Heads of Income Notes

1. Salary Income
Basic salary
Bonus
Furnished accomodation
Conveyance allowance N-1
Medical allowance N-2
Utility expense
Entertainment allowance
Air tickets N-3
Hotel expenses N-4
Car rental N-5
Leave encashment N-6:
Total
2. Property Income
Property Income
Less : Expenditures claimed against property
*Legal expenses
*Property tax
*Insurance premium
Total expenses against property N-7
Total property income
3. Income from Other Sources
Insurance money received on maturity N-8
Dividend N-9
Birthday present received N-10
Total Income
Deductions
Zakat paid N-11
Expense of children education N-12
Taxable Income After Deductions
Tax Liability (5% tax on amount exceeding 4 lac) N-13
Tax deducted at source
Net Tax Liability
 M/s. Aplha Petroleum Limited (APL)
Mr. Habib
Computation of Taxable Income & Tax Liability
Tax working for the year ended on June 30, 2013

Income (Rupees) Taxable Income (Rupees)

231000 231000
20000 20000
110000 110000
19800 19800
25000 1900
26400 26400
13200 13200
110000
55000
22000
27500 27500
659900 449800

132000 132000

8250
5500
3300
17050
114950 114950

110000
11000
11000
906850 564750

-11275
-2200
551275
7564
-2000
5564
 Notes:
N-1:
According to ITO 2001, Conveyance allowance given to the employee is taxable
1650*12=19800
N-2:
According to ITO 2001, Medical allowance upto 10% of the basic salary is exempted,
But in this case it is more than 10%. So the exceeding amount would be taxable
231000*10%=23100, 25000-23100=1900 which is taxable
N-3,N-4,N-5:
The employee went for an official trip so all the expenses incurred will be reimbursed
According to ITO 2001, reimbursements are non-taxable.
N-6:
Accordng to ITO 2001, Leave encashments are the earned leaves and they are non-taxable.
N-7:
Accordng to ITO 2001, expenses incurred against the earning of property income can be deducted
N-8:
According to ITO 2001, Insurance money is exempted from tax.
N-9:
According to ITO 2001, Dividend is covered under FTR
N-10:
According to ITO 2001, Present received which is verified from the bank is exempted from tax
N-11:
Total Zakat paid: 11000+275=11275
N-12:
As the no of children are not mentioned, so we will assume 1 child here.
Following are the rules regarding educational expense.
i) 60,000* 1 = 60,000
ii) Taxable income*20% = 551275*20% = 110255
iii) Education expense* 5% = 44000*5% = 2200
According to ITO 2001, whichever wil be the lower amount, would be allowed for deduction
N-13:
Taxable Income
0 to Rs.400,000
Rs.400,000 to Rs.750,000
Rs.750,000 to Rs.1,500,000
Rs.1,500,000 to Rs.2,000,000
Rs.2,000,000 to Rs.2,500,000
Income exceeds Rs.2,500,000
As here we're falling in the slab rate of Rs 4 lac to 7.5 lac so 5% of amount exceedind 4 lac would be paid
151275*5% = 7564
 Slab rates of Tax
0%
5% of the amount exceeding Rs.400,000
Rs.17,500 plus 10% of the amount exceeding Rs.750,000
Rs.95,000 plus 15% of the amount exceeding Rs.1,500,000
Rs.175,000 plus 17.5% of the amount exceeding Rs.2,000,000
Rs.420,000 plus 20% of the amount exceeding Rs.2,500,000