03-Oct-20

Mr. Y requested you to calculate his tax liability from the following information:
i. Taxable salary as a full time teacher from a recognized non-profit educational institution Rs. 8,800,000
ii. Taxable income from other source Rs. 5,100,000
iii. Zakat deducted by the bank Rs. 72,000
iv. Mr. Y received Rs. 8,000,000 through inheritance
v. He made the following donations:
a) Donation to a government hospital in cash Rs. 120,000
b) Donation to a government educational institution through cheque Rs. 80,000
c) Donation to a private charitable approved institution through cheque Rs.1,200,000
d) Donation of Rs. 50,000 paid to an institution specified under clause 61 Part I 2nd Schedule.
vi. He purchased the following shares:
a) Shares of a listed company as an original allottee Rs. 420,000
b) Shares of a private company as an original allottee Rs. 90,000
c) Shares of a private company through Privatization Commissioner of Pakistan Rs. 150,000
vii. He jointed an approved pension fund (APF) during the year and contributed Rs. 2,850,000 towards APF
viii. He paid mark up to HBFC Rs. 670,000 during the Year

Mr. Y
Salary 8,800,000
Income from other sources 5,100,000
Total income 13,900,000
Less: Zakat deducted at source 72,000
Donation to am instituted at source 50,000
Mark up paid to HBFC 670,000 792,000
Taxable income 13,108,000

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 03-Oct-20

Tax liability (Non-Salaried Case)

Tax on Rs. 6,000,000 1,220,000
Tax on Rs. 7,108,000 @ 35% 2,487,800
3,707,800
Less: Full time teacher allowance (as per working) 386,250
3,321,550
Less: Rebate on donation
3,321,550 / 13,108,000 x 1,280,000 324,350
2,997,200
Rebate on shares
3,321,550 / 13,108,000 x 570,000 144,437
2,852,763
Rebate on APF
3,321,550 / 13,108,000 X 2,621,600 664,310
Tax liability 2,18,453

Working of full time teacher allowance:

Salary Income 8,800,000

Tax liability (Salaried case)

Tax on Rs. 8,000,000 1,345,000
Tax on Rs. 800,000 @ 25% 200,000
1,545,000
Full time teacher allowance 25% of Rs. 1,545,000 386,250

Note:
- Amount received through inheritance is capital receipt and therefore not taxable.
- Donation to a Government Hospital in cash is not entitled for rebate.
- Share of a private company even if acquired as an original allottee is not entitled for rebate.

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 03-Oct-20

Pakiza Ltd (PL), an unlisted public company, was engaged in the business of producing dairy products in
Public. On 1.7.2018, PL established a new factory in Badin where the Federal Government has allowed
one-year tax exemption to all new businesses. PL imported plant and machinery for its new factory at a
cost of Rs. 8,200,000 from Japan. PL received a Provincial grant of Rs. 1,000,000 against installation
charges of the machinery in Badin whereas the actual expenditure on installation amounted to Rs.
700,000. Transportation cost of Rs. 200,000 was paid for bringing the machinery to the factory. During
installation, one of the parts was damaged which had to be replaced at a cost of Rs. 45,000. PL also paid
a premium of Rs. 50,000 for insuring the machinery against fire and theft. A cost of Rs. 5,000,000 was
incurred towards construction of building and Rs. 1,200,000 for the acquisition of furniture and fittings.
The factory was completed by the end of June 2019 and commercial production was started.

Required: Under the provisions of the Income Tax Ordinance, 2001 compute tax depreciation which PL
may claim as deduction in computing its taxable income for the year ended 30.06.2020.

Notes:
(a) Normal tax depreciation and initial allowance are required to be calculated even if the income is
exempt for any tax period.
(b) Government grant is specifically granted against installation charges. It is not income and required
to be deducted from installation charges of machinery but excess grant if any is chargeable to tax in
the tax year in which it is received.
(c) Rs. 45,000 incurred for the replacement of damaged part is a revenue expenditure and charged to
profit and loss account
(d) Insurance premium against fire and theft is a revenue expenditure.

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 03-Oct-20

Calculation of depreciation:
Plant Building Furniture
Rate of normal depreciation for tax year 2020 15% 10% 15%
Rate of initial allowance 25% -- --
Rs. Rs. Rs.
Cost 8,200,000 5,000,000 1,200,000
Installation charges 700,000
Government grant against installation charges (700,000)
Transportation cost 200,000
8,400,000
Initial allowance in tax year 2020 (2,100,000) -- --
Normal tax depreciation in tax year 2020 (945,000) (500,000) (180,000)
Opening tax WDV for tax year 2021 5,355,000 4,500,000 1,020,000
Total tax depreciation including initial allowance is Rs. 3,725,000

a) Loss under any head of income except capital loss and speculation loss can
be set off against any other head of income. However, loss can not be
adjusted against (i) Salary Income (ii) Income from property; and (iii) FTR.

Business 900,000
Other sources (70,000)
Taxable Income 830,000

Other sources 800,000

Speculation business (90,000) C/F (80,000)
Taxable income 800,000 700,000
620,000

Speculation loss can not be set off against any non-speculation income.
However, any non-speculation loss (other than capital loss) can be set off
against speculative gain. Same principles are applicable for capital gain.

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You are requested to calculate tax liability of a your client who is manufacturing company. The
pertinent information as follows.

a) Supplies made with tax deduction u/s 153 @ 4% Rs. 25,000,000

b) Imports of raw materials – tax paid u/s 148 @ 5.5% Rs. 30,000,000
c) Exports made with tax deduction u/s 154 @ 1% Rs. 50,000,000
d) Local sales without tax deduction Rs. 60,000,000
e) Gross profit Rs. 5,000,000
f) Profit and loss expenses Rs. 500,000

Tax at source has already deducted when required.

Sales GP Expenses Taxable income

Rs. Rs. Rs. Rs.
Local Sale of manuf. Good 85,000,000 3,148,148 314,815 2,833,333 - NTR
Exports 50,000,000 1,851,852 185,185 1,666,667 FTR

Taxable Income 2,833,222

Income Tax@ 29% 821,667
Minimum tax @ 1.5% 1,275,000
Whichever is higher 1,275,000
Tax under FTR u/S on exports 50 million x 1% 500,000
Tax Liability 1,775,000
Less: 5.5% of import value of Rs. 30 m 1,650,000
Tax deducted on supply of goods 1,000, 000
Tax deducted from exports 500,000 3,150,000
Refundable income 1,375,000

Minimum tax c/f for five year Rs. 1,275,000 – Rs. 821,667 = Rs. 453,333