CAF-02 Taxation Test-1 Solution

Test 1 – Suggested Solution

Answer-1

i. An individual shall be a resident individual for a tax year if the individual is an

employee or official of the Federal Government or a Provincial Government posted
abroad in the tax year.
As. Mr. Raza is working as Director of Operations in Ministry of Tourism, he is an
employee of Federal Government. Therefore, Mr. Raza will be considered as resident
individual for tax year 2016.
ii. A company shall be a resident company for a tax year if the control and management
of the affairs of the company is situated wholly in Pakistan at any time in the year.
As the control and management of Anderson LLC was situated wholly in Pakistan
from 01 July 2015 to 31 October 2015, Anderson LLC is considered to be resident
company for the tax year 2016.
iii. An individual shall be a resident individual for a tax year if the individual is present
in Pakistan for a period of, or periods amounting in aggregate to, 183 days or more in
the tax year.
Mr. Sameel is in Pakistan for 151 days (29+31+30+31+30) in a tax year 2016. As Mr.
Sameel’s stay in Pakistan is less than 183 days in tax year 2016, he is considered to
be a non-resident individual for the tax year 2016.
iv. A company shall be a resident company for a tax year if it is incorporated or formed
by or under any law in force in Pakistan.
As BBL is incorporated under Companies Act 2017, it is considered to be resident
company for the tax year 2016 irrespective of the fact that management and control is
situated outside Pakistan.
(2 Marks Each)

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CAF-02 Taxation Test-1 Solution

Answer-2
Farheen
Computation of Income
For TY 2020
0.25
Rupees Marks
Income from property (W-1) 1,976,000 0.25
Income from other sources (W-3) 120,000 0.25
Total income 2,096,000

(W-1) Income from property

Rent from Bungalow - Abbas [175,000 x 9] 1,575,000 0.25
Rent from Bungalow – Zafar [175,000 x 3] 525,000 0.25
Non-adjustable security deposit – Zafar (W-2) 150,000 0.25
2,250,000
Forfeiture of deposit for sale of plot 176,000 0.25
Gross rent chargeable to tax 2,426,000
Less: Admissible deductions
Repair allowance [2,250,000 x 1/5] (450,000) 0.5
1,976,000
(W-2) Non-adjustable advance
Received from Zafar 2,500,000 0.5
Less: Already taxed
- In TY 2016 (2,500,000/10) (250,000) 0.25
- In TY 2017 (2,500,000/10) (250,000) 0.25
- In TY 2018 (2,500,000/10) (250,000) 0.25
- In TY 2019 (2,500,000/10) (250,000) 0.25
1,500,000 /10 150,000 0.5
(W-3) Income from other sources
Security guard's salary [50,000 x 12] 600,000
Less: Payment for security services [40,000 x 12] (480,000) 120,000 01

Income from other sources 120,000

Answer-3
If a taxable source of income ceases to exist either:
 before the commencement of the year or
 during the tax year,
then any subsequent benefit derived from it shall be taxable in normal way assuming that the source has
not ceased at the time income was derived.
(04 Marks)

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CAF-02 Taxation Test-1 Solution

Answer-4
Mr. Spider Man
Income and Tax thereon
0.25
TY 2010
Income from business – FSI 40,000 0.25
Income from other source - Renting of building and P and M 500,000 0.5
Income from property (W-1) 584,000 0.25
Taxable income/Taxable income – NTR 1,124,000
Tax on above (10,000 + 12.5% x 324,000) 50,500 0.25
(W-1) Property Income
Rental (70,000 x 10) 700,000 0.5
Add: Non-adjustable amount (300,000/10) 30,000 0.5
Rent chargeable to tax 730,000
Less: Repair allowance (730,000 x 1/5) (146,000) 0.5
Income from property 584,000
TY 2011
Income from other source - Renting of building and P and M 500,000 0.5
Income from property (W-2) 696,000 0.25
Total income/Taxable income – NTR 1,196,000
Tax on above (10,000 + 12.5% x 396,000) 59,500 0.25
(W-2) Property Income
Rental (70,000 x 12) 840,000 0.5
Non-adjustable advance (300,000/10) 30,000 0.5
Rent chargeable to tax 870,000
Less: Repair allowance (870,000 x 1/5) (174,000) 0.5
Income from property 696,000
TY 2012
Income from other source
Renting of building and P and M 500,000 0.5
Income from property (W-3) 719,200 0.25
Total Income 1,219,200
Less: Zakat (40,000) 0.25
Taxable Income 1,179,200
Tax on above (10,000 + 12.5% x 379,200) 57,400 0.25
(W-3) Property Income
Rental income (70,000 x 11 + 85,000 x 1) 855,000 0.5
Add: Non-adjustable amount
Received from new tenant 500,000 0.5
Less: Already taxed - TY 2010 (300,000/10) (30,000) 0.25
- TY 2011 (300,000/10) (30,000) 0.25
440,000
To be taken to income (440,000/10) 44,000 0.5
Rent chargeable to tax 899,000
Less: Repair allowance (899,000 x 1/5) (179,800) 0.5
Income from property 719,200