Chapter 5 : INCOME FROM PRO : PERTY Section 15) The rent recéived or recei 7 eivab! . source of income and is eae by a person for a tax year is the le und ; other than the rent which is aot inder the head income from property, from tax. Explanation Property means constructed building or land. Building means block of brick or stone work coveredby roof. Land means vacant plot used for erecting temporary huts or for storing materials. Rent means any amount received or receivable by the owner of lend or a building for its use or the right to use its occupation. The amount of Tent shall not be less than the fair market rent. It means that where the land or building is let on rent and the actual amount of rent received or receivable is less than the fair market rent then fair market rent shall be taken as the amount of rent. The ebove shall not apply where the fair market rent is included in the income of the lessee (tenant) chargeable to tax under the head salary. amount of rent determined on the basis of Fair market rent means the min e a rent fetched by sitnilar property in the same or similar locality at that time. Pro r ting the A\ ! ' era eas cara rent means and includes the following: i i by the owner of land or a t received or receivable by the f land : tau et its use or the right to use its occupation, is the amount of rerit. 2. Any forfeited deposit building is also include mount of Rent paid under a contract for the sale of land or .d in the amount of rent. 3. Any obligation of the owner paid by the tenant, jn inst rent. A: Gen teeth (10) af the avec not adjustable 98a!income Tax ES Mr Aslam is the owner of the building which is let out to Mr. for Rs. §,000 per month on 1" July 2017. During the year he contracted Mr. Bashir for the sale of building for Rs. 100,000 and received Rs. 10,000 ag token money and agreed to pay the balance amount at the end of the year, | Before the date of maturity, Mr. Bashir breaches the contract and a5 per terms of agreement token moncy paid is forfeited by Mr. Aslam. % Calculate the income from property of Mr. Aslam for the year ended 30™ June 2018. Solution i Amount of rent received (Rs. 800012), * Rs. 96,000 Amount of token money reccived . 10,000 © Total amount of rent chargeable to tax 106,000 Note: For income tax purposes forfeited amount becomes a part of the rent and is chargeable to tax under the head income from ” property. Unadjusted Advance Received by the Owner {Section 16] The unadjustable advance received by the chargeable under the head income from property eccording to the following procedure: 1. Where the owner of a building receives from his tenant an advance amount which is ndt adjustable against the rent payable by the tenant, such advance amount shall be treated as rent and is ! chargeabie to tax under the head “income from Property” for the fax year in which it was received and the following nine tax years — in equal proportion. (Section 16(1)] B 4 1 ] ERSREs Mr. Saleem rented out his Property to Mr. Akram for Rs. 7,500 pet month on 1" July 2017. He also received unadjustable advance amount 10 Rs. 90,000 from Mr, Akram. The rental value of the property was determined 28 Rs. 100,000 by the tax authorities, = Calo the income from property of Mr. Saleem for the year ended ume 2018. :INCOME FROM Property Solution Rent value of property th of unadjustable advance under section 16(1) (90,000 x4) Total amount of rent chargeable to tax Note: Rs. 9,000 will be added to the rental value of property for ten con- terluous tax years unless the amount of advance is refunded back. 2. Where an amount is refunded by the owner to the tenant on termination of the tenancy before the expiry of ten years, nO portion of the amount shall be allocated to the tax year in which it is refunded or to any tax year thereafter. Th Mlustration 2 above, Mr. Akram vacated the property on 30 June 2018 and the amount of advance Rs. 90,000 was refunded to him by Mr. Saleem. The rental value of the property was determined 25 Rs. 120,000 by the tax authorities. What will be the income from property for the year ended on 30 June 2018? Solution Income from property for the tax year 2018 will be RS. 120,000 because _ as explained above one tenth advance will not be added in the income during the tax year it is refunded or after that. However, it miust.be noted that no credit will be provided for Rs. 18,000 taxed during the last two years. 3. Where after vacation of property by one tenant, it is let out to another tenant and after returning the advance to the previous tenant, another similar advance is taken from the succeeding tenant, the: amount of succeeding advance as reduced by the amount of previous advance charged to tax, shall be deemed to be the income of the taxpayer under the head “income from _ ‘Property’. This amount will be charged to tax during the tax year. WEEE Suppose in Llustration 3 above, Mr. Saleem again rents out the property - ont" July 2018 to Mr. Ali for Rs, 12,000 per and receives advance amounting to Rs. 120,000. Calculate the income Property for the tax year ended on 30” June 2019. cc” 'twcome TAX Solution | Rental income from property (Rs. 12,000 x 12) Rs. 1 +4 of (new advance - portion of old advance already charged to tax) 1,20,000 ~ (29% _10.209 : 10 Total rent chargeable to tax 154.200 © 4. Any burden of the owner (i.¢., municipal taxes and other local taxes) paid by the tenant. 4 5. Where the property is let out and tenants bear the cost of repairs in that case the amount of repairs becomes the part of the rent and. is chargeable to tax. Liability in Case of Co-Owner {Section 66] - Where any property to which section 15 applies is owned by two oF more persons and their respective shares are definite and ascertainable, such person shall not be assessed as an association of persons. In this case, the share of each such person is the income from property and shall be includeo in his individual total income. Income from Property not Taxable under Section 15 ’ Rental income from the following properties are not taxable under section 15 rather treated under section 39 as “income from other sources”: 1. Groundrent. + : 2. Rental income from building kept on lease together with plant and machinery. 3. Rental income derived by subletting a building or land by # tenant. ‘ & 4. Mining right and royalty. 1 5. Provision of amenities, utilities or any other service connected with renting of building. Income from Property Exempt from Tax Rental income from the following property is exempt from tax: 1, Income from agricultural building. 2. Income from property held under Trust. 3. Rental value of owner’s occupied residential property. 4 Rental value of owner’s occupied business property.INCOME FROM Promery The amount receiv, Association of other wxable i ed as income Persons upto Re. income under any Taxation of Incume from Property After the fair market v be reduced by certain stat other relating tules are as from property by an individual or 200,000 in a tax year and has no other head will also be exernpted. lutory deductions. The allowable deductions and. follows: Deductions (Section 15A(1)] company it shall be as followes. These ‘ed in case of individuals and Association of persons. In case rent of Property is being received by a c entitled to certain allowances and deductions which are deduction are not allow Repairs Allowance {Section 15A(1)(a)] A deduction of one fifth of rent chetgeable to tax for the year will be allowed as repairs allowance. This amount will be calculated before any deduction is made. It is a fixed amount irrespective of actual expenditure on Tepairs which may be more or less. Insurance Premium [Section 1SA(1}(6)] The amount of any premium paid or payable by the any in the year to insure the building against the risk of damage or destruction will be allowed. Municipal Taxes and Other Local Taxes {Section ISA(IMe)] Any local rate, tax, charge, or cess in respect of the Property or let out Property paid or payable to any local authority or government in the year, not being a tax payable under the Income Tax Ordinance, 2001. Ground Rent [Section 1SA(1\@)] Where is subjected to a ground rent, the amount paid or Payable a eee in the year on account of such ground rent is allowable deduction. ns where the person is a lessee in respect of the site on which Pas caitine algae: any rent which is due whether paid or not Le that i prcaiiad ground rent. Where the building site belongs to compen’ 5 liability on account of ground rent can arise in that case.14 IWOOME TAX. Profit Paid or Payable on Borrowed Money [Section 1 SACI (af Any profit paid or payable by tho person in the year on money bop rowed for the purchase, construction, renovation, extension or reconstructiog — of the property can be deducted. Share of Rental Income Pald to Financial Institution [Section 15A(1\/)} Where the property has been purchased, constructed, renovated, extended or reconstructed by the person with capital contributed by the House 1 Building Finance Corporation or a scheduled bank, the amount of ‘any share ] of rental income paid on such capital and share towards appreciation in the value of property (excluding the return of capital, if any). 4 Profit Paid or Payable on Mortgage [Section 15A(1Xg)] Where the property is subject to mortgage or other capital charge, the amount of profit paid or payable on such mortgage or charge. : £ Administration and Collection Charges [Section 1SA(1XA)] Any sum paid or payable by the company on account of administration and collection charges to collecting the rent or 6% of the rent chargeable to tax before allowing any other deduction, whichever is less, is deductible from the rent chargeable to tax. me ILLUSTRATION 5 Rent chargeable to tax 72,000 Administration and Collection charges 1,000 Solution ” Rent chargeable to tax (RCT) Less Repair charges +" of RCT 14,400 (Rs. 72,000 x 4) Administration and Collection charges Actual expenditure (Rs. 1,000) or 6% of RCT (Rs, 4,320), whichever is less, i.e, deducted 1,000 Jn this case, the amount j i Rs. 1,000 which i allowable deduction, [f coimeaen eee oes aINCOME FROM PROPERTY: 145 the rent chargeable to tax then it is restricted upto 6% and if the collection charges are less than 6% of the RCT then actual amount-spent is allowance. Legal Expenses {Section 15A(1)(} Any amount paid or payable by the company in the tax year for legal services acquired to defend the person's title of the property or any suit connected with this matter in a court of law can also be deducted from the rent chargeable to tax. Unrealized Rent {Section ISAC] If the rent payable by a tenant cannot be recovered by the owner of the property, such unrealized rent is deductible subject to the following conditions: 1. The tenancy is bona fide. 2. The defaulting tenant has vacated or steps have been taken to “compel him to vacate the property. 3. The defaulting tenant is not in occupation of any other property of the company. 4. The company has taken all reasonable steps fo institute legal proceedings for the recovery of the unpaid rent. Recovery of Unpaid Rent (Section 1SA(2)] Where an unpaid rent allowed as a deduction and subsequently during any tax year the company has recovered wholly or partly of such rent, the amount so Tecovered shall be chargeable to tax in the tax year in which it is recovered. Deduction Allowed but not Pald within 3 Years [Section 1SAG)] Where a company has been allowed a deduction under section 15(A) and the same has not been paid within 3 years of the end of the tax year in Which the deduction was allowed, the unpaid amount of deduction shall be "chargeable to tax in the tax year immediately after the end of the three years. Deduction Allowed and Paid In the Subsequent 3 Years [Section lsaees The unpaid amount of deduction which was chargeable to tax in » subsequent tires yours, shall be allowed as deduction inthe tx year in which hii the payment is made.146 INCOME TAK Deduction Allowed under Section 15 Not Deducted under any Other Head ; The allowances and deductions under section 15(A) shall not allowed as deduction for the purpose of computing income of the under any other head. : Deductions not Allowed (Section 15A( The provision of section 21 shall apply in determining the i allowed to a person under this section in the same manner as they apply to the allowances and deductions in respect of income chargeable under the head’ “income from business”. TAXATION PROCEDURE OF COMPANY FOR TAX YEAR 2019 After the above deductions are made the remaining amount will ie included in the total income of a company , and will be taxed at the rate applicable for the tax year 2019 @ 29%. = ADVANCE TAX ON RENT PAID TO A COMPANY Irrespective of the property taxation under the above mentioned procedure, the person making the payment of rent to a company deduct. advance tax at the rate of 15 % of the gross amount of rent for filer companies and 17.5% for non-filer companies. TAX YEAR 2019 ILLUSTRATION 6 sg Business income of Allied Services Limited (a public company) during the year ended 30" June 2019 is Rs. 4,36,75,000. The company has rented out a property at the rate of Rs. 18,00,000 P.M. and is a filer Following further details are available, Ground rent paid for property 16,00,000 Repair expenses on property 980,000 Collection charges paid for the property 20,00,000 Advance tax withheld by tenant 32,40,000 Required Calculate the total income of the company and its tax payable.FROM Property 147 Solution Allied Services Ltd Mes year 2019 ‘ax year ended Status : Resident Pasa Computation of total income and tax payable, Income from property (Section 15) Rent received @ 18,00,000 p.m. 2,16,00,000 Less :Deduction and allowances Repairs allowance (1/5 of 2,16,00,000) 43,20,000 “Ground Rent paid 16,00,000 Collection Charges 2000000 (maximum 6% allowed ) 21600000 @ 6 % 2,96,000 72,16,000 Taxable income from property 1,43,84,000 Income from Business (Section 18) 4,36,75,000 Total Income of the company 2.92,91,000 Tax payable Income tax on Rs. 2,92,91,000 @ 29% 84,94390 Less advance tax withheld by tenant 32,40,000 + §2,54,390 Note: 1. Repairs allowance is to be given as 1/5 of RCT , irrespective of the actual expenses incurred by the company. 2. Maximum limit of collection charges is 6% of RCT. 000) ie. 3. The tenant will deduct 15% of gross rent Cea 26a ) Rs. 32,40,000 as advance tax and pay it to the abe . 32,40, 4, Allied Services Ltd. will adjust this advance tax aga ee, rate of tax for company is 29%. 5. For the tax year 2019 onward” year ended June 30, 2019 ive (pvt) limited company provides the following details Income from Business 45,73,56,000 Income from dividend 112,000 Income from property rented out 32,69,95,000 Insurance premium paid on property 52,35,800 Rental income paid to H.B.F.C 1,78,50,000 * Ground rent paid 24,79,000 Repair expenditures 2,50,00,000 Muncipal tax paid 45,76,500 Unrealized rent 98,00,000 Calculate the total income and tax payable by the company . Note: 1, Company is an active tax payer 2, Company has made all possible efforts but failed to collect the amount which is now claimed as unrealized rent. 3. Advance tax withheld @ 15 % of gross tax by tenant. Solution Supportive (pvt) limited Tax year 2019 Tax year ended June 30, 2019 Status; Resident (Filer) Computation of total income and tax payable. Total Income : Income from property (Section 15) —32,69,95,000 Less: allowable deductions Repairs allowance (1/5" of RCT) F 1/5" of 32,69,95,000 6,53,99,000 Insurance premium on property 52.35,800 Share to profit passed to H.B.F.C 1,78,50,000 Ground Rent paid 24,7 Muncipal tax paid can Unrealized Rent 00, 10,53,40,300 Taxable income from property Income from business (section 18)149 INCOME PROM Property r 90,1 Total taxable income from property and busine: 97.09.19,209 (i) Rate of income tax fer propery and bu: 19,69,13,103 29% of Rs. 67,90,107 O7,h 5, Less advance tax withheld by tenant 4,99.49,250 14,78.63,853 Tax on dividend @ 15 »% (112,000 @ 15 %) 16,800 Note: » Tax on dividend for filer is 15 % 2. Actual expenses of repairs are not considered - Deductions fro m™ Property income are allowed only in case of companies, 4. The tenant will deducted @ 15 % of gross rent (326995000@ 15 %) ie. Rs. 49049250 as advance and Pay it to the authorities. wo TAX YEAR 2020 Xation of income from proy Me as in tax year company should a WO different rates for fi lished. ly receiv: 9. However ILLUSTRATION U3 Triumph company is a . Public limited ce MS property Constructed in §, ompany engaged in re; Ning out 7 Bodha by its equity and loan from bank in 2015. On s* December 2019 the Company got itself Fegistered at Lahore Stock Exchange. The details Tegarding property for the "Ax year 2020 is ag ‘ollows: Income from Property Rs. 13,12,52,000 Rental value determined by Muncipal Committee 15,00,00,000 Collection expenditure paid 35,96,000 surance Premium paid 97,86,500 Amount paid to bank an borrowed Money @) Retum of principal amount 87,75,000 Gi) Interest on borrowed amount 41.23.25,000 2,11,00,000 Calculate the ‘ax payable by the company, Name of the company appears in Active taxpayers’ list (ATL).130 econ Tat Solution iumph Company Limited Tax year ended June 30, 2020 ’ Status: Resident (Filer) Computation of total income and tax payable. le Income Ta al Rental (value of company 15,00,00,000 (Rent received of determined by local ‘Authority whichever is higher ) Repairs Allowance 3,00,00,000 (always 1/5* of RCT) Collection Charges (maximum limit 6% of RCT) 6 % of 15,00,00,000= Rs. 90,009,000 So within limits Insurance premium paid 97,86,500 Interest on money borrowed for construction (reum of principal amount is not allowed) Taxable income 9.22.92.s00 F 1 2 & 8 s Tx @ 29 % on Rs. 94292500 27344825 | Less advance tax withheld by the tenant | @1S % of gross rent (150000000@ 15%) 2 | Less Tax credit on enlistment Tax payable fer the ve ee co ‘Note:-~ 1. ihe gow ee on enlistment in Stock Exchange the sade 2. The tenant ion 65C in the chapter of Income from Business. deduct @ 15% gross rent ie. Rs. 22500000 3. For * the tax year 2020 rat of tax for company will be 29%.(SSE ‘Ceramics (pvt) Limited has cared income fro i a to Rs. 7,50,56,000 during the ax year 2020. mm business sont, Itis also has & plaza situated in Faisalabad . The ‘ plaza amounts 10 Rs 4,75,43,000. ee reneledle: Ses He claims the following deductions: Property repair expenses 43,24,200 Lawyer fee to defend the title of property 60,50,000 Insurance premium of the property 14,77,500 Property tax paid 54,22,300 Tax with held by the tenants @ 15% 71,31,450 Rental Income paid to HBFC 36,00,000 Administrative and collection charges 29,00,000 Calculate total income and the tax payable by the company for the tax year 3020. The company is,a non filer. Solution Ceramics (Pvt Limited Tax Year: 2020 Tax Year Ended: June 30, 2020 Residential Status: Resident Computation of Tax Payable Computation of Taxable Income Rs. Income from property (section 15) tn Annual rented value of property 4,75,43,000 88; Allowable deduction and allowances Repairs allowance (fixed as 1/5" of A.R.V. the property Repair expenses will-be ignored) EP Lawyer's fee 60,50,000 __ Rental Income paid to HBFC a 6,00,000 Administrative and 2 Collection charges 29,00,000 Collection charges S%OARY. co not to be exceed(COME Tax 152 6% of 4,75,43.000 is ntlowed Property tax paid i id Insurance premium pai Total Deductions 2.89.10.989 (4,75,43,000 - 2,89,10,980) Total Income of Property ' 186.32, Income from Business (Section 18) . Total income of Ceramics (Pvt) Ltd, 9.36, Ba £2y Tax payable (29% 0f 9,36,88,029) Less Tax withhe! 2.71,69.59¢ Id on Property @ 15 % Of gross rent (47543000@ 15% -) 2131 ag WM Tax payable with Tetum 5 cae ! Notes: 2.00.38 6 6 i y Rate afta from companies for the tax year 2¢9 / 2. Tax to be wi ithheld o; 15% in all cases for 1 Property for Y INCOME Fo AND ASSOCIATION OF PER RTHET R 2019 , a) Individua) and Association Of persons have Tent received je No deduction js allowed to th Q) "The nie of Y for individuals ani follows:- Rate of Tax Where the Bross amount of rent | Nit NOt exceed Rs. 200,000 the gross amount of tent 0,000 but de S percent of gross amma 600,000 eS not | exceeding Rs. 200,000 je ere the gross om Unt of rent [Rs 20,000 plas 10 P exceeds Rg. 00, gross * 000,000 but does Not} of the 0 Exceeds Rs, 10,00,000 exceeding Rs. 600,00 — eeeoss amount of exceeds Re. 10,00,000 but does Not exceeds Rs. 20,00,000 Where the gross amount of exceeds Rs, 20,00,000 ce Be. 60000 plas 7 of the gross amount exceeding Rs. 10,00,000 Rs. 210,000 plus 20 percent of the gross amount exceeding Rs. 20,00,000 The amount calculated above will be the final tax payment in tespect of Income from property. The remaining income will be taxed separately. Mr. Khan owns a property which he has rented out for Rs. 10,000 per onth. The local authority has determined the rental value of the property as s. 144,000. He has no other income. equired What will be the fair market value of the property? How much tax will be payable by Mr. Khan for the tax year 2019? a 000 Rs. 120,000. Rental |. Rent received from property @ Rs. 10,000 p.m. = Rs. 120,009- Rent value determined by local authority = Rs. 144,000, whichever is higher, so fair market value is Rs. 144,000. 2. Mr. Khan is an individual, property Income Yess than Rs. 200,000 so no tax.. - = TSE ERTS siculars relate to, Mt. Abdu Rehman. Calculate the i 2019: tax payable by him for the year ending 30" June ns 720,000 Tomes 72,000 Utilities allowance a Bonus . 32,000 Travelling allowance 31,500 Gross rent from property 480,000 Property tax paid 25,000 __ Collection charges 40,000 ‘Solution Mr. Abdul Rehman Tax Year: 2019 Tax Year End Personal Statu 10" June 2019 Individual (Salaried Person) Residential Status: Resident Computation of Tax Payable - } Income from Salary (Section 12) : 720,000 cate mi Utilities allowance 72,000 Travelling allowance 31,500 - Income form property 480,000 —_—. (to be taxed separately) Total Income 824.000 Computation of tax on total income Rs. - Tax on Rs. 800,000 to 12,00,000 2,000 Tax on Salary 2,000 Add: Tax on property income 480,000 Tax on Rs. 200,000 Nil Tax on balance Rs. 280,000 @ 5% 14,000 14.000 Total tax payable 16,009 Note:Income from Property is separate block of income and no deduction is allowed in case of individuals and Association of Persons, aE Mr. Saad received the follow ing income for the year ended June 30, 2019. Calculate his tax payable, Basic salary per month Rs. 24,000 Bonus 6 months salary Medical facility a Rs. 35,000 Toss fent from Property(Mark-up on house loan Rs. 10,000) 480,00 Dividend Teceived 2,00INCOME FROM PROPERTY Donation to approved charitable donation Note: 1, Mr. Saad has been provided with a conveyance for his personal as well as official use. The employer purchased the car for Rs. 13,60,000 2. He is a non-filer. Solution Mr. Saad Tax Year: 2019 Tax Year Ended: June 30, 2019. Residential Status: Resident (non filer) Computation of Tax Payable Income from Salary (Section 12) Rs. > Rs. Basic salary @ Rs. 24,000 PM 288,000 onus @ Rs. 24,000 x 6 144,000 Medical facility 35,000 Conveyance facility (5% of Rs. 13,60,000) $8,000 Total Salary Income 500,000 Income from Property (Section 15) Property income 480,000(Separate rate of tax) so Taxable Income 500,000 Gross tax on salary income Rs. 400000 to Rs. 800000 1,000 Add; Tax on property income @ 5 % exceeding Rs. 200,000 (480000-200000) 280,000 @ 5% 14,000 . 15,000 Average relief Doriation to approved institutions 60,000 (within limits 30 % of total income) 13000. 38000000000, 918 Tx a payable 14,082 T = 4x on dividend 20 % of Rs. 12,000 2.400 Palincome TAX 156 Notes: ed ig salaried person. : 1. Mr. Saad Joan isnotallowed. = x Nakane dy a ie me | i mae filer . ‘ 7 non filer. of 4, es is allowed in case of property income of individual a3 Le re averngS relief= Normal taxable income : {600.000) + property income(480000) = Rs. 980,000. | tly constructed an office complex for the | * ey Fer tle boxe 2019, following information has been I ji ) a I voided 3S ci for the computation of his income from property and tax liability thereon: Rs Rent for the year 12,00,000 5 ' Property tax paid to Cantt. Board 20,000 Lawyer's fee to defend the title of land : A 40,000 Lawyer's fee for drafting dead rent. 10,000 | Administration and Collection charges 80,000 Insurance premium of the property 74,00 | Repair and maintenance expenditure 50,000. | Tax withheld on property - 90,000 } : * Required. Compute taxable income and tax payable or refundable, ifbe has no other income for the tax year 2019, Solution Mr. Imran Shahzad ve, TexYear:2019- Tax Year Ended: June 30, 2019 Residential Status: Resident Computation of Tax Payable Income from Pro perty Re. B Rent chargeable to tax Bon Go) deduction is allowed.) So taxable income for PropertyPere: (COME FROM PROPERTY PP tec Be 10,00,000 60,000 Tax on Rs. 200,000@ 15% 30,000 Total tax on property . 90,000 Tax withheld on property 90,000 Tax payable /refundable Nil Greer In Illustration 13, assume that efong with income from property he has also taxable salary of Rs. 80,000 per month. Solution Mr. Imran Shahzad Tax Year: 2019 : Tax Year Ended: June 30, 2019 - Residential Status: Resident - Computation of Tax Payable Computation of Taxable Income Rs. Taxable salary (Rs. 80,000 = 12) 960,000 Tax payable Tax on Rs. 800,000 to Rs. 12,00,000 2,000 Add: Tax on property as calculated in previous illustration 90,000 Total Tax 92,000 Less tax withheld on property 90,000 Tax payable - 2,000 ILLUSTRATION 15 The following information is available in respect of Mr. Qayyum for the tax year to end on June 30, 2019. 1. Basic Salary Rs. 300,000 P.M. 2. Bonus 900,000 3. Overtime Payment : 250,000 4. PropertyIncome * . 450,000 P.M. 5. Property tax paid 715,000 - 6 Collection charges on property * 240,000 7. Zakat paid showing the during year 170,000 Required: Compute his tax payable .Mr. Qayyum ‘Tax year 2019 Tax year ended 30.06.2019 Residential status Resident Computation of tax payable, Income from salary (Section 12) Basic Salary 300,000 x 12 Bonus 900,000 Overtime payment , -250,000 Total income from Salary 47,50,000 Income from Property (Section 15) Property Income 450,000 x 12 54,00,000 . (Separate block of Income):- Total income 47, 50,000 Less Zakat paid 170,000 Taxable Income $5.80.000 ‘ Tax payable on taxable income . ; Tax on Rs. 40,00,000 = 290,000 Tax on Rs. 580,000 @ 20% =116,000 406,000 Add: Tax payable on income from Property Rs. 54,00,000 Tax on Rs. 20,00,000 = 290,000 Tax on Rs. Balance $80,000@ 20% = 116,000 406,000 Tax on property income $90,000 Total tax payable ‘ 12,96,000 - Note: Income from Property is separate block of income and no de allowed in case of individuals and Association of persons. s TAXATION OF PROPERTY INCOME FOR INDIVIDUALS a ASSOCIATION OF PERSONS FOR THE YEAR The following two changes have been made in this FeB year 2020INCOME FROM Property ’ Rate of Tax Gross amount of Rent Where the gross amount of rent not exceed Rs. 200,000 Where the gross amount of rent exceeds Rs, 200,000 but does not exceeds Rs. 600,000 Where the gross amount of rent exceeds Rs. 600,000 but does not + | exceeds Rs. 10,00,000 5 percent of gross amount exceeding Rs. 200,000 Rs. 20,000 plus 10 percent of the gross amount exceeding Rs. 600,600 4. Where the gross amount of rent exceeds Rs. 10,00,000 but does not exceeds Rs. 20,00,000 Where the gross amount of rent exceeds Rs. 20,00,000 but does not exceeds Rs. 40,00,000 {+ Rs. 60,000 plus 15 percent of ‘the gross amount exceeding Rs. 10,00,000 Rs. 210,000 plus 20 percent | of the gross amount exceeding Rs. 20,00,000 | 6. Where the gross amount of rent exceeds Rs. 40,00,000 but does not exceeds Rs. 60,00,000 a Where the gross amount of rent exceeds Rs. 60,00,000 but does not exceeds Rs. 80,00,000 Where the gross amount of rent exceeds Rs. 80,00,000 Rs. 610,000 plas 25 percent | of the gross amount exceeding Rs. 40,00,000 Rs. 11,10,000 plus 30 percent of the gross emount exceeding Rs. 60,00,000 i 000 plus 35 percent of the gross amount 000 Option to claim deductions and pay tax at the rate applicable to other Income, Fi 2019 allows that any individual or AOP whose income from openg ti skis Rs, 40;00,000 can opt for the rates applicable of other icome of individuals and Association of Persons. He will be allowed , in Such cases, to deduct allowable under Section 154.En owns a sn..ang, be resved nl Iso mts tats a Sa 650,000 P.MHe paid the following amount for his property . Repairs Expenses 450,000 Property tax 10,80,000 Collection charges 150,000 Calculate the tax payable by the Mr. Qasim oom Tax Solution Mr. Qasim Tax year 2020 Tax year ended 30.06.2020 Personal Status Individual Residential status Resident Computation of tax payable. Option-1 Property Income (650,000 x 12) 78,00,000 (To be taxed as a separate block) “Tax on 60,00,000 11,10,000 Tax on 18,00,000 @ 30 % 540,000 Option-2: Property Income (650,000 x 12) Deductions allowed Repairs allowance (1/5" RCT) 15,60,000 ° Property Tax 10,80,000 Collection charges (less than 6 %) 150,000 Total Deduction Taxable income To be taxed as anon salaried person Tax on 40,00,000 620,000 Tax on 10,00,000 @ 30 % 303,000 923,000 Mz. Qasi i asim will adopt option (2) a allowed forthe year 2020.INCOME FROM PROPERTY 161 Mr Ismail received a rent of Rs. 315,000 P.M. from his rented out building during the year ended 30" June 2020. Calculate his tax payable. Solution Mr. ismail Tax year 2020 Tax year ended 30.06.2020 Personal Status Individual Residential status Resident Computation of tax payable. Rent received 315,000 x 12 37,80,000 Tax payable Tax on Rs. 20,00,000 210,000 Tax on Rs. 17,80,000 20 @ 356,000 Total payable 7 566,000 Option-2 Option 2 will not be available to Mr. Ismail as his property income does not exceed Rs. 40,00,000, for the tax year 2020 .