Question 1:

Sara resigned from Kakashi Ltd as finance manager on 1st August 2022 and joined Mikasa Ltd as the
financial controller on the same date. Details of her remunerations are as follows:

Kakashi Ltd:

a) She received a basic salary of Rs. 200,000 pm. In addition, she was also paid conveyance and
medical allowance of Rs. 20,000 pm and 30,000 pm respectively. Kakashi Ltd credits the
salary on 5th of the following month.
b) On resignation, Sara was paid Rs. 500,000 and Rs. 650,000 on account of gratuity from an
unapproved fund and an approved provident fund respectively.

Mikasa Ltd:

a) She received a basic salary of Rs. 300,000 per month.

b) She also received Rs. 500,000 to terminate her employment with Kakashi Ltd.
c) Under her employment terms, Sara is also entitled to conveyance allowance, house guard
salary and medical allowance of Rs. 25,000 pm, Rs. 30,000 pm and Rs. 40,000 pm
respectively. Sara also gets a full medical reimbursement for her hospital bills and OPD.
d) Sara has been provided with an accommodation facility with an annual rental of Rs. 700,000
which she has opted for instead of a house rent allowance of Rs. 60,000 pm.
e) Mikasa Ltd contributes an amount equal to 10% of the basic salary per month in an approved
provident fund. Sara contributes the same monthly. During the year, Rs. 85,000 interest was
credited to her fund at the rate of 18%.
f) Mikasa Ltd gave an option to its employees to acquire used cars at substantial discounts.
During the year, Sara bought a Toyota Yasir for Rs. 2.5 million. The cost of the car, net book
value and fair market value on the date of purchase were Rs. 3 million, Rs. 1.5 million and Rs.
3.5 million respectively.
g) Sara is also provided with a company maintained Honda Civic for both personal and official
use. The cost of the car to the employer was Rs. 6 million.
h) During the year, Mikasa Ltd sent Sara on a scholarship abroad to attend a two-month course
on sustainability reporting. The cost to the employer was Rs. 500,000 in respect of course fee
and travel and accommodation.
i) Sara was provided tickets for her family vacations amounting to Rs. 250,000.
j) On Jan 15, 2021, Sara participated in employee share scheme offered by Mikasa Ltd. Cost of
the option was Rs. 5,000 for 10,000 shares. The shares were transferable on completion of 2
years of service from the date of issue. Sara exercised to buy 5,000 shares at a price of Rs. 12
per share. The fair market value of the shares on the exercise date was Rs. 20 per share. The
fair market value on Jan 15, 2023 was Rs. 25 per share. She sold the option for the remaining
shares at a price of Rs. 20,000. After 2 months, she sold 2,000 shares in the open market for
Rs. 32 per share.
k) During the year, Zakat of Rs. 15,000 was deducted from her savings account.

Calculate Sara’s total income, taxable income, and tax liability for tax year 23.