RIPHAH INTERNATIONAL UNIVERSITY

Course: Taxation Academic Year / Session: Spring Dated: 21-03-2020; Submission date: 29-3-2020
2020
Assignment No.: 02 Class: M.Com Total Marks: 07

Q. 1: Mr. Hamid, a citizen of Pakistan, is working with Zee (Pvt.) Limited, a multinational hotel as their head of
marketing for the last 15 years. He has provided you with the following information for the year ended June 30,
2020.

1. Break up of monthly salary is as follows:

Rupees
Basic Salary 500,000
Medical Allowance 75,000
Utility Allowance 50,000

No entitlement for free medical reimbursement is provided by the company. The basic salary received does not
include a onetime amount of Rs. 200,000 given by Zee (Pvt.) limited in cash on behalf of Mr. Hamid, as a
donation to a hospital established by the Government of Punjab.
2. Salary and allowances are deposited into each employee’s bank account on the 5 th working day of the following
month
3. A company maintained car for office and private use is also provided. Hamid pays Rs. 10,000 per month for the
private use of the car. For this purpose a new Mercedes was purchased on 01 January 2016, for Rs. 3,000,000.
Hamid purchased the car from the company at it book value of Rs. 900,000 in 31 October 2019 as per the
company policy. Market value of the company at that time was Rs. 1,500,000
4. On 31 October, 2019, Hamid opted for early retirement. On his retirement, in addition to the monthly
remuneration, he received Rs. 2,000,000 as a golden handshake payment. Hamid’s average rate of tax on his
taxable income for the last three tax years was 5%
5. On 01 April, 2020, Hamid left for Dubai and commenced employment on the same day with Kee (Pvt.) Limited,
an associated company of Zee (Pvt.) Limited. He was paid per month salary of Rs. 300,000. Following his
departure, Hamid returned to Pakistan for the first time on 09 August 2020 for Eid holidays.
6. Hamid was due Rs. 5,000,000 as a gratuity under the gratuity scheme of Zee (Pvt.) Limited. The scheme was not
approved by the FBR. Due to cash constrains, the gratuity though due to Hamid on 31 October 2019 was not
paid to Hamid. On 30 April, 2020, at the request of the Zee (Pvt.) Limited, Kee (Pvt.) Limited transferred the
equivalent of Rs. 5,000,000 in US dollar into Hamid’s US dollar account in UAE in lieu of gratuity due from Zee
(Pvt.) Limited.
7. Hamid was also entitled for a pension of Rs. 50,000 per month from Zee (Pvt.) Limited
8. Hamid paid Rs. 750,000 to Rozee.pk recruitment consultants in Pakistan to help him secure his employment in
Dubai
9. Hamid made a cash payment of Rs. 250,000 on account of Zakat under the Zakat and Ushr Ordinance, 1980
10. Hamid was entitled to lunch at the hotel’s restaurant where the usual charges are Rs. 1,500 per person. He is
entitled to a concessional rate of Rs. 100 per day, which is deducted from his salary. Total number of working
days during his employment with Zee (Pvt.) Ltd were 80 during tax year 2020
11. Hamid received a certificate of deduction of tax on his salary of Rs. 1,500,000

Required:

Give brief reasons for the

Compute Mr. Hamid’s taxable income and tax payable for the tax year 2020.
treatment of any item excluded from taxable income / liability
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