Tax Book 2023

Chapter 30 Solved Past Papers Income Tax Numericals of ICMAP Stage IV - (2003 to 2018)

· Monthly salary of Rs. 465,000 was paid to him by the company consisting of the following:

Rupees

300,000

30,000

135,000

465,000

Utility allowance (@ 10%)

House rent allowance (@ 45%)

Basic salary

SoftexPakistanLimited(SPL)isarenownedlistedcompany,operatinginPakistan.Assumeinthe

taxyear2023,thecompanyhasannouncedtheredundancyschemetoitsemployeesatdifferent

levelofmanagementinordertodecreaseitscostandincreaseitsoperationalefficiency.Mr.Israr

RazahasbeenworkingasaheadofthedepartmentinInformationTechnologyDepartmentofSPL

forlasttenyears.HeoptedtheschemeandresignedfromthecompanywitheffectfromApril01,

2023. He has provided the following information relating to his assessment:

Companymaintained,an1800cccarwasprovidedtohimbothforbusinessandprivateuse.The

carwaspurchasedthreeyearsagoatamarketpriceofRs.2,500,000.ItwasallowedtoMr.Israrto

Conceptual Approach to Taxes _____755

Rupees

Compensation under the redundancy scheme 3,500,000

Gratuity under unapproved scheme 2,200,000

.        
Tax of Rs. 1,197,000 was withheld by SPL from the above payment.
Additional Information:
Following further information is also available:

carwaspurchasedthreeyearsagoatamarketpriceofRs.2,500,000.ItwasallowedtoMr.Israrto

purchasecaratanaccountingbookvalueofRs.1,000,000.Heboughtthecarfromthecompany

and sold in the open market at a price of Rs. 1,500,000.

· Monthly fuel of 250 litres and communication allowance of Rs. 5,000 per month were allowed

during the year.

· Mr. Israr incurred actual medical expenses of Rs. 120,000 during the year which were

reimbursedtohimbythecompanyequaltoonebasicsalaryinaccordancewiththetermsofhis

employment.

·SPLwaived25%ofhisoutstandinginterestfreeloanbalance ofRs.2,400,000whichwas

providedtohimonJuly01,2022,whiletheremainingloanwasadjustedfromhisfinalsettlement.

He has received the following payments from the company:

• Mr.Israrhasahouse,whichheletouttoDigitalLtd.since 2022 atamonthlyrentofRs.80,000,
  includingRs. 10,000forthe servicesofaservant. Duetoadispute overcertainrepair issues

Rupees

includingRs. 10,000forthe servicesofaservant. Duetoadispute overcertainrepair issues

regardingtherentedhouse,DigitalLtd.hasnotpaidRs.140,000outofrentpayableforthemonth

ofJanuaryandFebruary2023.Mr.IsrarsentalegalnoticetoDigitalLtd.eithertopaytheRs.

140,000orvacatethehouse.DigitalLtd.vacatedthehouseonJune30,2023.Followingarethe

expenditures/ deductions in respect of the house in the year ended June 30, 2023.

Conceptual Approach to Taxes _____755