Tax Book 2023

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

Q.NO. 1 Autumn 2009

Income from MPL

(i) Monthly remuneration:

Rupees

Basic salary 280,000

Medical allowance 45,000

Mr.Zulfiqar,aseniorexecutiveofMirzaPetroleumLimited(MPL),retiredonMarch31, 2023 aftercompletion

ofnineteenyearsofdedicatedservice.ThedetailsofMr.Zulfiqar’sincomeforthetaxyear 2023 aregiven

below:

(^544) ____ _ _Conceptual Approach to Taxes
Medical allowance 45,000
Utilities allowance 45,000
Cost of living allowance 25,000
Total monthly salary 395,000
Market value of rent free accommodation provided 120,000
(iv) He is receiving pension amounting to Rs. 50,000 per month from the date of his retirement.
Other Information
(ii) As per terms of employment, tax liability of Mr. Zulfiqar to the extent of Rs. 200,000 is to be borne by
MPL.
(iii) On his retirement, he received gratuity of Rs. 2,660,000 from an unrecognized gratuity fund maintained by
MPL.
Other Information
(viii) Rs. 500,000 were invested in new shares offered by a listed company.
(ix) He paid mark up amounting to Rs. 250,000 on a house loan obtained from a scheduled bank.
(x) He incurred a loss of Rs. 20,000 on sale of a painting.
(v) He is also receiving pension of Rs. 12,000 p.m. from a multinational company where he worked from
1984 to 1999.
(vi) A plot inherited from his father was sold for Rs. 5,000,000. Fair market value of the plot at the time of
inheritance was Rs. 1,000,000.
(vii) On January 1, 2023, he rented out one of his residential bungalows to a private school for Rs. 100,000
per month and received advance rent for two years.
Required:
(a) Compute taxable income and tax liability of Mr. Zulfiqar for the tax year 2023.
(b) Briefly comment on the items which are not considered in the above computation.
Solution:
Tax Year Ednded on : June 30, 2023
Rupees Rupees
INCOME FROM SALARY
Name of Taxpayer : Mr Zulfiqar
National Tax Number :
Tax Year : 2023
Personal Status : Individual
Basic salary (Rs. 280,000 x 9 months) 2,520,000
225,000
Salary for provident fund 2,745,000
405,000
(252,000) 153,000
Utilities allowance (45,000 x 9 months) 405,000
Rent free accommodation (N-2)
1,134,000
200,000
2,660,000
75,000 2,585,000
Less: exempt upto 10% of basic salary U/C 139 (Rs. 2,520,000
x 10%)
Gratuity from an unrecognized gratuity fund exempt upto lesser
of 75,000 or 50% of amount received
Tax liability of Mr. Zulfiqar to the extent of Rs. 200,000 is to be
borne by MPL
Less: Lesser of Rs. 75,000 or (50% x Rs. 2,660,000 =
1,330,000)
Higher of Rs. 120,000 or (45% x Rs. 2,520,000) will be taxable
Cost of living allowance (Rs. 25,000 x 9 months)
Medical allowance (Rs. 45,000 x 9 months)
(^544) __ ___ _Conceptual Approach to Taxes