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3 current papers that i solved now sharing with you!
Paper Number: 1
Define Depreciable asset
Depreciable asset means a tangible movable or immovable property (not unimproved land) or structural improvement to immovable property owned by a person that has:
Normal useful life of one year or more.
Likely to lose value due to normal wear and tear.
Used wholly in deriving income from business chargeable to tax.
Define employee share scheme under section 14 and also tell under what condition right to acquire shares are chargeable to tax under section 14 of IT ordinance 2001.
Employee Share Schemes sec 14:
The value of a right or option to acquire share under this scheme shall be not chargeable to tax.
Where shares issued are subject to a restriction on transfer of the shares-
No amount shall be chargeable to tax under the head Salary until the earlier of-
The time the employee has a free right to transfer the shares; or
The time the employee disposes of the shares &
b) the amount chargeable to tax to the employee shall be fair market value of shares at the time employee has free right to transfer as reduced be any amount given as consideration for the grant of a right or option to acquire the shares.
Where in a tax year an employee disposes of a right or option to acquire shares under an employee share scheme, the amount chargeable to tax shall include the amount of any gain made on the disposal computed accordance with the following formula:
A-B
Where A is the consideration received from the disposal of the right or option.
B is the employee’s cost in respect of the right or option.
Numerical Question from income from property section
Mr. Hassan is the employee of PAK AIR FORCE and receives allowance of Rs. 100000. What is the tax treatment of this allowance under IT ordinance 2001?
Tax payer: Mr. Hassan Tax year: 2009
Residential Status: Resident NTN: 000111
Computation of taxable income and tax thereon: In Rs
Receive Allowance 100,000
Flying Allowance @ 2.5%
= 100,000*2.5%
= 2500
Give five examples of disposal.
Some Examples of Disposal:
Transfer of capital asset by a subsidiary company to a parent company or vice versa
Any transfer, in a scheme of amalgamation, or a capital asset by the amalgamating company to the amalgamated company.
Transfer of share by a share holder in a scheme of amalgamation of companies.
Any transfer of a capital asset by a wholly-owned subsidiary company to its Pakistani holding company.
Any transfer of capital asset being any work of art, archaeological, scientific nature or art collection, book, manuscript, drawing, painting, photograph or paint, to the Government or a University or the National Museums, National Art Gallery, National Archives or any other such public museum or institution.
Question of lesson 45 topic capital value of engines of 800 cc to 1600cc. table is given by the teacher. Just mention their relative tax amounts against each capacity of engine.
Motor vehicle of an engine capacity
Amount of Tax
Up to 850cc
Rs. 7,500
851cc to 1000cc
Rs. 10,500
1001cc to 1300cc
Rs. 16,875
1301cc to 1600cc
Rs. 16,875
1801cc to 2000cc
Rs. 16,875
1601cc to 1800cc
Rs. 22,500
Above 2000cc
Rs. 50,000
Another Numerical question was given from income from property Section
Un explained investment under section 111
Unexplained Investments
Sec. 111 unexplained income or assets, +Where
A person has made an investment,
Any amount credited to person’s books of account
A person has incurred expenditure
Sec. III unexplained income or assets
But no reasonable explanation offered regarding sources of fund –the amount as (a), (b) and © above shall be included in person’s income chargeable to tax.
Sub Sec. 1 of Sec. 111 does not apply to any amount of Foreign Exchange remitted from outside Pakistan through normal banking channels that is en-cashed into Pak. Rupees by a scheduled Bank and encashment certificate from such bank is produced to that effect.
Sub Sec. 1 of Sec 111 does not also apply to any unexplained amount relating to a period beyond proceeding five tax years.
Advice regarding Objectives
I have attempted at least 30 numerical questions in objective portion relating of salary individuals for calculating their tax payable and companies as well. So it is my advice to all taxation students to plz memorizes all tax rates for salaried individuals and companies as well at priority.
hi guys easy paper but as well a bit tough get good grip on gratuity and provident fund 12 short questions are form them long question are numerical basis like to calculate the taxable income one is asked about the if the person is full time teacher then its taxable income also get grip on rates of taxes of salaried person and of individual
BEST OF LUCK TO ALL OF U.
64 questions in total
56 MCQ's, mostly from the past papers, Guys memorize the IT 2001 rates for salaried persons pertaining to tax year 2011.
08 subjective questions. These were
Paper Number: 2
i) what are the contents of i.t ordinance 2001 (03marks)
Basic Features of Income Tax Ordinance 2001
Scheme of the Ordinance is given below:
There are thirteen chapters
Chapters are divided into:
Parts &
Divisions
There are 240 Sections
This ordinance comprises of seven Schedules
Schedules are integral part of the Ordinance.
ii) what would be the treatment of depreciable asset if the company is operating on three shifts as compared to the single shift operation (03marks)
Depreciable asset means a tangible movable or immovable property (not unimproved land) or structural improvement to immovable property owned by a person that has:
Normal useful life of one year or more.
Likely to lose value due to normal wear and tear.
Used wholly in deriving income from business chargeable to tax.
iii) Treatment of pension received by the dependents and families of "Shaheeds" (03marks)
iv)Difference b/w Tax and Fee
Taxes Vs Fees:
Taxes are compulsory levy and it is the legal obligation of the person to pay the amount of tax which is required to pay under the law, where as payment of fee is the discretion of any person and when a fee is paid, the person becomes an entitled to claim counter benefits.
v) What are the feature of Sales Tax ordinance
Features of Sales Tax
Indirect tax
Broad based
Elastic/ Flexible
Easy to collect
Potential for revenue generation
vi) Initial allowance and pre commencement expenditure
Initial Allowance (Sec. 23)
A person who places an eligible depreciable asset into service in Pakistan for the first time in a tax year shall be allowed a deduction at the rate of 50% of the cost of asset provided the asset is used by the person for the purposes of business for the first time or the tax year in which commercial production is commenced, whichever is later.The rate of initial allowance under section 23 shall be 50%.
Pre-commencement expenditure (Sec.25)
It means any expenditure incurred before the commencement of the business wholly and exclusively to derive income chargeable to tax, including the cost of feasibility studies, trial production activities but shall not include any expenditure which is incurred in acquiring land, or which is depreciated or amortized under section 22 ( depreciation) or section 24 ( intangibles)
The rate of amortization of pre-commencement expenditure under section 25 shall be 20%.
vii) Calculate the taxable income of MR.A for the year ended on 30.06.2010. (05marks)
Remuneration received @ Rs.36000 p.m Conveyance provided by the employer for official as well as personal use. Cost of vehicle is Rs.1200000Rent free accommodation provided Rs.35000 paid by the employer for medical facilities.
Tax payer: MR. A Tax Year: 2010
Residential Status: Resident NTN:00012154
Calculate the taxable income for the year ended 30.06.2010
Amount in Rupees.
Remuneration received = 36000*12 = 432000
Cost of Vehicle: = 1200000 10% of cost is taxable which is =1, 20,000
Medical Facilities = 35000 Medical facilities are exempt from tax
So the taxable income will be 432000+120000
Taxable income = 552000
=552000* 3.50%
=19320
FIN623 Taxation Management
My Paper Today 16.07.2001
Zaheer Abbas
Paper Number: 3
Q.57 Write basic contents of Income Tax Ordinance 2001.
Basic Features of Income Tax Ordinance 2001
Scheme of the Ordinance is given below:
There are thirteen chapters
Chapters are divided into:
Parts &
Divisions
There are 240 Sections
This ordinance comprises of seven Schedules
Schedules are integral part of the Ordinance.
Q.58 What is the tax treatment of Speculation Business as per section 19 of Income tax ordinance 2001?
Answer:
Speculation Business shall be charged under the head income from business (Separate Treatment)
Treatment of Speculation Business (Sec 19):
To be treated as distinct and separate from other business carried on by the person.
Expenditures/deductions incurred on account of speculation business shall be apportioned in light of section 67.
Profit and gains arising out of speculation business shall be included in the person’s income chargeable under the head “Income from Business”.
Speculation Business Sec. 19:
Speculation means any business in which a contract for the purchase and sale of any commodity (including [stocks] and shares) is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity, but does not include a business in which:
A contract in respect of raw materials merchandise is entered into by a person in the course of a manufacturing or mercantile business to guard against loss through future price fluctuations for the purpose of fulfilling the person’s other contracts for the actual delivery of the goods to be manufactured or merchandise to be sold;
A contract in respect of stocks and shares is entered into by a dealer or investor therein to guard against loss in the person’s holding of stocks and shares through price fluctuations; or
A contract is entered into by a member of a forward market or stock exchange in the course of any transaction in the nature of jobbing [arbitrage] to guard against any loss which may arise in the ordinary course of the person’s business as such members.
Q.59 Who is liable to pay Capital Value Tax on capital value of certain assets?
Capital Value Tax was levied with effect from 1st July, 1989 on the capital value of assets.
This is payable by every individual, association of persons, firm or a company which acquires by purchase gift, exchange, relinquishment, surrender if rights by the owners (whether effected orally or by deed or obtained through court decree) except by inheritance an asset or a right to the use thereof for more than twenty years. An asset or a right to the use thereof for more than twenty years.
OR
Levy of tax on Capital Value of certain assets:
Capital value tax shall be payable by
Individual
Association of persons, firm or
A company which acquires by:
Purchase
Gift
Exchange
Power of attorney
Surrender of rights
Relinquishment of rights by the owner
Q.60 Complete the table by filling the 2nd column with the respective rates as per Income Tax Ordinance 2001 for the tax year 2010.
Depreciation under Section 22
1. Building (all types) (.......? %)
2. Furniture and machinery and plant, Motor Vehicles, Ships, Technical or Professional Books. (.......?%)
3. Computer hardware including printer, monitor and allied items, aircrafts and aero engines. (.......?%)
Depreciation rates specified for the purposes of section 22 shall be:
I. Building (all types)
10%
II. Furniture (including fittings) and machinery and plant (not otherwise specified), Motor Vehicles (all types), ships, technical or professional Books.
15%
III. Computer hardware including printer, monitor and allied items [machinery and equipment used in manufacture of I.T. products], aircrafts and aero engines.
30%
IV. In case of mineral oil concerns the income of which is liable to be computed in accordance with the rules of Part 1 of the fifth Schedule.
a) Below ground installations
b) Offshore platform and production installations.
100%
20%
Q.61 Explain different types of taxes. (Any five)
Type of Taxes:
Different types of taxes are explained below:
Direct taxes
Direct taxes are the taxes where incidence of taxation is on the person on whom levied. For example income tax
Indirect Taxes
Indirect taxes are the taxes where incidence of tax can be shifted by the person on whom levied to other persons. For example sale tax
Proportional Taxes
These taxes are levied with the same percentage. For example, sales tax is levied at the rate of 15%.
Progressive Taxes
This is based on the “capacity to pay” principle of taxation. In this type, the rate of tax increase as the income increase.
Regressive taxes
A Regressive tax is the opposite of a Progressive Tax. It is based on the benefits received principle. A type of tax that takes a larger percentage from the income of low-income people than the income of high-income people is called regressive tax.
Value Added Taxes.
This type of tax is levied at each stage of value addition. For example sales tax
Q.62 What do you mean by 'Intangibles' and 'Cost of Intangibles' as per defined in section 24 and how the amortization of cost of intangibles compute?
Something of value that cannot be physically touched, such as a brand, franchise, trademark, or patents, opposite of tangible asset.
Intangibles (Sec. 24):
A person shall be allowed an amortization deduction in a tax year for the cost of intangibles;
The intangibles or wholly or partially used by the person is the tax year in deriving income from business chargeable to tax and
The intangibles have a normal useful life exceeding one year. Amortization deduction allowed as under
A/B
Where
A is the cost of intangible; and
B is normal useful life of intangible
Deductions---Special Provisions
An intangible that has:
Normal useful life of more than 10 years; or
Does not have an ascertainable useful life, shall be treated as if it had a normal useful life of 10 years.
Q.63 What is meant by Pension? What is the tax treatment of Pension under clause 08 of Part 1 of second schedule? (Marks=1+4)
Pension
Pension is the amount received on account of past services/employment. And recipient should be citizen of Pakistan.
If received by a citizen of Pakistan under clause (8) part I of second Schedule.
Provided
As stated above the recipient should be citizen of Pakistan
The recipient must not be working for the same employer for any remuneration.
In case a person receives pension from more than one employer, the exemption shall be available to the higher of the pensions received by him.
Pension Received by Ex-Government Employees and Members of Armed Forces.
Any pension received by employees of Federal Govt. /Provincial Govts. Members of Armed
Forces of Pakistan or granted under the rules to their families is exempt from tax under clause (9), part I of second Schedule
Q.64 What are the Penalties in case of failure to maintain record and non compliance with the notice under section 185 and 186 of Income Tax Ordinance 2001 respectively?
Penalty
Penalty for failure to furnish a return or statement Sec. 182
Liable for penalty equal to one-tenth of one percent of the tax payable for each day of default subject to a minimum penalty of Rupees five hundred and maximum penalty of twenty five percent of tax payable in respect of that tax year.
Penalty for failure to maintain records Sec. 185
In case of first failure, two thousand rupees
In the case of second failure, five thousand rupees
In the case of third and subsequent failure, ten thousand rupees
Penalty for non-compliance with notice: Sec 186
In case of first failure, two thousand rupees
In the case of second failure, five thousand rupees
In the case of third and subsequent failure, ten thousand rupees
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