Banking Business Chapter- 27
Total advance tax paid for the tax year 20 23 16,500
Solution:
XYZ Banking Company
Computation of taxable income and tax thereon
for the tax year 20 23
Income from business Rs. (in “000”)
Profit before Taxation as per P and L Account 48,000
Add: Accounting depreciation 9,000
Bad debts (N-1) 750
Provision for bad debts (N- 2 ) 999
Outstanding liability not paid over last 3 years ending on 201 8 1,500
Head Office expenditure charged to the branch (in accounts) 3,855
Total 64,104
Less: Admissible depreciation by the taxation authority 10,500
Provision for bad debts (N-2) 666
Amount paid for outstanding liability 875
Admissible Head Office expenditure (N-3) 3,212.5
Total business income 48,850.5
Tax liability
39 % tax on business and other income (48,850,500 x 3 9 %) 19,051.70
Less: Advance tax 16,500
Total tax liability 2,551.70
NOTES:
N- 1 Bad debts are not allowed as deduction
N- 2 Provision for bad debts is allowed maximum to 1% of total advances, it shall be calculated as
Provision for bad debts = Total Advances x 1%
= Rs. 66,600 x 1%
= Rs. 666
N- 3 Head Office shall be allowed as deduction according to the following formula
Head Office expenditure = (A / B) x C
= (Gross receipts of branch in Pakistan / World gross receipts) x Total Head
Office expenditure= Rs. (320,000 / 1,280,000) x 12,850
= Rs. 3,212.5
N- 4 Loss on sale of shares of listed company shall be adjusted against business income in the 1st year
the loss was occurred. The un-adjusted loss on sale of shares of listed company brought forward
from first year shall be adjusted against Capital gain only.
N- 5 No super tax has been computed as the taxable income under section 4C is less than Rs. 150 million
during the tax year 2023.