Tax Book 2023

Chapter 21 ___ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2022)

Answer

Rupees

Salary (500,000 x 6) 3,000,000

Leave encashment 600,000

Arrear for 2020 & 2021 3,000,000

Following options are available to Jamal (Salaried individual): Option 1: By applying applicable tax rate to total

taxable income - Tax year 2023

(^476) ____ _ _Conceptual Approach to Taxes
Arrear for 2020 & 2021 3,000,000
Total taxable income 6,600,000
Tax computations:
On Rs. 6,000,000 1,005,000
On balance [(6,600,000 - 6,000,000) 32.5%] 195,000
Tax liability under option 1 1,200,000
Option 2 Rupees
Salary (500,000 x 6) 3,000,000
Leave encashment 600,000
3,600,000
Tax computation - Salary
On (Rs. 2,400,000)On (Rs. 2,400,000) 165,000 165,000
On balance [(3,600,000 - 2,400,000) x 20%] 240,000
405,000
Tax on amount received in arrear for the tax year 2020
Received in 2020 3,200,000
Received in 2023 1,300,000
4,500,000
Tax on Rs. 3,500,000 370,000
On balance Rs. 1,000,000 @ 20% 200,000
570,000 570,000
(404,500)
165,500
Tax on amount received in arrear for the tax year 2021
Received in 2021 3,800,000
Received in 2023 1,700,000
5,500,000
Tax on Rs. 5,000,000 670,000
On balance Rs. 500,000 @ 22.5% 112,500
782,500
Already paid (300,000)
482,500
Tax payable for arrears (165,500+482,500)Tax payable for arrears (165,500+482,500) 1,200,000 1,200,000
Total tax payable
(405,000+165,500+482,500)
1,053,000
Tax saving (1,200,000-1,053,000) 147,000
Note: Since Provident fund is recognized, it is fully exempt.
Conclusion:
Jamal should select option 2 as it would result in tax saving of Rs. 147,000 (1,200,000 - 1,053,000).
(^476) __ ___ _Conceptual Approach to Taxes