Rise School of Accountancy

Suggested Solution Test 05

Question 01

Mr. Manto
Computation of income and tax thereon
For TY 2009

Income from salary (W-1) 1,882,030

Income from other source 100,000
Income from capital gain – Gain on sale of shares 25,000 x (62-42) 500,000
(holding period is less than one year)
Taxable income 2,482,030

Tax liability on income under NTR (90,000 + 682,030 x 15%) (2) 192,305
Less: Tax paid by employer [S.12(3)] (102,030)
Payable to Government 90,275
Items which are not considered
(N-1) Lease rentals are not considered when car is acquired on lease, rather fair market value is considered.
(N-2) Interest credited is exempt up to higher of interest calculated @ 16% or 1/3 of salary. Since the rate
atwhich interest has been credited is not given therefore it cannot be compared with 1/3rd of salary.
(N-3) As Mr. Manto is returning expatriate as per section 51(1), therefore Rs. 4,000,000 is exempt.
Workings
(W-1) Income from salary
Basic Salary [S.12(2)(a)] (100,000 x 12) 1,200,000
House rent allowance [S.12(2)(c)] (30,000 x 12) 360,000
Medical allowance (Fully taxable)[S.12(2)(c)] (10,000 x 12) 120,000
Medical facility (Fully exempt because as per terms) [2nd Sch. Clause 139] -
Conveyance provided [S.13(3)] (2,000,000x5%) 100,000
Concessional lunch facility (Exempt because Manto is employee of a hotel)[2nd Sch. Clause 53A(ii)] -
Training course (Not chargeable because for official purpose) [S.12(2)(d)] -
Employer contribution to provident fund (1,200,000 x 10%) 120,000
Less: Exempt up to lower of:
- 10% of basic salary and dearness all. (10% of 1,200,000 = 120,000) or
- 150,000 (120,000) -
Interest credited 48,000
Less: Exempt up to 1/3rd of (basic salary+dearness allowance) (1/3 x 1,200,000) (400,000) -
1,780,000
Add: Tax borne by employer [S.12(3)] (W-2) 102,030
1,882,030
(W-2) Tax borne by employer
Step 1
Salary income 1,780,000
Tax thereon (30,000 + 580,000 x 10%) 88,000
Step 2
Salary income (1,780,000 + 88,000) 1,868,000
Tax thereon (90,000 + 68,000 x 15%) 100,200
Step 3
Salary income (1,780,000 + 100,200) 1,880,200
Tax thereon (90,000 + 80,200 x 15%) 102,030

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