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Tax Year 2012

Short Notes
On
INCOME TAX
Topics Covered:

1. Salary
2. Employee share scheme
3. Income from property
4. Capital Gains
5. Final Tax Regime
6. Tax Credit
7. Income From Business
8. Tax on Tax
9. Losses
10. Minimum Tax
11. AOP

BY : Kashif Nawaz Jakhar


Contact No# 0331-4791167

INCOME TAX (Tax Year 2012)

PREFACE
Al-Hamd-O-Lillah, the 2nd addition of Short Notes on Income Tax
has been completed. These notes have been prepared under the
senior guidance of my dearest teacher Mr. Imran Shehzad (ACA) sb,
who guided me through the way in the preparation of such quality
notes for the students of Module-C.
In these note, I covered almost all the material areas covering upto
50 to 60 marks in the paper including numerical calculations and
fair presentations of the conceptual queries frequently asked by the
ICAP-Examiner.
These notes include:
a) Salary
b) Income from property
c) Income from business
d) Capital Gain (37 & 37A)
e) Income from other sources
f) Final Tax Regime
I try to retain the focus of the ICAP-examiner in paper construction
relative to the marks allocation as:
Topics
Individual or AOP
Conceptual queries

Marks
20-25
30-35

I recommend to study these notes with reference to


INCOME TAX & SALES TAX Khalid Petiwalas Notes.
I hope my efforts will help you to retain maximum marks in your
examination.
Utmost efforts have been made to make these notes free from
errors, yet there is always a room for improvement. Any suggestion
from you will highly be appreciated.
Kashif Nawaz

By : Kashif Nawaz Jakhar

Page 2

INCOME TAX (Tax Year 2012)

TABLE OF CONTENTS
Sr. no. Topics

Page no. Sr. no. Topics

Page no.

Basic concepts

12

Bad Debts

36

Salary

13

SPV

37

Provident Fund

11

14

Methods of
Accounting

39

Employee Share
Scheme

12

15

Minimum Tax

40

Capital Gain

13

16

Losses
( concepts )

43

Final Tax
Regime

15

17

Losses

45

Tax Credit

19

18

Group Taxation 49
& Group Relief

Income From
Business

22

19

AOP

53

In-admissible
Expenses

25

20

Tax on Tax

57

10

Depreciation

27

21

Share from
AOP

59

11

Amortization

35

22

By : Kashif Nawaz Jakhar

Page 3

INCOME TAX (Tax Year 2012)

COMPUTATION OF TAX LIABILITY (Under NTR)

Part A
Profile of Assessee

Part B
Computation of Income

Rs.

Name:

Salary ( U/S 12 )

xxx

NTN :

Income From Business


a) Speculative

Xxx

(1) Personal Status


I.
II.

Salaried
Non-Salaried

III.

AOP

IV.

Company

II.

Resident
Non-Resident

III.

Pakistan source

IV.

Foreign Source

(3) Tax Year


I. Normal tax Year

Tax on Tax Able Income

xxx

Tax on person
Add :
Income Prom Property
Capital Gain ( U/S ) 37A

Capital Gain ( U/S 37 )

xxx

Tax Credits:

Income From Other Sources

xxx

Less: Allowances

Less:

Senior Citizen Allowances


(xxx) Full time Teacher Allowances
(xxx) Foreign Tax credit
(xxx)
(xxx) Less : Average Relief

(xxx)
(xxx)
(xxx)

xxx
xxx

(xxx)
(xxx)
(xxx)
(xxx)

b) Non-Speculative

WWF
WWPF
Zakat
Donations U/S 61

(2) Residential Status


I.

Part C
Computation of Tax Liability Rs.

Add:
Income from property
Capital gain ( U/S ) 37 A
Total Income
( excluding share from AOP )

xxx

Investment in shares
Contribution to PF
Donation
Profit On debt

xxx
xxx
xxx

Less; Advance Tax

Add:
Share from AOP

xxx

Total Taxable Income

XXX

II. Special Tax Year

Collection of Tax
Deduction of Tax
Advance Tax ( u/s 147 )
Tax Payable /Refundable

III. Transitional Tax Year

By : Kashif Nawaz Jakhar

Page 4

(xxx)
(xxx)
(xxx)
XXX

INCOME TAX (Tax Year 2012)


INCOME TAX ( Tax year 2012)
TAX LAWS

Income Tax Ordinance

Ordinance

Income Tax rules

Explanation

Schedule

STATUS

Personal Status

Individual

Salaried

Residential Status

AOP ( 25%)

Company ( 35%)

Resident

Non Resident

Non Salaried

Salaried Person :
Total Salary Income . X 100=If answer is >50%,then salaried person.
Total Taxable Income

AOP ( Association of person ) 25%


Resident when control and management of affairs is
situated wholly or partially in Pakistan.
AOP may be a * firm * joint venture * Hindu undivided
family * but does not include a company.

By : Kashif Nawaz Jakhar

Page 5

INCOME TAX (Tax Year 2012)


Company : 35%
(1)

private (2) Public (3) Banking

Company incorporated in Pakistan , provincial govt. , and local


govt. are resident
Other companies are resident if control and management
affairs are situated wholly in Pakistan.

Resident :
183 or more days
Half day consider full day
NOTE: Only transit days are excluded.

Computation of Taxable income


Income is classified as by law
Geographical Source of Income
1) Pakistan source Income
2) Foreign source income

Heads of income
Regimes
1) Normal
2) Final

SCOPE OF TAXABLE INCOME


1. Resident
Both incomes are taxable
2. Non resident
Only Pakistan source income is taxable

By : Kashif Nawaz Jakhar

Page 6

INCOME TAX (Tax Year 2012)


3. Foreign source income of a short term resident
Pakistan source income is taxable
Foreign source income exempt which is not
brought / received in Pakistan
He is in Pakistan only for employment not for
business
Present in Pakistan for not exceeding 3 years
4. Foreign source income of a Returning Expatriate
non resident for last 4 years
National of Pakistan
An individual
Income ( current & next year exempt )

TAX YEAR

Normal Tax Year

Special Tax Year

1july 02------30june 03
A period of 12 months
ending on 30th June

1-10-2008-to 30-09-2009

A period of 12 months
ending on any date
other than 30th June

By : Kashif Nawaz Jakhar

Transitional Tax Year

Whenever there is a change in


tax year the period in between
the normal tax year and special
tax year is treat as transitional
tax year

Page 7

INCOME TAX (Tax Year 2012)


HEADS OF INCOME
1.
2.
3.
4.
5.

Salary
Income from property
income from Business
capital gain
income from other sources

SALARY : ( taxed on receipt basis )


relationship of employee and employer
Cash basis

Income From property : ( taxed on accrual basis )


Rent from immoveable property ( Land & building )
Forfeited deposit against sale of immovable Property
Only for that year in which Forfeited
Advance unadjusted Rent
{Unadjusted amount X 1/10} in that year
Signing amount
Note :
I. Mod of payment is irrelevant
II. Any benefit given by tenant to his landlord is rent

Income from business


Trade , manufacturing . any profession

Capital Gain ( gain from disposal of capital assets )


Shares , coins , postage stamp, jewelry

Income from other sources


If any income does not fall under any other heads . then it
will be under the head of income from other sources.
e.g.,
Dividend

By : Kashif Nawaz Jakhar

Page 8

INCOME TAX (Tax Year 2012)

SALARY
Any kind of benefit transfer or
given by employer to employee will be taxed and it will be add in the
salary income of the employee.

Components of salary

Basic Salary

T.T

Perquisites

Allowances

Accommodation
Conveyance
Medical facility

Others benefits

H.R.Allowance ( T.T )
Conveyance allowance
( T.T )
Medical allowance
(exempt upto 10% of B.S)

Loans
U. bills
Comp. shares
TA / DA

Terminal benefits

Gratuity
Provident fund
Pension
Golden hand
Shake

Perquisites

1) ACCOMMODATION :
45% of BS or Actual Expense of employer(rent)
( whichever is higher = add in salary )

2) Conveyance:
Only for office use
Owned ( cost )
I. Personal
II. Personal + Business use
Leased ( FMV )
I. Personal
II. Personal + Business use

( T.E )
( 10% )
( 5% )
( 10% )
( 5% )

3) Medical Facility :
a) Facility Given
i.
ii.

Under the contract


Not Under the Contract

( T.E )
(T.T )

b) Re-imbursement
c) Insurance
Amount contributed by employer will be added in
salary
By : Kashif Nawaz Jakhar

Page 9

INCOME TAX (Tax Year 2012)


4) Medical facility & medical Allowance both given
i.
ii.

Under the contract


a. Facility
( T.E )
b. Allowance
( T.T )
Not Under the contract
a. Facility
( T.T )
b. Allowance
(Exempt upto 10% of BS )

5) Asset is given to employee Permanently

FMV of Asset payment by employee = add in salary

6) Marginal cost:
Nothing will be added in salary, if no additional cost incurred
by the employer

Other Benefits :
Loan provided by employer
Loan X 14% X time = XXX add in salary
Note : if any interest paid by employee then that amount
will be deduct from above answer . and the remaining will be
added in salary.

Terminal Benefits
1. Pension ( Exempt )
a. In case of 2 or more than 2 pensions
( higher will be exempt)
b. In case of re-employment with same employer or group
No amount will be exempt

2. Gratuity
a. Approved
I. Government
II. Fund
III. Scheme
b. Unapproved

( T.E )
( T.E )
(exempt upto Rs.200,000 )

Rs. 75000 or 50% of gratuity amount


( lower will be exempt)

Note : unapproved conditions or exemptions will


be not applied on the following Cases.
i.
ii.
iii.

iv.

By : Kashif Nawaz Jakhar

Non employee
Non resident
Not received in Pakistan
Re-employment

Page 10

INCOME TAX (Tax Year 2012)


3. Provident Fund.
= Employer + employee contribution
Unrecognized PF
Annual
X
Withdrawal Employer Contribution + interest = add in salary

Recognized PF
Note
X

Note:

Rs.

Rs.
Employer contribution (p.a)
10% X ( BS + DA )
Whichever
Or 100,000
is lower
Interest on Acc. Balance (p.a )
1/3 X ( BS + DA )
Whichever
Or 16% X Acc.Balance
is lower

XXX
(xxx)

XXX

add in salary

XXX

add in salary

XXX
(XXX)

Note :
Acc. Balance = Employee cont. + Employer Cont. + interest
Formula ::: ( For calculate missing figure )
Interest = Acc. Balance X Rate
If any figure missing we can calculate with the help of above
formula .

By : Kashif Nawaz Jakhar

Page 11

INCOME TAX (Tax Year 2012)


EMPLYEES SHARE SCHEME
60
Capital Gain

Rs.20

Benefit given by Market


40

Salary

Rs.10

Benefit given by employer or company


30

Example :
Persons
Kashif
Rameez
Farhan

2010

2011

2012

Option sale = Rs.5000


Option sale of 200 shares
@ sale price Rs. 3000

Acquisition of shares
Balance(300) Acquisition
Sale Rs.60/ share

Sale = Rs. 70

On march 2010.
FMV = Rs. 50/share
Offer value = Rs. 30/share
No. of share = 500 shares
Advance = 2 per share
On march 2011
FMV= Rs.40/ share

SOLUTON:
Persons
Kashif
Rameez

Salary
Capital Gain
Salary

2010
4000
X
X

2011
X
X
5000
(500 X 10 )

Capital Gain

500 X 30 = 15000
X

Farhan

Salary

2600
{3000-(200 X 2 )

Capital Gain

2012
X
X
X

X
3000
(300 X 10 )
6000
{300 X (60-40)}

SP-FMV=70-40=30
X
X

Here Rs. 10 = FMV Offer Value

By : Kashif Nawaz Jakhar

Page 12

INCOME TAX (Tax Year 2012)

CAPITAL GAINS
Definition : The Gain from Disposal of Capital Assets.
C
A
B
Explanation:

a) Gain

b) Disposal

Sale price/FMV --- cost of


disposal

I. Sale with in one year ,100%


add in taxable income
II. Disposal after one year ,75%
add in salary

c) Capital Assets

Disposal
Means
Sale
Transfer
Destroyed
Gift
Relinquished

Capital Assets :

These
o
o
o
o
o

So,

are not capital assets


Immovable
Intangible
Depreciable
Stock-in-trade
Other movables ( cars )

These are Capital Assets


o Shares
o Debentures
o Shares of Private company
o Shares of AOP
o Membership cards of stock
exchange

After one year 25% of gain


is Exempt. & 75% of gain is
taxable

Capital Gains

37

Gain/Loss

37 A

Gain

Taxable income in case of Gain


I. Disposal within year, 100% add
in taxable income.
II. Disposal after one year , 75%
add in taxable income.

By : Kashif Nawaz Jakhar

Shares of public limited company


Redeemable debentures
Modaraba certificates
PTC vouchers
Derivatives

If these assets sold


With in 6 months = 10% of gain is taxable
With in one year = 7.5% of gain is taxable
After one year
= No tax

Page 13

INCOME TAX (Tax Year 2012)

Non recognition rule:


under the following conditions income is not taxed.
1) Inheritance
2) Gift
3) To transfer to a spouse
4) In case of dissolution of a company

ASSETS whose Gain is Taxable But no treatment of loss

1)
2)
3)
4)
5)

Jewelry
Coins
Medallions
Postage stamp
Sculpture

By : Kashif Nawaz Jakhar

etc

Page 14

INCOME TAX (Tax Year 2012)

Final Tax Regimes


Regime: Traditions
1. NTR ( normal Tax Regime )
2. FTR ( Final Tax Regime )

1. NTR :
Just add the income on the basis of persons and applied tax.

PERSONS
I. Individual
Salaried
Non Salaried
II. AOP
25%
III. Company
35%
Incomes should be under there related head of incomes
Revenue Expense = Income
Sale price purchase price = income
Return file in case of NTR.
2. FTR :
No expenses are allowed
e.g.
Revenue = income
No heads of incomes
Tax rates are independents for persons
No loss
Income is Tax on gross basis
Statement file in case of FTR.
Note

i.

Dividend for
o Individual
o AOP
Shall be considered under FTR

ii.

Dividend for
o Company
Shall be considered under NTR.
So for companies the dividend shall be recorded
under the head of Income from business in case
of banking business.

By : Kashif Nawaz Jakhar

Page 15

INCOME TAX (Tax Year 2012)


Dividend Income :
Dividend income shall be deducted @10% of gross
dividend which shall be considered full and final tax for the other than a
corporate shareholder .

e.g.
Net dividend after deducting Tax and Zakat is Rs. 875
Calculate gross dividend .
Solution :
Formula :
875 .
X 100 = 1000
87.5

By : Kashif Nawaz Jakhar

Page 16

INCOME TAX (Tax Year 2012)

Important Terms
Deduction Of Tax
Collection Of Tax
Advance Tax
Final Tax
1. Deduction Of Tax:

Deduct from Income


Payer will deduct the Tax in case of deducting authority
Income over which Deduction of Tax Applied
Supply of Goods , Dividend , Services , Price
winning , Salary , Export

2. Collection Of Tax :

Formula to Remember

Collect from expense


Services provider will collect the tax
Expenses over which Collection of tax applied
Cell phone payment , imports
D
I
C
E

=
=
=
=

Deduction from
Income
Collection from
Expense

3. Advance Tax : ( NTR )

The items which fall under NTR ( according to law ).


So the tax deduct or collect on such items is Advance tax

4. Final Tax :

( FTR )

The items which fall under FTR ( according to law ). So


the tax deduct or collect on such items is Final tax.

Withholding TAX
Aisa tax jo kisi bhi source say collect ya
deduct hova hoo.

By : Kashif Nawaz Jakhar

Page 17

INCOME TAX (Tax Year 2012)

Table For understanding


Persons
Supply

Trading
Manufacturing

Contracts

Individual/ AOP

Unlisted companies

listed companies

FTR
FTR
FTR

FTR
NTR
FTR

NTR
NTR
NTR

Retailers ( sale goods for final consumptions )


Individual / AOP

Turnover < 5 million

Turnover > 5 millions

Option to pay tax @ 1% of Sale


as Final Tax.
Compulsory to pay as
final tax

Condition
Turnover > 5 m but < 10 m
Turnover > 10 m

By : Kashif Nawaz Jakhar

Rate of Tax
Rs.25000 + 0.5% of Turnover > 5 m
Rs.25000 + 0.75% of Turnover > 10 m

Page 18

INCOME TAX (Tax Year 2012)

TAX CREDIT
Rs.
XXXX
(xxx)
(xxx)
(xxx)
. A .

Tax liability
Less: Senior citizen allowance
Less: Full time teacher allowance
Less: Foreign Tax Credit
Less:
Less:
Less:
Less:

Investment in shares
Pension fund
Donation
Profit on debt

(xxx)
(xxx)
(xxx)
(xxx)
XXXX
(xxx)

Less: Advance Tax

or

Tax Payable

XXXX

Tax Refundable (f negative figure)

(XXXX)

Note( Related to Tax Credit )

Lower

Invest. In shares

Pension Fund

Donation

Actual Amount

Actual Amount

Actual Amount

15 %

20 %

500,000

------

Profit on debt
Actual Amount

30 %
------

50 %

% of taxable income

750,000

FORMULA :
A
X Lower = Tax credit
Taxable Income
.

By : Kashif Nawaz Jakhar

Page 19

INCOME TAX (Tax Year 2012)


Rules Of Tax Credit :
Conditions
Senior citizen allowance

Full time teacher allowance

Foreign tax credit

Eligibility amount

Age 60 years or more


Taxable income does
exceed Rs. 10,00,000

A full time teacher ; or


A researcher of a recognized
non-profit
educational
or
research institution including
government
training
and
research institution .

Then his tax payable


shall be reduce by
75%.

If the foreign source income of a


resident person is taxable in
Pakistan

then the taxpayer shall


be allowed tax credit in
respect
of
foreign
income tax paid by him
as lower of:

not

Then his tax liability


shall be reduced by
50%.

Investment in shares

Foreign income tax


paid; and
Pakistan tax payable
in respect of foreign
source income at
average rate of tax.

o
o

Shares must be of listed


Comp.
Must be original allottee
Did not dispose in one year

o
o
o

actual
15 % of T.I
Rs.500,000

Approves Institution
Govt. hospital
Not trough CASH
May be direct or by cheque.

actual

20% of T.I

Donation

Eligible person (u/s 19A )


PF must be approved

Actual
30% of T.I

Lower

Profit on debt

Loan for house build.


Loan from bank or financial
institution

Actual
50% of T.I
Rs.750,000

Lower

Contribution
fund

to

pension

See illustration no. 2.9 & 2.10 of K.petiwala


By : Kashif Nawaz Jakhar

Page 20

Lower

Lower

INCOME TAX (Tax Year 2012)


Full Time Teacher Allowance :
Formula :
Taxable salary(as F.T.T) X Tax payable X 75% = XXX
Taxable Income
Where :
F.T.T means = Full time Teacher

After deducting senior


citizen allowance

Foreign Tax Credit :


Formula :
Tax payable(Note 1) X Foreign source income = xxxx
Taxable Income
Tax paid in foreign Country
= xxxx

Note 1 :
Tax Payable
xxxxx
Less: Senior citizen allowance
(xxxxx)
Less: Full time Teacher allowance (xxxxx)
Tax Payable ( Note 1 )
xxxxxx

By : Kashif Nawaz Jakhar

Lower will be deducted


from tax payable

Page 21

INCOME TAX (Tax Year 2012)


INCOME FROM BUSINESS
Taxable

Income

(Income Deduction = T.Income)

Deduction

( 5 % discussion)

( 95 % Discussion )

Exempt

Non speculative

Speculative
WE discuss about it:
1: Definition
2: Losses

Special
(Separate Calculation)

Depreciation

Allowed (20% discussion)


Or ( Admissible )

Amortization

Without any condition


e.g.
* Tax
* Personal expenditure

By : Kashif Nawaz Jakhar

Pre-commencement

Dis-Allowed (80% discussion)


Or ( inadmissible )

Research
&
Development

Conditionally
e.g.
* salary in certain condition
paid through cash
* Tax is deducted

Page 22

INCOME TAX (Tax Year 2012)


Example : ( of allowed and disallowed expenses )
!!!!!!!! Income statement according to IAS !!!!!!
Particulars
Rs.
Particulars
Purchase
Opening Stock
Factory Salary (10)
Depreciation (70)
Income Tax
Admin salary

300
100
50
50
40
30

Profit

500

Rs.

Sales
Closing Stock
Dividend

1000
50
20

1070

1070

!! Income statement according to Income Tax Ordinance 2001 !!


Particulars

Rs.

Particulars

Rs.

Purchase
Opening Stock
Factory Salary
Depreciation
Admin salary

300
100
40
70
30

Sales
Closing Stock

1000
50

Profit

510

1050

1050

Solution :
Computation OF Taxable Income :
Rs.
Accounting Profit

Rs.
500

Add: Disallowed Expenses


Salary
Depreciation
Income tax

10
50
40

100

Less: Allowed Expenses:


Dividend Income
Depreciation

20
70

(90)

Taxable Income

By : Kashif Nawaz Jakhar

510
Page 23

INCOME TAX (Tax Year 2012)


SECTION. 20.
ALLOWED EXPENSES
All expenses incurred for business.
Apportionment of Expenses :
e.g.
FTR

Common Expenses

500,000

NTR

400,000
Expenses

Expenses
333333
27778
16667

266667
22222
13333

=900,000 (turnover)
Expenses

600,000
50,000
30,000

purchases
salary
depreciation

Income under FTR ( no expenses allowed ) = Rs. 500,000


Income under NTR ( expenses are allowed ) = Rs. 337,778
Formula for calculate Expense:
Sale(under NTR)
Total Turnover

By : Kashif Nawaz Jakhar

X Expense = xxxx

Page 24

INCOME TAX (Tax Year 2012)


Section . 21:

In-Admissible Expenses
Not Allowed Expenses:

Following expenses are not allowed


TAX :
Income Tax
Sales Tax
Advance Tax
Violation Of Law ( Penalty )

Allowed
(For Business)

Disallowed
(Against Law)

AOP

Salary or other benefit by AOP to its members are not


allowed.
Salary Paid
Notes :
o Salary , commission
o Deducting the authority but did not deduct tax
o Then the tax expense not allowed.
TRADING LIABILITY
Those liabilities which effect the P & L A/C
e.g.
a. Cash
To Loan

XXX

b. Salary
XXX
To Salary Payable
c. Purchases
To Mr. Z

By : Kashif Nawaz Jakhar

XXX

( Capital Liability )
.

XXX

( Trading Liability )
.

XXX
XXX

( Trading Liability )
.

Page 25

INCOME TAX (Tax Year 2012)

DONATION
INCOME

TAX

U/S 61 of 2nd Schedule


Less: ( as Zakat )
Rate:

Donation to approved institution.


e.g. Govt. hospital
( Chapter #2)
Rate: 30 %

30 %

Conditions:
o Pay in cash
o By cheque
o In any kind

Conditions:
o Do not pay in cash
o By cheque
o In any kind

Preliminary Expenses:

are disallowed upto commercial production


( pre-commencement expense )

Trading Liability:

Not paid with in 3 years.

By : Kashif Nawaz Jakhar

Page 26

INCOME TAX (Tax Year 2012)


Chapter # 12

DEPRECIATION

The Rules and Regulation For Depreciation


Rules:

Depreciation shall be charged on depreciable assets.


Depreciation shall be charged after deducting initial

allowance .
FORMULA :
( cost initial allowance ) X Rate of depreciation
e.g.
( 100 50 ) X 10% = 5
INITIAL ALLOWANCE
( Rate 50% )
All depreciable assets are also eligible
depreciable assets except the following :
1. Furniture and Fixture
2. Transport vehicle not plying(use) for hire
e.g. business or rent a car
3. Second time used plant and machinery
Note:
In Pakistan one asset is :
Depreciable + eligible depreciable asset
Only for 1st user . For all other users that asset will be only a
depreciable asset.

INITIAL ALLOWANCE ON VEHICLE


CASES

Rent a car + Daewoo


( eligible depreciable asset )

By : Kashif Nawaz Jakhar

Directors car + company car


( not plying for hire )

Page 27

INCOME TAX (Tax Year 2012)


Eligible depreciable Assets:
Life more than one year
Subject to wear and tear
For business use

IMPORTANT NOTES

Initial allowance @ 50% shall be charged on the


eligible depreciable assets in the 1st year only.
Depreciation shall be charged on reducing balance
method.

Depreciation Rates
Depreciation rates are as follows.
Rates
10 %

Assets
Building

30 %

Computer and related equipment

15 %

All other assets

HINT
Try to compute depreciation in the examination /
prepare the depreciation schedule on written down
value bases.

By : Kashif Nawaz Jakhar

Page 28

INCOME TAX (Tax Year 2012)

Assets use partially for Business:


If an asset , use partially
for business and partially for other objectives , we will charge
deprecation proportionally
BUT initial allowance fully
Example:
Business use ( 60 % ) & for other objectives ( 40 % )
Full yearly
Cost
Initial
allowance
Depreciation

10,00,000
(5,00,000)
5,00,000
(50,000)
4,50,000

60 %
5,00,000

5,00,000

50,000 (60%)

. 30,000.
5,30,000

NOTE
Full year depreciation charge in the year of
purchase.

No depreciation is charged in the year of disposal.

By : Kashif Nawaz Jakhar

Page 29

INCOME TAX (Tax Year 2012)

GAIN or LOSS in disposal of Depreciable Asset:


The gain
or loss on disposal of depreciable assets charged to income from
business.

COMPUTATION OF GAIN or LOSS


Gain or Loss = Sale price/FMV ( higher) - Tax WDV
WHERE:
Tax written down value = Cost Tax depreciation
WHERE:
Tax Depreciation = Depreciation + Initial allowance

NOTE
Full year depreciation charge in the year of
purchase.

No depreciation is charged in the year of disposal.

By : Kashif Nawaz Jakhar

Page 30

INCOME TAX (Tax Year 2012)


Examples :

a(I)

Computation of Depreciation
e.g. numerical example
Year
2007

cost
Initial
allowance(50%)
Depreciation(15%)

Furniture &
Fixture

Plant

500,000

10,00,000

Tax
allowance
500,000

500,000
(75000)
425,000

(500,000)
500,000
(75000)
425,000

150,000
650,000

2008

Depreciation(15%)

(63750)
361250

(63750)
361250

127500

2009

Depreciation(15%)

(54188)
307062

(54188)
307062

108376

b(II)
Computation of Gain or Loss
Assume the plant sold for Rs.500,000 in 2009. now compute the
gain or loss.
= sale price tax WDV
= 500,000 361250
Gain = 138750

its the income from business in 2009.


now less depreciation Rs. 54188 of this year from
this income .

By : Kashif Nawaz Jakhar

Page 31

INCOME TAX (Tax Year 2012)

a(II)
Asset Partially Used For Business
(assume 60% for business use )

Year
2007

Plant
Cost
Initial allowance
Depreciation(15%)

2008

Depreciation(15%)

2009

Depreciation(15%)

10,00,000
(500,000)
500,000
(75000)
425,000
(63750)
361,250
(54188)
307,062

Tax Allowance/ dep.


allowance
500,000
45000
545,000
38250
583,250

NOTE: the depreciation column must be draw and calculate


depreciation.

b(II)
!!!! Calculation of Profit or Loss !!!!!!!!!
when
!!!!!Asset partially used for business !!!!!
Assume the plant sold for Rs.500,000 .

= sale price Tax WDV


= Sale price - ( cost depreciation allowances )
= Sale price [ cost ( initial allowance + depreciation)]
= 500,000 [ 10,00,000 583250 ]
= 83250
income from business

By : Kashif Nawaz Jakhar

Page 32

INCOME TAX (Tax Year 2012)

Cases for Gain or Loss

( three cases )

Exceptions:

Building
( Case 1 )

Export of use asset


( Case 2 )

= sale price Tax WDV


= Sale Price ( cost tax Depreciation )

NOTE:

= sale price Tax WDV


= Sale Price ( cost tax Depreciation )

NOTE:

If sale price is above the cost price


If a used asset sold, out of Pakistan ,
then the cost shall be consider as sale price sale price will be consider as cost.
So,
So,
=Sale Price ( sale price tax Depreciation )
= cost ( cost tax Depreciation )
=Sale Price - sale price + tax Depreciation
= cost cost + tax Depreciation
= Tax depreciation
= Tax depreciation
It means that the INCOME will be equal
to the TAX DEPRECIATION .
e.g.
Tax depreciation = Gain
500,000
= 500,000

Case 3:

NOTE:
It is assume that the asset , sold at
price , at which that was purchased.

CAR

its not about vehicle . because all


cars are vehicle but all vehicles are not cars.
Maximum cost of car is Rs. 1500,000
NOTE

Even it is purchased above the Rs. 1500,000 , we will


consider Rs. 1500,000 and the depreciation will be calculated on
this amount.
e.g.
Year
2010

X car
Cost
Depreciation ( 15 % )

20,00,000
( 225,000 )
1500,000 X 15 %
Written Down Value
*1275,000
*Where 1500,000 225,000 = 1275,000

By : Kashif Nawaz Jakhar

Y car
1200,000
( 180,000 )
1200,000 X 15 %
1020,000

Page 33

INCOME TAX (Tax Year 2012)


ASSUME

Both cars were sold for Rs. 1500,000 each

NOTE:
sale price ki amount utni laini hai , jitni cost ki %age allow ki
gai thi
FORMULA :
n=

1500,000 X 100
cost

only for those assets whose cost id above Rs.1500,000

So,
= sale price Tax WDV
and ,
sale price = 1500,000 X 75% = 1125,000

X car

1500,000 . X 100
20,00,000
Y car

= ( sale price x n ) Tax WDV


= 1125,000 1275,000
Loss = ( 150,000 )

By : Kashif Nawaz Jakhar

= sale price Tax WDV


= 1500,000 10,20,000
Gain = 480,000

Page 34

INCOME TAX (Tax Year 2012)

AMORTIZATION

NOTE

amortization is allowed on intangible assets.


intangible asset--------definition .
amortization shall be charged on per day used method.
no amortization in the year of disposal
the maximum life of a intangible asset is 10 years.

if life exceeds 10 years or unknown , in this case,


10 years will be consider as the life of intangible
asset.

e.g.
Year Copy Right
Purchase price= Rs. 200,000
Life
= 7 years
Date of purchase . 1-1-2011
Year end = 30 June, 2011
Solution,
cost

2011 = useful life

Solution,
.

x days used

cost
.
useful life

= 200,000 . x 181

= 300,000 .

= 14168

= 14876

7 X 365

2012

Patent
Purchase price= Rs. 300,000
Life
= 15 years
Date of purchase . 1-1-2011
Year end = 30 June, 2011

= 200,000

. x 365

7 X 365

= 28571

x days used

x 181

10 X 365

= 300,000 .

x 365

10 X 365

= 30,000

NOTE: use full life in days


By : Kashif Nawaz Jakhar

Page 35

INCOME TAX (Tax Year 2012)

BAD DEBTS
Sale to Mr. A for Rs. 100,000 on credit in 2009. it will the income
for 2009 under NTR.
2010 :
Mr. A didnt pay back. we claim Rs. 100,000 in Tax`
Department for allowing us expense.( bad debts ). but tax
department allow expense to us Rs. 50,000.

2011:
No.
A
B
C

Situations. (Receipts)

Actual Bad Debts

Tax Treatment

100,000
50,000
Nothing

nil
50,000
100,000

80,0000

20,000

50,000 ---Income
No treatment
50,000 --- expense
allowed
30,000 ---income

Ways of asking question about Bad Debts in exam.


1) Conditions of Bad Debts :
how to claim bad debts in the
department.

2) Recovery of Bad Debts :


Tax treatment .

Formula :
Allowed Actual = + or
NOTE
If answer is + then = add in income from business
If answer is - then = less from income from business

By : Kashif Nawaz Jakhar

Page 36

INCOME TAX (Tax Year 2012)

!!!!!!! Perquisites for claiming Bad Debts !!!!


The amount must be declared as income before.(pahly)
Entry of bad debts has been passed in the books of
accounts.

NOTE :
it is not necessary that the department will allow the
whole amount as expanse which we claimed in the department.

!!!!!!! ACCOUNTING TREATMENT OF LEASE !!!!


amount paid for lease.
Amount of Lease ( Rs.50,000 )

Depreciation
( 10,000 )

Capital

Interest
( 1000 )

Insurance
( 500 )

Expense claim in accounting :


depreciation
Interest
Insurance

10,000
1,000
500
11,500

Expense claim in Tax :


The amount which paid against lease that
amount will be allowed. ( Rs. 50,000 )

By : Kashif Nawaz Jakhar

Page 37

INCOME TAX (Tax Year 2012)

!!!!!!!!!

PROFIT ON DEBT !!!!!!!!


( Interest )

We borrow the amount .


So interest is our expense

ALLOWED EXPENSE
debt is utilized for business .its not the part of cost.

SALE OF DEBTOR
SPV

Special purpose vehicle


A person or Organization which used for
special purpose.
e.g. SPV:
Originator

SPV
.5 interest

Itefaq

Itefaq ( IT )

(Sugar)

Investment
.5 interest
5 m loan

single company = loan 5 million


Group
= loan 20 million

NOTE
NOTE

loan from subsidiary is not allowed


.

BANK

Loan & lease are both allowed to


SPV.

NOTE
If any Income earned by SPV . That income will be exempt
because income earning is not its objective.
SPV

Originator
6 million

By : Kashif Nawaz Jakhar

1 m --income(exempt)
5 m loan return

Bank
Page 38

INCOME TAX (Tax Year 2012)

METHODS OF ACCOUNTING

Accrual Basis ( Absorptional Costing )

Company

Cash basis ( Marginal Costing )

Individual / AOP
Option

Closing Stock Valuation

Absorptional Costing
( Add all kinds of Costs )

Marginal Costing
( Fixed FOH will be excluded )

e.g.
Factor of
Production

Absorptional
Costing

Factor of
Production

Marginal
Costing

Material
Labour
FOH
Variable
Fixed

50
10

Material
Labour
FOH
Variable

50
10

20
10
90

Define Small company .

By : Kashif Nawaz Jakhar

20
80

Rate : 25 %

Page 39

INCOME TAX (Tax Year 2012)

MINIMUM TAX
Rate :
1 % of Turnover
Higher

Or
Actual Tax Liability
income is exempt .

Who will pay Tax :


Resident Company
Individual having Turnover 50 million or Above.
AOP having 50 million or Above.

Turnover :
means,

Sale

Excludes
sales tax , excise duty
Services
Share from AOP

Provisions :
1st Year

2nd Year

forward

Excess of actual Tax Liability shall be carry


for subsequent 3 years.

Advance Tax = Actual Tax Liability 1 % of Turn Over

Advance Tax =Remaining Actual Tax Liability 1 % of Turn Over

HINT
Excess of 1 % of T.O from Actual Tax Liability will be advance tax and
that excess amount will be deduct in the next year from actual tax
liability. And then the remaining of actual tax liability will be compare
with 1 % of turn over.
Higher of :
Actual Tax liability
&
1 % of Turnover
will be payable.
By : Kashif Nawaz Jakhar

Page 40

INCOME TAX (Tax Year 2012)


EXCEPTIONS:
Minimum tax not apply , if business entity declare
gross loss before depreciation and other inadmissible
expenses.
Commissioner has the power to re-asses the income.
Minimum tax not apply on certain cases.
e.g. Modaraba , non-profit organization.

Employee Training and Facilities :


allowed expenditures other than capital expenditures
.

o
o
o

Hospital or educational institution for the benefit of


employees.
For the training of industrial workers run by federal
or Provincial Government
Training of citizen of Pakistan . e.g. PHD

TAX paid on import Stage :


Tax collected by collector of
custom on import of,
edible oil
&
packing material

TAX deduct from services as minimum Tax :


6 % at source from gross income.
no adjustment or refund shall be allowed.

NOTE :
HINT

Services provided to a person , who is not Tax deducting


authority then the said services income is not subject to minimum
Tax.
This provision of minimum tax is not applicable for a company , receiving income
from services.

By : Kashif Nawaz Jakhar

Page 41

INCOME TAX (Tax Year 2012)


Advance Tax on Electricity Bill As minimum Tax :
advance tax is payable on
1. Commercial
&
2. Industrial Bills
RANGE :
TAX

Amount

From Rs.80 to Rs. 1500

Monthly bill exceeds Rs.400 but does not exceeds Rs.


2000

If monthly bill exceeds Rs. 20,000


Users

Rate

Commercial
Industrial

10 %
5%

Electricity bill for person other than Company :


Bill upto Rs. 30,000 per month shall be treated
as minimum tax.
No refund or adjustment shall be allowed.

Scientific Research Expenditure :


Deduction allowed , if expenditure incurred in
Pakistan
For business purpose

!!!!!! Scientific Research !!!!!


Any activity in the
field of natural (mining, oil refinery) or Applied Science (new
technology) for the development of human knowledge.

By : Kashif Nawaz Jakhar

Page 42

INCOME TAX (Tax Year 2012)

CH # 15 :

LOSSES

General concepts :

ENGINE 1

in urdu

Categories of tickets :

A type ticket
B type ticket
C type ticket
Usage of tickets :

explanation in Urdu.

A type ticket:
A type ticket say ap train k box 1 & 2 main
baith sakty hain. ager in boxes main jaga na hoo tu ap next any wali
6 ( six ) trains main bhe ap un k box no. 1 & 2 main baith sakty hain.
laiken in boxes k elawa ap kisi bhi aor box main nai baith sakty.

B type ticket:
B type ticket say ap mojoda train k kisi bhi box
main baith sakty hain. aor ager is train main jaga nai hai tu ap any
wali kisi bhi train main nai baith sakty.

By : Kashif Nawaz Jakhar

Page 43

INCOME TAX (Tax Year 2012)

C type ticket:
C type ticket ki madad say ap mojoda train k to
kisi bhi box main baith sakty hain laiken ager mojoda train main
jaga na hoo to ap next any wali 6 ( six ) trains main un k box no. 3
main hii baith sakain gay.

HINT
for understanding

mojoda train main bathny say morad hai ====


next train main bathny say morad hai

By : Kashif Nawaz Jakhar

set off

==== carry forward.

Page 44

INCOME TAX (Tax Year 2012)


Ch # 15.

LOSSES
under NTR. because under FTR losses
and expenses are not allowed.
HEADS OF INCOMES UNDER NTR

salary
income from property

NO Loss

separate block of income

income from business

non-speculative
speculative

capital gain

37
37-A

other losses.

No Loss
C type
A type
A type

Losses can be set off only against the


incomes from other items U/S 37 A.

B type

EXPLANATION:
A type:
can be carry forward but they can by set off only
against the incomes of their heads.
B type:
can be set off only
C type:
can be carry forward and set off. but they can
be set off only in 1st year.

Set off :

adjustment of one income or loss in

other head .
Inter head adjustment: adjustment in the same head.
Carry forward:
Transfer to next year.
By : Kashif Nawaz Jakhar

Page 45

INCOME TAX (Tax Year 2012)

Example : 1
Case 1
Rs.(000)
Salary
Non-speculative business
Speculative
Capital gain
Other Losses

500
(800)
(400)
700
(300)

Case 2
Rs.(000)
500
(900)
(400)
700
(300)

Total Income
1200
1200
Requirement :
I. Compute taxable income
II. amount of loss to be carry forward
Solution:
I.
Case 1
Rs.(000)
Total Income
Other losses
Non-speculative business

Total Income
II. Losses to be c/f.
non-speculative

By : Kashif Nawaz Jakhar

Case 2
Rs.(000)

1200
(300)
900
(800)

1200
(300)
900
(900)

100

------

( 400 )

( 400 )

Page 46

INCOME TAX (Tax Year 2012)

Example : 2
Case 1
Rs.(000)
Salary
Non-speculative business
Speculative
Capital gain
Other Losses or Gain

500
(1000)
(400)
700
(300)

Case 2
Rs.(000)
500
(1000)
(400)
700
300

Total Income
1200
1500
Requirement :
III. Compute taxable income
IV. amount of loss to be carry forward
Solution:
I.
Case 1
Rs.(000)
Total Income
Other losses

Case 2
Rs.(000)
1500

Non-speculative business

1200
(300)
900
(900)

Total Income

-------

500 .

(1000)

II. Losses to be c/f.


non-speculative (1000-900) ( 100 )
Speculative
( 400 )

By : Kashif Nawaz Jakhar

------( 400 )

Page 47

INCOME TAX (Tax Year 2012)


HINT

A: In case set off losses.


1st set off other losses
2nd set off non-speculative business losses.

B: In case of carry forward losses.


year wise.
2009
2010
2011

( 100 )
( 200 )
( 500 )

If there is gain in 2012 , then use FIFO method of adjustment of


losses.
2012
2009
2010
2011

By : Kashif Nawaz Jakhar

10000
( 100 )
( 200 )
( 500 )
200 .

Page 48

INCOME TAX (Tax Year 2012)

GROUP TAXATION
as a single fiscal unit.
Features of group taxation:

Note

100% owned group of companies locally incorporated under


companies ordinance 1984.
Loss of any group will be set-off against income of any other
group.
consolidated group accounts as required under companies
ordinance , 1984 will form.
I. Basis of computation of income
II. tax payable by the person
GT relief will not be available to losses prior to the
formation of the group.
Inter corporate dividend income with in the group companies
entitled to group taxation shall be exempt .

GROUP RELIEF
{ surrender of tax loss by a subsidiary company }

Note

a subsidiary company may surrender its assessed loss


( excluding b/f loss and capital loss ) for the tax year in favor
of its holding company or any subsidiary of the holding
company.
The holding company shall directly hold , share capital of the
subsidiary company as under,
55% or more
75% or more

NOTE

in case of listed companies.


in case of non-listed companies.

The loss surrender by 1 subsidiary company may be adjusted by the holding company
or subsidiary company against its business income in the tax year and the following
two tax year.
Any un-adjusted loss shall be revert back to the subsidiary company and shall be
carry forward in the normal manner.

By : Kashif Nawaz Jakhar

Page 49

INCOME TAX (Tax Year 2012)


Example :
S
H

stands for
stands for
1st year = 30

subsidiary company
holding company

2nd year = 40

S-2

H
LOSS = 100
(surrender)

Listed Company

S-1

Assume :

loss incurred in 2006 (adjusted in next 6 tax years)

2012.

the losses were surrender for two years.

So,
2007----- 2008
S-2
losses = 30+40= 70

By : Kashif Nawaz Jakhar

2009, 2010, 2011, 2012


S-1
Remaining 30 were adjusted by
original subsidiary company.

Page 50

INCOME TAX (Tax Year 2012)

Conditions of Group Relief


1. Ownership of share capital shall be continued for 5 years to the
extent of 75% or 55%.
2. Trading company with in the group shall be entitled to avail
group relief.
3. If the holding company is a private company, it is required to
be listed with in 3 years from the year in which loss is claimed.
4. group companies are locally incorporated companies under
companies ordinance 1984.
5. board of directors approval of both the companies is required.
6. Subsidiary company , continuous the same business during the
said period of 3 years.
7. all the companies in the group shall comply with specific
corporate governance requirement.
8. Inter corporate dividend with in the group companies entitled
to group taxation shall be exempt.
9. The subsidiary company cannot surrender its assessed losses for
more than the 3 tax years.
10. The tax relief availed would be reversed if holding companys
equity interest falls below 75% or 55%. As a consequences of
disposal of shares during the stipulated period of 5 years .
11. Loss claiming company , may , with the approval of Board of
directors , transfer cash to loss surrendering company , equal to
the amount of tax saving in this respect.
This transfer shall would not be allowed tax
expense for the loss claiming company or taxable income for the
loss surrendering company.

By : Kashif Nawaz Jakhar

Page 51

INCOME TAX (Tax Year 2012)


Some Important Concepts

S
H

stands for
stands for

1st year = 30

subsidiary company
holding company

2nd year = 40

Benefit

= Rs15

S-2

H
LOSS = 100
(surrender)

Cash Rs.10

S-1

This Cash of RS.10 received by Loss surrendering


company will be not treated as income of this company.

Transfer of shares between the companies and the

shareholder , in one direction , would not be taxable capital


gain provided the transfer is , to acquire share capital for the
formation of the SECP or STATE BANK has been obtained in
this effect.

By : Kashif Nawaz Jakhar

Page 52

INCOME TAX (Tax Year 2012)


CH # 6

ASSOCIATION OF PERSONS ( AOP )

Important Notes

1. In Case of Loss ( Loss of AOP ):


Loss shall not be distributed among the
partners .

2. In case of income:

Income shall be distributed among the

partners .
3. If any partner have no income other than the share from
AOP ( income from AOP ) then his , this income ( share
from AOP ) shall be exempt.
4. if any partner have income other than the share from
AOP ( income from AOP ) then his , this income ( share
from AOP ) shall be included only for tax purpose.
5. For checking individual status share from AOP shall
be excluded.
6. For calculating full time teacher allowance share from
AOP shall be excluded.
7. For average relief share from AOP shall be included.

Rules For
1. Investment in shares 2. Donations 3. Contribution in
pension fund 4. profit on debt

Assume for Investment in shares :


10% of Taxable income
300,0000
Actual

Excluding Share from


AOP

Lower

And :
Tax liability
X Lower
Taxable income (Including share from AOP )
.

By : Kashif Nawaz Jakhar

Page 53

INCOME TAX (Tax Year 2012)


Example :
Total taxable business income = Rs. 10,00,000
Tax ( 25% )
= Rs ( 2,50,000 )
Distributable Income
7,50,000 .
Income After Tax
Not Distributable Income

Assume there are 3 partners of AOP.


Partners

Rate of share

Share from AOP

Business Income

A ( Individual )
B ( Individual )
C ( Ltd Company )

20%
30%
50%

150,000
225,000
375,000

500,000
------------500,000

Requirement :
compute taxable income of AOP and its members.
Also compute tax payable .

Solution :
(i) Mr. A
Rs.
business income
Add: share from AOP
Total Taxable Income
Tax Liability
Tax on Rs. 650,000 @ 10%
Less:

500,000
150,000
650,000
65000

Tax ( individual)
. X share form AOP
Taxable Income ( individual )
65000
.
650,000 X 150,000
Tax Payable

By : Kashif Nawaz Jakhar

( 15000 )
50,000 .

Page 54

INCOME TAX (Tax Year 2012)


(ii) Mr. B;
Mr. Bs income shall be exempt because he
has no income other than share from AOP.

(iii) C ltd Company :


Rs.
Business income
Add: share from AOP
Total Taxable Income
Tax Liability
Tax on Rs. 875,000@ 35%
Less:

Tax ( of AOP)
Taxable Income ( AOP )

306250

X share form AOP

250,000
.
X
10,00,000 375,000
Tax payable

By : Kashif Nawaz Jakhar

500,000
375,000
875,000

( 93750)
212500

Page 55

INCOME TAX (Tax Year 2012)

General Format of

( Income tax numerical ):

Compute Taxable Income


Salary Income
Capital Gain
Business Income
Other source income
Zakat
Donation
Add : share from AOP
Taxable Income

Computation of tax liability .


Tax liability
Property
37-A

:
:
:
:

Investment in shares
Donation
Contribution
Profit on debt

Less : Advance Tax

Tax Payable

By : Kashif Nawaz Jakhar

XXXX
XXXX
XXXX
XXXX
XXXX
( XXX )
( XXX )
XXXXX
( XXXX )
XXXX .

RS
XXXXX

Tax Liability
Less : Senior citizen Allowance
Less : Full time Teacher Allowance
Less : Foreign Tax Credit

Less
Less
Less
Less

RS

XXXXX
XXXXX
XXXXX
(XXXX)
(XXXX)
(XXXX)
XXXXX
(XXXX)
(XXXX)
(XXXX)
(XXXX)
XXXXX
(XXXX)
XXXXX

Page 56

INCOME TAX (Tax Year 2012)

TAX ON TAX
Tax of employee paid by the employer.

Impacts:
Tax Born by Employer

1. Income

Tax in Salary.

2. Advance Tax

Less from tax liability.

How to Compute:
Mostly in exam this amount will be given.

Compute:
Cases

1. Fully paid by employer


2. Partially paid by employer and
partially paid by employee

Example
Case 1:

Total salary
= 500,000
Tax employee paid by employer = 10,000
Explanation :
According to Tax department the tax paid by the
employer , will be income of the employee because , it was
basically the expense of employee . So now the Total salary of the
employee will be Rs.510,000 instead of Rs.500,000.
Assume Tax on Rs. 510,000 is Rs. 12,000. and paid by the employer.
so now
Total salary
= 500,000
Tax employee paid by employer = 12,000
According to Tax department the tax paid by the employer , will be
income of the employee because , it was basically the expense of
employee . So now the Total salary of the employee will be
Rs.512,000 instead of Rs.500,000.
By : Kashif Nawaz Jakhar

Page 57

INCOME TAX (Tax Year 2012)


NOTE
The Tax calculation will be same as we calculte in other questions.
Means :
Tax on Rs. XXX @XXX % is
= XXX
1
Marginal Relief
Rs. XXXX @ XXX % = XXX
Marginal amount
{difference between total taxable income and Marginal relief @
XXX% }
= XXX
2
= XXX
Lower of 1 & 2 will be Tax liability = XXXX

NOTE
the same calculation should be repeated for
minimum 3 times
Maximum 5 times
After the repeated calculations now the individual will calculate tax
as below.
The following figures are assumed figures.
Taxable Income
= 500,000
Tax paid by employer = 13050
Total taxable Income
Tax on Rs. 513050 @ 2.544%
Advance Tax ( paid by employer )

By : Kashif Nawaz Jakhar

513050
13050
13050
------

Page 58

INCOME TAX (Tax Year 2012)

SHARE FROM AOP


Computation of taxable income
Taxation of members

Computation of taxable income :


Assume share fro AOP is equally distributed among the members of
AOP.
EXAPMLE :

Salary
Electricity Bills
Share from AOP

Mr. X ( 50% )

Mr. Y ( 50% )

Total

50
------200

10
40
200

60
40
400

250

250

500

This amount will be


added in the income
from other sources of
the Mr. X only for
Rate purpose

If we assume
that Mr. Y have
no any source of
income other
than share from
AOP.
So in this
condition the
share from AOP
for Mr. Y will be
exempt

Rs.400 is balancing
figure

Distributable Income

Calculation of distributable income


taxable Income ( AOP )
Less: Tax liability
Distributable income

1200
(700)
500

THE END
By : Kashif Nawaz Jakhar

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