Chapter 21 ___ Solved Past Papers Income Tax Numericals of CA Module C - (2001 to 2022)
(1) Income from ZGC
Khursheed was employed with ZGC up to 31 December 2022. During this period he received the
following emoluments:
- BasicsalaryofRs.400,000permonth,medicalallowanceofRs.75,000permonthandutilityallowance
equivalent to 10% of basic salary.
- Acompany-maintainedcarforofficialandprivateuse.Thecarwaspurchasedtwoyearsagoatacostof
Rs. 5 million.Accordingtothecompany’spolicy,ZGCdeductedRs.10,000permonthfromhissalary,for
private use of the car.(^536) ____ ___ _Conceptual Approach to Taxes
- Rs. 7,500,000 as a golden handshake under the voluntary retirement scheme.
- Rs. 9,100,000 from an unapproved gratuity fund maintained by ZGC.
The tax deducted at source for the tax year 2023 amounted to Rs. 3,750,000.
(2) Other Information
Duetopoorhealth,Khursheedoptedforearlyretirementon 31 December 2022 underthecompany’s
voluntary retirement scheme. He received the following benefits on his retirement:
- Transferofcompany’scarforRs.2,600,000.Theamountwasdeductedfromhisfinalsettlement.Thefair
market value of the car as of 31 December 2022 was Rs. 2,800,000.
On 31 July2022,KhursheedhadundergoneamajorsurgeryandincurredanexpenditureofRs.1,500,000.
ZGC reimbursed the entire amount as a special case as it was not covered under the terms of employment.
(2) Other Information
- He incurred a loss of Rs. 500,000 on the sale of his shareholdings in a private limited company.
- He sold his personal car at a profit of Rs. 300,000.
- Hepurchased 5000 sharesforRs.500,000frominitialpublicofferingofanewlistedcompanyon 1 June
2022.HeclaimedataxcreditofRs.60,000onsuchinvestment,againstthetaxpayableforthetaxyear2022.
On 15 June 2023, he sold these shares for Rs. 700,000.
- On 1 January2023,Khursheedcommencedbusinessofmarketingofhorticulturalplantsandrelated
items.However,duetointensecompetition,hehadtowind-upthisventureon 31 May2023.Duringthis
period, he had incurred a loss of Rs. 750,000.
- On 1 March2023,hepurchasedanapartmentforRs.5,000,000.60%ofthisamountwasfinancedbya
scheduledbank.Duringthetaxyear2023,hepaidmarkupamountingtoRs.127,500.On 1 April2023,he
rentedouttheflattoMr.AbdulSattaratamonthlyrentofRs.25,000andreceivedadvancerentforeight
- His average tax rate for the preceding three years is 13%.
Required:
(b) Briefly comment on the items which are not considered by you in the above computation.
Solution:
Mr. Khursheed
Tax year 2023
INCOME FROM SALARY U/S 12 Note Rupees Rupees
rentedouttheflattoMr.AbdulSattaratamonthlyrentofRs.25,000andreceivedadvancerentforeight
months.
(a) Compute the amount of taxable income, tax liability and tax payable / (refundable), if any, for the tax year
2023.
INCOME FROM SALARY U/S 12 Note Rupees Rupees
Basic salary (Rs. 400,000 × 6) 2,400,000
Utility allowance (400,000 × 6 × 10%) 240,000
Medical allowance (75,000 × 6) 450,000
Less: Exempt up to 10% of basic salary (240,000) 210,000
1,500,000
125,000
(60,000) 65,000
Golden handshake payment 7,500,000
9,025,000
200,000
21,140,000
INCOME FROM PROPERTY U/S 15
Rent (Rs. 25,000 × 3 months) 1 75,000
Less: Amount deducted from salary (10,000 × 6)
Company maintained car (5,000,000 × 5% × 6/12) U/R 5
Gratuity (Rs. 9,100,000 - Exempt upto Rs. 75,000)
Difference in purchase value and FMV of vehicle as benefit for
employee
Medical reimbursement (totally taxable as not covered by the
terms of employment)
(^536) ____ ___ _Conceptual Approach to Taxes