Chapter 21 ___ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2022)
(ii) Rs. 4,000,000 from unapproved provident fund. 50% of this amount was contributed by Sajid.
(iii) Un-approved gratuity of Rs. 2,500,000.Required:AnswerHe also acquired the vehicle, provided to him by SCL, at accounting written down value of Rs. 500,000. The market value
of the vehicle at the time of retirement was Rs. 2,000,000.Under the Income Tax Ordinance, 2001 and Rules made there under, discuss the tax treatment of the above benefits
received by Sajid on retirement(^488) ____ ___ _Conceptual Approach to Taxes
Answer
Q.1 Autumn 2019
The benefit received by Sajid on his retirement would be treated as follows:
(i) Leave encashment comes under the definition of salary and therefore it would be fully taxable.
(ii) Since the amount was received from unapproved PF, the employer's contribution and interest on accumulated balance
would be taxable in the year of receipt.
(iii) In the case of unapproved gratuity, exemption is available up to Rs. 75,000or 50% of the amount receivable whichever
is lower. Therefore, the amount to be included in Sajid's taxable income would be Rs. 2,425,000 (2,500,000?75,000).
(iv) Since the market value of the vehicle was more than cost of acquisition the difference i.e. 1,500,000 would be included
in his taxable income.
Rupees
Basic salary 600,000
Medical allowance 66,000
In addition to the above, he was also provided the following:
Q.1 Autumn 2019
Saeed, a citizen of Pakistan, was working on a foreign vessel belonging to Delta Shipping Company (DSL) based in Spain
for the past three years. His monthly salary was USD 15,000 which was remitted to his Pakistani bank account through
normal banking channel. The amount received during the tax year 2023 was converted to Pak Rupees at an average
exchange rate of USD 1 = PKR 131.
On 1 October 2022, he resigned from DSL and joined Haris Pharma Limited (HPL) in Pakistan as a General Manager. He was
offered following monthly salary and allowance in HPL:
(i) Bonus equal to two monthly basic salaries. However, bonus amount was adjusted in proportion to the duration of his stay in
the company. The bonus amount was paid to him on 5 July 2023.
(ii) Two company maintained cars. Both cars were purchased on 1 October 2022. The car costing Rs. 3,500,000 was
Other information relevant to tax year 20X9 is as under:
(ii) During the year, he received dividends of Rs. 575,000 from a listed company. The amount was net of withholding
income tax at the rate of 15% and Zakat of Rs. 62,500 deducted under the Zakat and Usher Ordinance, 1980.
(iii) Withholding tax deducted by HPL from Saeed’s salary during the tax year 2023 amounted to Rs. 1,300,000.
(iv) A special allowance of Rs. 20,000 per month to meet expenses wholly and necessarily incurred in the
performance of his official duties. Actual expenses incurred by him during the year were Rs. 150,000.
(ii) Two company maintained cars. Both cars were purchased on 1 October 2022. The car costing Rs. 3,500,000 was
used for official purposes whereas the car costing Rs. 1,900,000 was used for personal purposes.
(iii) Free lunch from the restaurant owned by one of HPL’s directors. The fair market value of food provided to him
during the year was Rs. 125,000.
(v) Provident fund contribution of Rs. 60,000 per month. An equal amount per month was also contributed by Saeed
to the fund.
(i) On 1 December 2022, Saeed obtained a loan of Rs. 25 million from a scheduled bank at 15% mark-up per annum to
acquire a residential house.
Answer
Rupees
Income from salary
Received from HPL
Basic salary (Rs. 600,000 × 9 months) 5,400,000
(iii) Withholding tax deducted by HPL from Saeed’s salary during the tax year 2023 amounted to Rs. 1,300,000.
Under the provisions of the Income Tax Ordinance, 2001 and Rules made there under, compute under the appropriate
head of income, the total income, taxable income and net tax payable by or refundable to Saeed for the tax year 2023.
Saeed
Computation of total income, taxable income and net tax payable/refundable
For tax year 2023
Required:
(^488) ____ ___ _Conceptual Approach to Taxes