RISE SCHOOL OF ACCOUNTANCY

Section: All Batches of Spring 2022

Marks : 15
Subject: Principles of Taxation
Time : 30 Minutes
Teacher: Mr. Zahid Qavi
Test 05 Date: 03 December 2021

Name: ___________________________________ Rise ID: ____________________

Question 01
Mr. Manto worked as an employee in Berlin Hotel, Germany for a period of five years. During the said period he
did not visit Pakistan for a single day. He returned to Pakistan on July 1, 2008 and immediately joined as a
General Manager in a well-reputed hotel, based in Karachi.
Assume that the details of his income for the tax year 2009 are as follows:
(i) Basic salary (per month) 100,000
(ii) House rent allowance (per month) 30,000
(iii) Medical allowance (per month) 10,000
(iv) Besides medical allowance, he is also entitled to free medical treatment at approved hospital.
(v) He has been provided a company maintained 1600cc car which was used partly for official and partly
for personal purposes. The hotel has leased the car from a bank. The gross lease rentals payable over
the period of lease amount to Rs.2,700,000. The fair market value of the car at the time of lease was
Rs.2,000,000. The total lease rentals paid by the hotel during the year amounted to Rs.800,000.
(vi) He is entitled to lunch at the hotel’s restaurants where the usual charges are Rs.400 per person. He is
entitled to concessional rate of Rs. 40 per day which is deducted from his salary. Assume that there
are 300 working days in the year.
(vii) He went for a training course to Islamabad where boarding and lodging cost amounting to Rs.150,000
was borne by the hotel. He incurred a further expense of Rs.125,000 which was reimbursed by the
hotel.
(viii) Provident fund was deducted @ 10% of his basic salary. An equal amount was contributed by the
hotel. Interest credited to his provident fund account amounted to Rs.48,000.
(ix) As per terms of employment agreed with Mr. Manto, tax payable on salary will be borne by the hotel.
(x) During the year, he earned income from other source of Rs. 100,000.
(xi) On July 15, 2008, he received a lump sum amount of Rs.4,000,000 through a normal banking channel
as final settlement from Berlin Hotel.
(xii) On August 1, 2008, he inherited 25,000 shares of a private limited company. The estimated fair
market value of the share, on the date of inheritance, was Rs. 42 per share. He sold all the shares on
February 28, 2009 at Rs. 62 per share.
(xiii) He paid Zakat amounting Rs.200,000 to an approved organization, through cross cheque.
Required:
a) Compute Mr. Manto’s taxable income and tax payable for the tax year 2009.
b) Briefly explain the treatment of items which are not considered in the above computation

(15)
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THE FIRST SCHEDULE

Rates of Tax for Individuals and

Association of Person
1. Subject to clause (2), the rates of tax imposed on income of every individual and association of
persons except a salaried individual shall be as set out in the following Table, namely:

TABLE

S. No Taxable Income Rate of Tax

1. Where taxable income does not exceed Rs. 400,000 0%

2. Where taxable income exceeds Rs. 400,000 5% of the amount exceeding Rs. 400,000
but does not exceed Rs. 600,000

3. Where taxable income exceeds Rs. 600,000 Rs. 10,000 plus 10% of the amount
but does not exceed Rs. 1,200,000 exceeding Rs. 600,000

4. Where taxable Income exceeds Rs. 70,000 plus 15% of the amount
Rs. 1,200,000 but does not exceed Rs. exceeding Rs. 1,200,000
2,400,000
5 Where taxable Income exceeds Rs. 2,400,000 Rs. 250,000 plus 20% of the amount
but does not exceed Rs. 3,000,000 exceeding Rs. 2,400,000

6 Where taxable Income exceeds Rs. 370,000 plus 25% of the amount
Rs. 3,000,000 but does not exceed Rs. exceeding Rs. 3,000,000
4,000,000
7. Where taxable Income exceeds Rs. 620,000 plus 30% of the amount
Rs. 4,000,000 but does not exceed Rs. exceeding Rs. 4,000,000
6,000,000
8. Where taxable Income exceeds Rs. 6,000,000 Rs. 1,220,000 plus 35% of the amount
exceeding Rs. 6,000,000

(1) Where the income of an individual chargeable under the head “„salary” exceeds seventy-five per cent
of his taxable income, the rates of tax to be applied shall be as set out in the following Table, namely:

S. No Taxable Income Rate of Tax

(1) (2) (3)
Where taxable income does not exceed Rs.600,000
1. 0%

Where taxable income exceeds Rs. 600,000

5% of the amount exceedingRs.
2. but does not exceedRs. 1,200,000
600,000

Where taxable income exceeds Rs. 1,200,000

Rs. 30,000 plus 10% of the amount
3. but does not exceedRs. 1,800,000
exceeding Rs. 1,200,000
 RISE SCHOOL OF ACCOUNTANCY
Where taxable income exceeds Rs. 1,800,000
Rs. 90,000 plus 15% of the amount
4. but does not exceedRs. 2,500,000
exceeding Rs. 1,800,000

Where taxable income exceeds Rs. 2,500,000

Rs. 195,000 plus 17.5% of the amount
5. but does not exceedRs. 3,500,000
exceeding Rs. 2,500,000

Where taxable income exceeds Rs. 3,500,000

Rs. 370,000 plus 20% of the amount
6. but does not exceedRs. 5,000,000
exceeding Rs. 3,500,000

Where taxable income exceeds Rs. 5,000,000

Rs. 670,000 plus 22.5% of the amount
7. but does not exceedRs. 8,000,000
exceeding Rs. 5,000,000

Where taxable income exceeds Rs. 8,000,000

Rs. 1,345,000 plus 25% of the amount
8. but does not exceedRs. 12,000,000
exceeding Rs. 8,000,000

Where taxable income exceeds

Rs. 2,345,000 plus 27.5% of the Amountexceeding
9. Rs. 12,000,000 but does not exceed
Rs. 12,000,000
Rs.30,000,000
Where taxable income exceeds
Rs. 7,295,000 plus 30% of the amount
10. Rs. 30,000,000 but does not exceed
exceeding Rs. 30,000,000
Rs.50,000,000
Where taxable income exceeds
Rs. 13,295,000 plus 32.5% of the amountexceeding
11. Rs. 50,000,000 but does not exceed
Rs. 50,000,000
Rs.75,000,000

Rs. 21,420,000 plus 35% of the amount

12. Where taxable income exceeds Rs.75,000,000
exceeding Rs. 75,000,000

Rates of Tax for Individuals and

Association of Person under
Income from Property
(7) An individual or AOP who derive income from property upto Rs. 200,000 is not required to pay tax.
The rate of tax to be paid under section 15, in the case of individual and association of person shall be as follows:-

S. No. Gross amount of rent Rate of tax

1. Where the gross amount of rent does not exceed Nil
Rs. 200,000.
2. Where the gross amount of rent exceeds Rs. 5% of the gross amount exceeding
200,000 but does not exceed Rs. 600,000. Rs.200,000.
3. Where the gross amount of rent exceeds Rs. Rs. 20,000 + 10% of the gross amount
600,000 but does not exceed Rs. 1,000,000. exceeding Rs. 600,000
4. Where the gross amount of rent exceeds Rs. Rs. 60,000 + 15% of the gross amount
1,000,000 but does not exceed Rs. 2,000,000. exceeding Rs. 1,000,000.
5. Where the gross amount of rent exceeds Rs. 210,000 + 20% of the gross amount
Rs.2,000,000 exceeding Rs. 2,000,000.
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6. Where the gross amount of rent exceeds Rs.
4,000,000 but does not exceed Rs. 6,000,000.
7. Where the gross amount of rent exceeds Rs.
6,000,000 but does not exceed Rs. 8,000,000
8. Where the gross amount of rent exceeds Rs.
8,000,000
Rs. 610,000 + 25% of the gross amount
exceeding Rs. 4,000,000
Rs. 1,110,000 + 30% of the gross amount
exceeding Rs. 6,000,000
Rs. 1,710,000 + 35% of the gross amount
exceeding Rs. 8,000,000