Certificate in Accounting and Finance Stage Examination

November 13 ,2023
65 minutes – 35 marks
Additional Reading Time – 10 minutes

Tax Practices
Assessment-1
Instructions to examinee

(i) Answer All 4 Questions

(ii) Answer in Black pen only
(iii) Attempt each Question on new page.

Question-1
Anjum, the sole proprietor of GG and company, is a resident individual and is in the process of filing his wealth
statement for the tax year 20X7. The relevant information is as under:
(i) Assets and liabilities disclosed in the wealth statement for the tax year 20X6 were as follows:
Rupees
Land in Karachi 5,000,000
Investment in solar system in his own house 400,000
Business capital-GG & Co. 4,000,000
Motor vehicle 1,540,000
Cash at bank 900,000
ASSETS TOTAL 11,840,000
LESS: Bank loan (1,500,000)
Net assets 10,340,000

(ii) Details relating to GG & Co. are as follows: Rupees

Income from business for the tax year 20X7 2,540,000
Drawings during the year 450,000
(iii) Transactions carried out by Anjum during the year were as follows:
• The value of land in Karachi is increased by 10%.
• Half of the Solar system is sold at a loss of Rs. 5,000.
• Obtained further bank loan of Rs. 200,000.
• Interest paid on bank loan is Rs. 30,000.
• Loan of Rs. 22,000 is provided to a friend.
• Personal expenses amounted to Rs. 700,000 out of which Rs. 250,000 are spent by his wife.
Required: Prepare Anjum’s wealth statement and wealth reconciliation statement for the tax year 20X7.
(07)
Question-2
a) Explain the provisions relating to revision of wealth statement? (03)
b) What is the remedy available to tax payer if he does not get extension/further extension in filing wealth
statement? (03)

Question-3
Under the provisions of the Income Tax Ordinance, 2001, discuss the taxability of foreign source income of the
following resident persons for tax year 2022. (Computation of tax amount, if any, is not required)
(a) Li, a Chinese engineer, has been working since March 2020 as a production manager in a Karachi based
company, Karam Limited. During the tax year 2022, his bank account in China was credited with CNY
40,000 on account of rental income for his apartment situated in China. He remitted 40% of this amount to
his bank account in Pakistan. (03)
(b) Omar, a Pakistani national, came into Pakistan on 1 September 2021 after 20 years of service in UAE. On 1
January 2022, his bank account in UAE was credited with AED 50,000 on account of dividend received from
a UAE based company. He remitted 50% of this amount to his bank account in Pakistan. (03)
 Tax Practices Page 2 of 4

Question-4
Mr. Iqbal, joined as a Chief Engineer in a listed company Tameer Limited (TL) on 1 September 20X3. He derived
following emoluments during the tax year ended 30 June 20X4:
Rupees
Basic salary (per month) 300,000
Milk allowance (per month) *10,000
* He bought milk of Rs. 7,000 per month.
In addition to the above emoluments, Mr. Iqbal was also provided the following:
(i) Bonus equal to one month basic salary. However, bonus amount was adjusted in proportion to the duration
of his stay in the company. The bonus amount was paid to him on 30 June 20X4.
(ii) A reimbursement of Rs. 36,000 in respect of driver’s salary. Mr. Iqbal paid Rs. 60,000 to the driver.
(iii) A fully furnished accommodation. The fair market value of the rent was Rs. 85,000 per month.
(iv) An amount of Rs. 50,000 was paid by TL to an approved pension fund.
(v) On 1 November 20X3, Iqbal obtained a loan of Rs. 7,000,000 @ 6% per annum First instalment of
Rs.5,000,000 was repaid on 31 March 20X4 and remaining loan was waived by employer on 31 May 20X4.
Mr. Iqbal informed following further for the tax year 20X4:
(i) He received sales tax refund of Rs. 225,000 related to tax year 20X2. The amount included Rs. 25,000 being
compensation for delayed refund.
(ii) Annual rent of Rs. 800,000 is received from letting out a building on 1 Oct 20X3 to KK Enterprise (including
Rs. 5,000 per month for arranging two security guards for the building). Following expenses were incurred
by Mr. Iqbal in this year: Repairs Rs. 200,000, Fire insurance premium Rs. 30,000, Ground rent Rs. 10,000,
Security guard salary Rs. 8,000 and Interest of Rs. 15,000 on a house loan.
(iii) During the year, Iqbal was surprised to receive Rs. 500,000 in cash (as gift) and a laptop worth Rs. 200,000
from his wife. His wife holds National Tax Number.
(iv) On 1 Jan 20X4, his bank account in UAE was credited with AED 49,500 (1AED = Rs. 72) for dividend
received from a UAE company. The amount is net off 10% tax.
(v) On 1 July 20X3, Mr. Iqbal contributed Rs. 1,600,000 to an approved pension fund after obtaining cash loan
from his father of Rs. 300,000.
(vi) On 1 May 20X2 Iqbal received 3,000 shares, by way of a gift from his father, in Lucky Inc., a company
registered on Toronto Stock Exchange. On 1 January 20X0 his father had bought these shares at a price of
CAD 20 per share (equivalent to PKR 1,300 per share). The market value of each share at the time of transfer
to Iqbal was CAD 28 (equivalent to PKR 2,100 per share). On 15 June 20X4 Iqbal sold all shares in Lucky
Inc. to an investor for CAD 32 per share and paid a brokerage commission of CAD 0.2 per share to the stock
broker. He also paid income tax of CAD 1,500 to the tax authorities in Toronto. The exchange rate at the
time of above transaction was CAD 1 = PKR 90.

Required: Compute the income and tax payable by Mr. Iqbal for the tax year 30 June 20X4.
Note: Show all relevant exemptions, exclusions and disallowance (16)
 Tax Practices Page 3 of 4

Rates of Tax for Individuals and

Association of Persons
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:—

S. No Taxable Income Rate of Tax

1. Where taxable income does not exceed 0%
Rs. 600,000
2. Where taxable income exceeds 7.5% of the amount exceeding Rs. 600,000
Rs. 600,000 but does not exceed
Rs. 800,000
3. Where taxable income exceeds Rs. 15,000 + 15% of the amount exceeding Rs.
Rs. 800,000 but does not exceed 800,000
Rs. 1,200,000
4. Where taxable income exceeds Rs. 75,000 + 20% of the amount exceeding Rs.
Rs. 1,200,000 but does not exceed 1,200,000
Rs. 2,400,000
5 Where taxable income exceeds Rs. 315,000 + 25% of the amount exceeding Rs.
Rs. 2,400,000 but does not exceed 2,400,000
Rs. 3,000,000
6 Where taxable income exceeds Rs. 465,000 + 30% of the amount exceeding Rs.
Rs. 3,000,000 but does not exceed 3,000,000
Rs. 4,000,000
7. Where taxable income exceeds Rs. 765,000 + 35% of the amount exceeding Rs.
Rs. 4,000,000 4,000,000

(2) 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 0%
1.
Rs. 600,000
2. Where taxable income exceeds 2.5% of the amount exceeding
Rs. 600,000 but does not exceed Rs. 600,000
Rs. 1,200,000
3. Where taxable income exceeds Rs. 15,000 + 12.5% of the
Rs. 1,200,000 but does not exceed amount exceeding Rs. 1,200,000
Rs. 2,400,000
4. Where taxable income exceeds Rs. 165,000 + 22.5% of the
Rs. 2,400,000 but does not exceed amount exceeding Rs. 2,400,000
Rs. 3,600,000
5. Where taxable income exceeds Rs. 435,000 + 27.5% of the
Rs. 3,600,000 but does not exceed amount exceeding Rs. 3,600,000
Rs. 6,000,000
6. Where taxable income exceeds Rs. 1,095,000 + 35% of the
Rs. 6,000,000 amount exceeding Rs. 6,000,000
 Tax Practices Page 4 of 4

Rates of tax for securities

Holding Period Securities acquired on or Securities
before 30.06.2022 acquired on or
(Between 1.7.13 – 30.6.22) after 01.07.2022
1. Where the holding period does not exceed one year 15%
2. Where the holding period exceeds one year but does
12.5%
exceed two years
3. Where the holding period exceeds two years but does
12.5% 10%
not exceed three years
Where the holding period exceeds three years but does [Irrespective of the holding 7.5%
4. period]
not exceed four years
Where the holding period exceeds four years but does 5%
5.
not exceed five years
Where the holding period exceeds five years but does 2.50%
6.
not exceed six years
7. Where the holding period exceeds six years 0%
Future commodity contracts entered into by members 5%
8.
of Pakistan Mercantile Exchange

Rates for immovable properties

Gain
S.No. Holding Period Open Constructed Flats
Plots Property
(1) (2) (3) (4) (5)
1. Where the holding period does not exceed one year 15% 15% 15%
2. Where the holding period exceeds one year but does 12.5% 10% 7.5%
not exceed two years
3. Where the holding period exceeds two years but does 10% 7.5% 0
not exceed three years
4. Where the holding period exceeds three years but 7.5% 5% -
does not exceed four years
5. Where the holding period exceeds four years but does 5% 0 -
not exceed five years
6. Where the holding period exceeds five years but does 2.5% - -
not exceed six years
7. Where the holding period exceeds six years. 0% - -