Tax Credits Chapter- 15
Computation of taxable income and tax thereon Rs.
Income from salary 300,000
Income from other sources 8 ,500,000
Profit on Behbood Saving certificates 80,00 0
Taxable income 8 ,880,000
Taxpayer is a non-salaried person (salary income is less than 75% of taxable income).
Computation of tax liability
Tax on Rs. 8 ,880,000 [1, 33 0,000 + 3 5 % x ( 8 ,880,000 – 6 , 00 0,000)] 2, 338 , 000
Less: tax credit (if any for senior citizen and full time teacher) 0
2, 338 ,0 00
Reduction in respect of Behbood Saving Certificate (Note – 1) 12,072
2,215, 928
(Note – 1) : Reduction in respect of Behbood Saving Certificate:
Proportionate tax on Behbood saving certificate
Tax after tax reductions / taxable income x profit on Behbood Saving certificates
(2, 33 8, 000 / 8 ,880,000 x 80,000) 21,063
Tax @ 5 % [80,000 x 5 %] 4 ,000
Excess tax (to be allowed as reduction in tax) 17 ,0 63
Important note: It in worthwhile to mention here that where the proportionate tax liability under NTR
on Behbood Saving certificates is less than the amount computed on such profit at 5 % then no tax
reduction shall be computed and the same reduced tax is to be paid by the taxpayer.
22. Tax credit for tax already paid or deducted at source [Section 168(5)]
A person shall be allowed a tax credit for advance tax already paid or collected or deducted at
source. If amount of this tax credit is more than the tax liability, then excess shall be refunded to the
taxpayer in accordance with section 170.
Master example covering all the tax credits:
Calculate tax liability of Mr. Hamid Sarfraz (66 years old, resident person) from following data
available.
Rs.
Salary from Punjab University as full time teacher 6 00,000
Income from other sources (Taxable) 100,000
Taxable income from business in foreign country 100,000
Tax paid in foreign country in respect of above business income 20,000
Property income (Net amount after admissible deductions) 200,000
Zakat deducted at source 6,000
Zakat paid to relatives 40,000
Donation paid to approved charitable institution 12,000
Furniture donated to a Government Hospital with FMV 90,000
Shares acquired from privatization commission of Pakistan. 60,000
Share from AOP 150,000Solution:
Pakistan source income: Rs. Rs.Salary income
600,000
Income from other sources 100,000
Property income (Net amount after admissible deductions)