000 x 5%) 25,000
Total tax liability 25,000
 Practical Example – 6

Mr. Adnan sold some shares in tax year 2019. Detail of gain or loss on sale is given
below:
Gain / (loss)
Rs.
(a) Shares of Alpha Chemicals (Pvt.) Ltd. 100,000
(Holding period is 15 months)
(b) Shares of Beta Industries Ltd.
(Unlisted public Company) (60,000)
(Holding period is 6 months)
(c) Shares of Omega Limited (Listed Company) 10,000
(Holding period 9 months shares acquired
after July 01, 2016)
(d) Shares of Delta Limited (Listed Company) 20,000
(Holding period 18 months shares acquired
before July 01, 2016)

Required: Compute taxable income and tax liability for tax year 2019.
 Practical Solution – 6
Mr. Adnan
Computation of taxable income and tax liability: Rs.

Capital gain:
Gain on shares of Alpha Chemicals (Pvt.) Ltd.
(Holding period is more than 1 year) (100,000 x 75%) 75,000
Loss on shares of Beta Industries Ltd. (Unlisted Public Company)
(In case of loss, holding period has no effect) (60,000)
Taxable income 15,000

Computation of tax liability:

Tax on taxable income (Below taxable limit) Nil
Tax on income under separate block of income:
Tax on gain on shares of Omega Ltd.(10,000 x 15%) 1,500
Tax on gain on shares of Delta Ltd.(20,000 x 12.5%) 2,500
Total tax liability 4,000
 Practical Example – 7
From the following information, compute the amount of capital loss to be
carried forward, if any
Taxable capital gain 40,000
Capital loss 80,000

Note: Out of given capital loss Rs. 20,000 relates to capital asset that is
exempt from tax.
 Practical Solution - 7
Total capital loss 80,000
Less: capital loss of exempt capital asset 20,000
60,000
Less: Taxable capital gain 40,000
Capital loss to be carried forward 20,000
 Practical Example – 8
From following information compute taxable income and tax liability of Mr.
A.
Rs.
Gain on sale of painting 40,000
Loss on sale of jewellery 20,000
Loss on sale of shares of an industrial undertaking in EPZ 10,000
 Practical Solution– 8

Capital gain chargeable to tax is Rs. 40,000.

Loss on sale of Jewellery is not recognised.

Loss on sale of shares of industrial undertaking in Export Processing

Zone (EPZ) shall also not be recognized as gain on such shares is
exempt from tax.