Tax Book 2023

Insurance Business Chapter- 25

2,180,000

Less

Lease rentals 655,000

Taxable Income 22,525,000

Computation of tax liability

Tax on Taxable income Rs 22,525,000 @ 29 % 6, 532 , 250

Total Tax 6, 532 , 230

Note: No super tax has been computed as the taxable income under section 4C is less than Rs. 150

million during the tax year 2023.

Example:

ABC and Company Ltd. deals in life and General Insurance business. Followings are brought from

accounting records.

Accounting profit before tax Rs. 42.390 m

Dividend income Rs. 1.5 m

Provision for claims Rs. 5 m

Accounting depreciation Rs. 8.586 m

Tax depreciation Rs. 9.380 m

Profit on debt from securities of Federal Government Rs. 0.312 m

Claims are paid out of provisions but not claimed as deduction Rs. 2 m

Amount of provision for claims ceases to be so reserved Rs. 0.998 m

Remuneration exp of chief executive Rs.0.840 m

Remuneration of chief executive disallowed by SECP Rs. 0.199 m

Payment of re-insurance premium to an overseas re-insurance company

Without the deduction of with-holding Tax (@ 5%) Rs. 1.75 m

Capital gain from sale of PTC vouchers issued by the Govt. of Pakistan

(where the holding period of such vouchers is 7 months) Rs. 0.897 m

Loss on disposal of Modaraba certificates Rs. 0.543

Solution:

ABC Insurance Company Ltd.

Computation of taxable income and tax liability

For the tax year 20 23

Income from business Rs.

Profit before Taxation as per P and L Account 42,390,000

Add back: Depreciation for separate consideration 8,586,000

Amount of provision for claims ceases to be so reserved 998,000

Remuneration of chief executive disallowed by SECP 199,000

Payment of insurance premium to an overseas re-insurance company 1,750,000

53,923,000

Less: Depreciation admissible as per rules 9,380,000