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SALARY AND ITS COMPUTATION EXERCISES 3 |
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Taxation
Management FIN 623
VU
MODULE
6
LESSON
6.28
SALARY
AND ITS COMPUTATION
Exercise
9:
Computation
of taxable income and tax thereon in
respect of Mr. Yasir (a salaried
individual) for the tax
year
2007 from the following
information/data:
MTS
Rs20,000--2000--30,000
Basic
salary
Rs
20,000 pm
Accommodation
provided by the employer to Mr. Yasir. He
is entitled to house rent
allowance@50% of
basic
salary.
Motor
vehicle provided partly for
official and partly for
personal use. Cost of vehicle to the
employer
was Rs
1,000,000.
Flying
allowance provided, Mr. Yasir is
working for a Pakistani
Airline Rs 400,000
Concessional
Loan of Rs 1 million provided by employer
@ of markup of 4% per anum (bench
mark
rate
for tax year 2007 is 9% per
annum).
Solution
to Exercise 9:
Tax
payer: Mr. Yasir
Tax
year: 2007
Residential
Status: Resident
NTN:
000111
Computation
of taxable income and tax
thereon:
In
Rs
Particulars
Total
income
Exempt
Income
Taxable
Income
Salary
240,000
Nil
240,000
Accommodation
---
---
120,000
Refer
(note-1)
Motor
Vehicle for personal
---
---
50,000
use,
Refer (note-2)
Flying
allowance
---
---
---
Refer
(note-3)
Concessional
loan
---
---
50,000
Refer
(note-4)
Total
460,000
Tax
liability:
Tax
rate of 3.5% percent as given at
serial #7 for taxable income
exceeding Rs 400,000 up to Rs
500,000
Income
tax payable:
460,000
x 3.5%= Rs.16,100
Note
1: Accommodation --
Amount that would have
been otherwise provided under
terms of
employment
but in no case less than 45% of
MTS or basic salary.
Note
2:
Valuation
of Conveyance
Partly
for personal and partly for
official use
5%
of
cost or 5%
of
FMV of Vehicle, in case of
lease
Note
3:
Flying
allowance
Flying
allowance shall be taxed @
2.5% of amount received as a separate
block of income under sub
clause
1 of
part 3 of second
schedule.
Note
4:
Bench
mark rate for tax year
2007 is 9%
Loan
provided at the rate of mark-up of
4%
Amount
added back 1,000,000 x 5%=
Rs.50,000
Exercise
10:
Computation
of taxable income and tax thereon in
respect of Mr. Yasir (a salaried
individual) for the tax
year
2007 from the following
information/data:
MTS
Rs
30,000-2000-50,000
46
Taxation
Management FIN 623
VU
Basic
Salary
Rs
40,000 pm
Accommodation
provided by the employer. Mr. Yasir is
entitled to house rent
allowance @50% of basic
salary.
Employer
provided motor vehicle to Mr. Yasir
exclusively for official
use. Cost of the vehicle
is
Rs.800,000.
Mr.
Yasir paid Zakat amounting Rs 5,000
during the tax year
2007.
The
said employee paid donations amounting
Rs. 10,000 to a charitable
institution duly approved by
CBR.
Solution
to Exercise 10:
Tax
payer: Mr. Yasir
Tax
year: 2007
Residential
Status: Resident
NTN:
000111
Computation
of taxable income and tax
thereon:
In
Rs
Particulars
Total
income
Exempt
Income
Taxable
Income
Salary
480,000
Nil
480,000
Accommodation
---
---
240,000
Refer
(note-1)
Motor
Vehicle
---
---
---
Refer
(note-2)
Sub
Total
720,000
Zakat
paid by Mr. Yasir
(5,000)
(Deductible
allowance)
Total
taxable income
Rs.
715,000
Tax
liability:
Tax
rate of 7.50% percent as given at
serial #10 for taxable
income exceeding Rs.700,000 up to
Rs.850,000
Income
tax payable: 715,000
x 7.5%= Rs.53,625
Computation
of tax credit on
Donation:
A/B x
C
53625/715,000 x
10,000=Rs.750
Income
tax payable
=
53625 750=
Rs.52,875
(C 30% of
taxable income shall be:
715,000 x 30%=214500. Hence C taken as
Rs.10,000)
Note
1: Accommodation --
Amount that would have
been otherwise provided under
terms of
employment
but in no case less than 45% of
MTS or basic salary.
Note
2: Motor vehicle--provided
for official use since
motor vehicle is provided
exclusively for
official
use,
no add-back shall be made
towards the salary income of the
employee.
Exercise
11- Consolidated
exercise.
Compute
taxable income & tax thereon for tax
year 2007 in respect of Mr.
Yasir, a salaried
individual.
MTS
Rs30,000-2,500-50,000
a.
Basic salary,
Rs.
420,000pa
b.
Salary received from former
employer
Rs
200,000
c.
Salary received from
prospective employer
Rs
100,000
d. Tax
liability of employee paid by the
employer
Rs
40,000
e.
Voluntary payments made by
employee.
Rs
80,000
f. Mr.
Yasir incurred the expenses during the tax
year on account of personal
car Rs. 40,000 and
on
renovation
of his house
Rs.100,000
g.
Leave pay
Rs.20,000
h.
Medical allowance
Rs.60,000
i.
Free hospitalization services received
under the term of employment.
Rs.100,000
j.
Extra duty Allowance
Rs.15,000
k.
Bonuses received
Rs.40,000
l.
Utilities provided by the employer
Rs.30,000
m. T.A
/D.A reimbursed on account of official
assignments.
Rs
40,000
n.
Golden handshake payments
received
Rs
1,600,000
Average
rate of tax for last 3 years
was 25%, 20%, 15%.
47
Taxation
Management FIN 623
VU
o.
Donation paid by the employee to a
charitable institution duly approved by
CBR
Rs.
40,000
p.
Deduction of tax at source
Rs.
224,000
Solution
to Exercise 11:
Tax
payer: Mr. Yasir
Tax
year: 2007
Residential
Status: Resident
NTN:
000111
Computation
of taxable income and tax
thereon:
In
Rs
Particulars
Total
income
Exempt
Income
Taxable
Income
Salary
420,000
Nil
420,000
Salary
from former employer
200,000
Nil
200,000
Salary
from prospective employer
100,000
Nil
100,000
Tax
liability paid by employer
40,000
Nil
40,000
Voluntary
payments
80,000
Nil
80,000
Expenses
incurred (deductions
---
---
---
not
admissible to salaried
individuals)
Leave
pay
20,000
Nil
20,000
Medical
allowance
60,000
Nil
60,000
(Exemption
not allowed since
free
hospitalization
services provided)
Free
hospitalization
100,000
100,000
Nil
Extra
duty allowance
15,000
Nil
15,000
-Bonuses
received
40,000
Nil
40,000
-
Utilities
30,000
Nil
30,000
TA/DA
for official purpose
40,000
40,000
Nil
Golden
handshake amount of Rs
1,600,000
1,600,000
can be taxed @average
rate
of tax of last 3 years i.e.;
25+
20+15/3=
20%
--not
advisable
Total
taxable income
2,605,000
Tax
liability:
Tax
rate of 16% percent as given at serial
#17 for taxable income
exceeding Rs.2,000,000 up to
Rs.
3,150,000
Income
tax payable:
2,605,000
x 17%= Rs. 442,850
Computation
of tax credit on Donation:
A/B x
C
442,850/2,605,000 x
40,000 = Rs. 6,800
Income
tax payable
=
442,850 6,800 =
436,050
(C
is2,605,000 x 30%=781,500. Hence C is
taken as Rs.40,000)
Salary
and Its Computation
Tax
Payable=
Rs.
436,050
Deduction
at source =
Rs.
224,000
Tax
Payable =
Rs.
212,050
48
Table of Contents:
- AN OVERVIEW OF TAXATION
- What is Fiscal Policy, Canons of Taxation
- Type of Taxes, Taxation Management
- BASIC FEATURES OF INCOME TAX
- STATUTORY DEFINITIONS
- IMPORTANT DEFINITIONS
- DETERMINATION OF LEGAL STATUS OF A PERSON
- HEADS OF INCOME
- Rules to Prevent Double Derivation of Income and Double Deductions
- Agricultural Income
- Computation of Income, partly Agricultural,
- Foreign Government Officials
- Exemptions and Tax Concessions
- RESIDENTIAL STATUS & TAXATION 1
- RESIDENTIAL STATUS & TAXATION 2
- Important Points Regarding Income
- Geographical Source of Income
- Taxation of Foreign-Source Income of Residents
- Exercises on Determination of Income 1
- Exercises on Determination of Income 2
- SALARY AND ITS COMPUTATION
- Definition of Salary
- Significant points regarding Salary
- Tax credits on Charitable Donations
- Investment in Shares
- SALARY AND ITS COMPUTATION EXERCISES 1
- SALARY AND ITS COMPUTATION EXERCISES 2
- SALARY AND ITS COMPUTATION EXERCISES 3
- Tax treatment of Gratuity
- Gratuity Exercise
- PROVIDENT FUND
- Exemptions on Business income, Treatment of Speculation Business
- Deductions Allowed & Not Allowed
- Deductions: Special Provisions, Depreciation
- Methods of Accounting
- Taxation of Resident Company
- Taxation of Companies: Exercises
- Computation of Capital Gain
- Disposals Not Chargeable To Tax
- TAX RETURNS & ASSESSMENT OF INCOME UNIVERSAL SELF ASSESSMENT SCHEME
- Normal Assessment, USAS, Provisional Assessment, Best Judgment Assessment
- ADVANCE TAX COLLECTION & RECOVERY OF TAX PENALTIES & PROSECUTION
- What is Value Added Tax (VAT)?
- SALES TAX
- SALES TAX RETURNS