Certificate in Accounting and Finance Stage Examination

October 26 ,2024
45 minutes – 22 marks
Additional Reading Time – 10 minutes

Tax Practices
Test-4
Instructions to examinee
(i) Answer All 4 Questions
(ii) Answer in Black pen only
(iii) Attempt each Question on new page.
(iv) After attempting, convert your answer script to PDF using CamScanner and upload on your LMS .

Question-1
Taqi Ahmed is working as Director Marketing with Zee Textiles Limited (ZTL) for the last twenty five
years. Details of his monthly emoluments during the year ended 30 June 2022 are as under:

Rupees
Basic salary 440,000
Conveyance allowance 44,000
Entertainment allowance 44,000
In addition to the above, Taqi Ahmed has provided the following information:
(i) During the year an oven having fair value of Rs. 40,800 is transferred to him free of cost.
(ii) On 31 July 2022, the HR Committee approved a performance bonus for all employees for the
year ended 30 June 2022. Taqi received Rs.1,200,000 as performance bonus on 15 August 2022.
(iii) During the year, he received Rs.100,000 for attending board meetings of ZTL. No tax was
withheld fromthis amount.
(iv) Amount of tax withheld by ZTL from his salary amounted to Rs.2,000,000.
Other information relevant to tax year 2022 is as under:
(i) Salary is transferred to the bank account on 10th of the following month.
(ii) 10% annual increase was given to him effective 1st July in each of the last three years.
(iii) Taqi has given his house on rent to his cousin at annual rent of Rs.250,000. The rent was inclusive
of amenities and utilities of Rs.8,000 per month. However, annual rent for a similar house with
same amenities and utilities, in the vicinity, is Rs.300,000.
(iv) He also received Rs.159,375 as cash dividend declared by a company. The share registrar correctly
deducted withholding tax accordingly.

Required:
Under the provisions of the Income Tax Ordinance, 2001 and Rules made thereunder, compute under correct head
of income, the total income, the taxable income and net tax payable by or refundable to Taqi Ahmed for the year
ended 30 June 2022. (13)

Question-2
Explain different kinds of taxes.
(6)
Question-3
What is the tax treatment of salary received in arrears?
(3)
 Tax Practices Page 2 of 3

Extracts from the Income Tax Ordinance, 2001

Rates of Tax for non-salaried Individuals andAssociation of Persons

S. No Taxable Income Rate of Tax

1. Where taxable income does not exceed Rs. 600,000 0%
2. Where taxable income exceeds Rs. 600,000 but does not exceed 15% of the amount exceeding Rs. 600,000
Rs. 1,200,000
3. Where taxable income exceeds Rs. 1,200,000 but does not Rs. 90,000 + 20% of the amount exceeding Rs.
exceed Rs. 1,600,000 1,200,000
4. Where taxable income exceeds Rs. 1,600,000 but does not Rs. 170,000 + 30% of the amount exceeding Rs.
exceed Rs. 3,200,000 1,600,000
5. Where taxable income exceeds Rs. 3,200,000 but does not Rs. 650,000 + 40% of the amount exceeding Rs.
exceed Rs. 5,600,000 3,200,000
6. Where taxable income exceeds Rs. 5,600,000 Rs. 1,610,000 + 45% of the amount exceeding
Rs.prohibited
Provided that in the case of an association of persons that is a professional firm 5,600,000from incorporating by any law
or the rules of the body regulating their profession, the 45% rate of tax mentioned against serial number 6 of the Table
shall be 40%.
Surcharge for High Earners: 10% on Gross Tax Liability for Income Exceeding Rs. 10 Million
A surcharge shall also be payable by every individual (including salaried) and Association of person (AOP) @ 10% of the
Gross tax liability where taxable income exceeds Rs.10 million.

Rates of Tax for salaried Individuals

S. No Taxable Income Rate of Tax
1. Where taxable income does not exceed Rs. 600,000 0%
2. Where taxable income exceeds Rs. 600,000 but does not 5% of the amount exceeding Rs. 600,000
exceed Rs. 1,200,000
3. Where taxable income exceeds Rs. 1,200,000 but does not Rs. 30,000 + 15% of the amount exceeding
exceed Rs. 2,200,000 Rs. 1,200,000
4. Where taxable income exceeds Rs. 2,200,000 but does not Rs. 180,000 + 25% of the amount exceeding
exceed Rs. 3,200,000 Rs. 2,200,000
5. Where taxable income exceeds Rs. 3,200,000 but does not Rs. 430,000 + 30% of the amount exceeding
exceed Rs. 4,100,000 Rs. 3,200,000
6. Where taxable income exceeds Rs. 4,100,000 Rs. 700,000 + 35% of the amount exceeding
Rs. 4,100,000

Salaried Person
An individual whose income from salary exceeds 75% of taxable income in a tax year will be considered as a salaried
person.
Surcharge for High Earners: 10% on Gross Tax Liability for Income Exceeding Rs. 10 Million
A surcharge shall also be payable by every individual (including salaried) and Association of person (AOP) @ 10% of the
Gross tax liability where taxable income exceeds Rs.10 million.
 Tax Practices Page 3 of 3

Capital Gain on disposal of Securities

Holding Period Securities acquired between Securities acquired Rate of Tax on disposal of
01 July 2013 to 30 June 2022 on or after securities acquired on or
01.07.2022 after 1st day of July,2024
1. Where the holding period Active taxpayers
15%
does not exceed one year 15% for persons appearing on
2. Where the holding period the Active Taxpayers List on
exceeds one year but does 12.5% the date of acquisition and the
exceed two years 12.5% date of disposal of securities
3. Where the holding period [Irrespective of the holding
exceeds two years but does period] 10% Non-active taxpayers
not exceed three years Progressive rates specified in
Where the holding period 7.5% Division I for individuals and
4. exceeds three years but does association of persons and
not exceed four years (29%) Division II for
Where the holding period 5% companies. However, the rate
5. exceeds four years but does of tax shall not be less than
not exceed five years 15% in any case.
Where the holding period 2.50%
6. exceeds five years but does
not exceed six years
Where the holding period 0%
7.
exceeds six years
Future commodity contracts 5% 5%
entered into by members of
8.
Pakistan Mercantile
Exchange
The rate of 0% tax shall be charged on capital gain arising on disposal where the securities are acquired before the first day
of July, 2013.

Gain on disposal of immovable proprty

Rate of Tax on properties acquired
th
on or before 30 day of June, 2024 Rate of Tax on properties
S. No Holding Period Open Constructed Flats acquired on or after 1st day of
Plots Property July, 2024
(1) (2) (3) (4) (5) (6)
1. Where the holding period does not 15% 15% 15% Active taxpayers
exceed one year 15%
2. Where the holding period exceeds one 12.5% 10% 7.5% Non-active persons
year but does not exceed two years At the progressive slab rates
3. Where the holding period exceeds two 10% 7.5% 0 specified in Division I for
years but does not exceed three years individuals and AOP (this rate
4. Where the holding period exceeds three 7.5% 5% - shall not be less than 15% in any
years but does not exceed four years case)
5. Where the holding period exceeds four 5% 0 -
years but does not exceed five years
6. Where the holding period exceeds five 2.5% - -
years but does not exceed six years
7. Where the holding period exceeds six 0% - -
years.