Question no.

1
Wasil and Basit jointly own a bungalow in Lahore. Wasil has 60% share in the bungalow. On 1st October,
2014 the bungalow was rented for Rs.500,000/- per month. During the year owners incurred following
expenses in relation to the bungalow:
i.

Utilities, cleaning and security Rs.700,000/-

ii.

Repairs and maintenance Rs.900,000/-

iii.

Legal expenses for drafting of rent agreement Rs.300,000/-

iv.

Collection charges Rs.200,000/-

v.

Profit on money borrowed for extension of the bungalow Rs.1.0m

vi.

Wasil and Basit have no other source of income. All the above expenses were incurred by them
jointly.

Required: Calculate taxable income and tax charge of Wasil and Basit under appropriate head of income
for the tax year 2015.
Question no. 2
Mr. A rented his house to Mr. B at Rs.100,000/- per month with effect from 1.7.2011. Mr. A received
Rs.1,500,000/- as deposit from Mr. B which was not adjustable against rents payable by Mr. B.
Mr. B vacated the premises on 30.09.2013 and got refund of his deposit. Mr. A rented his house to Mr. C
at Rs.175,000/- per month with effect from 1.9.2014. Mr. C paid Rs. 2,000,000/- as deposit not
adjustable against rent.
In July14, Mr. A entered into an agreement to sell the house to Mr. D and received Rs. 500,000 as token
money (Biyana). Mr. D backed out resulting into forfeiture of the said token money. Mr. A incurred
following expenses up to Jun15:
1. Depreciation of property Rs.500,000/2. Insurance premium Rs.40,000/3. Local taxes and ground rent for Rs. 30,000/- out of which Rs.20,000/- was paid.
4. Salary for a person for collecting rent Rs.3,000/- per month
5. Legal expenses of Rs.50,000/- in respect of legal proceedings against Mr. C for the recovery of
rent.
6. Bank deducted charges of Rs.5,000/- for realisation of rent cheques.

7. Repairs and maintenance Rs.200,000/Required: Work out taxable income and tax charge of Mr. A for the year ended 30 th June, 2015. Mr. A is
of 62 years and has no other source of income
Question no. 3
Mr. Haris, a citizen of Pakistan is working as Head of Production with Gulzar Textile Limited (GTL). Mr.
Haris provided following information in respect of TY 2015:
a.

Monthly basic salary as at 31st March, 2014 was Rs. 300,000 which was increased by 10%
with effect from 1st July, 2014.

b. GTL provided medical allowance at 10% of basic salary and facility for free medical
treatment.
c. Salary and allowances are deposited into each employees bank account on the 5th working
day of the following month.
d. GTL contributes 8.33% of the basic salary into a recognized Provident Fund. Mr. Haris joined
GTL on 1st March, 2014. Interest on PF was at 18% of the accumulated balance as at 30 th
June, 2015.
e. Gratuity entitlement is on gross salary for each completed year of service.
f.

30 days of paid leaves are allowed every year but such leaves cannot be converted into cash.
However Leave fare assistance of Rs. 300,000/- is paid when leaves are availed.

g. A residential house is provided whose monthly rent is Rs.75,000.

h. A 2700 CC car is provided for office use only. Cost of car is Rs.5.00 million. Fuel, insurance
and other operating expenses of the car are borne by GTL which amount to Rs. 20,000 per
month.
i.

A 1300 cc vehicle is provided for personal use only. Cost of car is Rs. 2.7 million. Family of
Mr. Haris lives abroad and such car is not used by anyone.

j.

Any tax on salary exceeding Rs.75,000/- is to be borne by GTL.

k. An interest free loan of Rs.600,000/- was taken by Mr. Haris from GTL on 1st December,
2014 for extension and renovation of his property.
l.

Mr. Hariss date of birth is 1st March, 1955.

m. Property owned by Mr. Haris and his brother (50% each) is rented at a monthly rent of
Rs.300,000/-. No tax has been withheld by the tenant.
n. Expenses incurred in respect of property are as follows:
i. Utilities, cleaning and security Rs. 100,000/ii. Repairs and maintenance Rs. 200,000/iii. Collection charges Rs.25,000/o. Zakat paid during TY 2015 is Rs. 500,000/-

p. An amount of Rs.500,000/- was paid as contribution to an approved pension fund which is

lower than 50% of the taxable income of TY 2014.
q. Fees of Rs.200,000/ was received from a private limited company for attending board
meetings. Tax was withheld from such fees.
Required: Calculate the following for TY 2015:
I.

Total income of Mr. Haris

II. Taxable income of Mr. Haris

III. Tax on taxable income of by Mr. Haris
IV. Tax payable by Mr. Haris
V. Effective tax rate on total income of Mr. Haris
VI. Net cash inflow after tax of Mr. Haris for TY 2015 assuming tax payable has been paid by
him.
Question no. 4
Mr. Zahid is an employee of an Indonesian Company. He has been assigned to work in its Pakistani
subsidiary which is a company registered under the Companies Ordinance, 1984 with effect from 1st
March, 2014. The assignment is for two years which may be extended subject to consent of Mr. Zahid.
Mr. Zahids remuneration was paid in Indonesia as follows:

A. TY 2014:
a. Pakistan source salary Rs. 2.5 million
b. Indonesia source salary Rs. 7.0million
B. TY 2015:
a. Pakistan source salary Rs. 7.5 million
b. Indonesia source salary Rs. 3.5 million
Required:
I.

Explain the residential status of Mr. Zahid under the Income Tax Ordinance, 2001 for the TY
2014 and TY 2015.

II. Compute taxable income of Mr. Zahid for the TYs 2014 and 2015. Support your computation
with appropriate comments.
Question no. 5
Mr. Aslam had two bank accounts. He earned Rs.15 million from business in a year. However he
declared only balance of Rs.8 million in one bank account. The balance of Rs.7m in the other bank
account was not declared to meet the expenses of his daughters marriage. Explain which type of tax
strategy is being adopted by Mr. Aslam in only two words?

Question no.6
A group comprising of 100 persons is taxed as follows:
a. Those earning Rs.400,000/- per annum would pay zero tax;
b. Those earning Rs.500,000/- per annum would pay Rs.2,000/- tax
c. Those earning Rs.750,000 /- per annum would pay Rs.9,500/- tax.
The above signifies which type of tax system?
Question no.7
Mr. Tariq, a citizen of Pakistan is working as Textile Engineer with Horizon Limited (HL). Mr. Tariq
provided following information in respect of TY 2015:
a. He accepted the offer letter on 1st May14 for joining HL after serving the notice period of three
months to his previous employer, from the date of acceptance of offer letter. Monthly basic
salary offered by HL to him is Rs.500,000.
b. He received the final settlement from his past employer in Aug15 as follows:
i. Last months basic salary Rs.250,000/ii. Accumulated balance from recognized Provident Fund Rs.2.0m. Previous employer contributed 10%
of basic salary to PF.
iii. Gratuity from approved gratuity fund Rs.1.0m
iv. Encashment of leave balance Rs.200,000/v. Golden handshake Rs.2.0m
c. HL provided medical allowance at 10% of basic salary and facility for free medical treatment.
d. HL contributes 10% of the basic salary into a recognized Provident Fund.
e. A residential house is provided whose monthly rent is Rs.190,000/f. A company maintained car is provided for office and personal use. Cost of car is Rs.5.00 million.
g. Allowances amounting to Rs.1.0m were provided for performing office duties in other cities. Actual
expenses against such allowances was Rs.800,000/h. Any tax on salary related to employment with HL exceeding Rs.200,000/- is to be borne by HL.
i. Zakat paid in July15 is Rs.1,000,000/j. Fees of Rs.200,000/ was received from a private limited company for attending board meetings. Tax
was withheld from such fees.
k. His taxable income and tax liability expressed as rupees in million during the preceding five tax years
were as under:
Tax Year

2010

2011

2012

2013

2014

Total taxable income

2.0

2.5

2.8

3.1

4.0

Total tax paid

0.30

0.40

0.48

0.55

0.7

Required: Calculate the following for Mr. Tariq in respect of TY 2015:

I. Total income.
II. Taxable income.
III. Tax on taxable income. Advice Tariq about what option he can elect under the income tax law along
with impact of his decision in terms of tax saving and effective tax rates on total salary income.
IV. Tax payable.