Aiou solved assignment Taxation code 456
Solved assignment Taxation code 456
Q 01: Answer (See your Book page # 4 and 5.
Q 02: Answer
Company (Section 2 (12) and 80.
According to income tax ordinance 2001 “company” mean and includes:-
- A company as defined in company’s ordinance 1984.
- A Body corporate formed under Pakistani law
- A Body incorporated by a country outside Pakistan relating to incorporation of companies.
- A Trust, co-operative society or a finance society or any other society formed under Pakistani law.
- A Local Autority
- Government of Province.
- Any association declarecd by central board of revenue to be a company.
- A modarba as defined in modarba companies ordinance 1980
The term accumulated mean and include:-
- All types of reserves maintained by a business out of its profits.
- All profits of the company upto the date of distribution of dividend.
- In case of liquidation of a company or trust, all profits up to date of its liquidation.
According to income tax ordinance 2001, finance society includes a co-operative society which accepts money on deposit or otherwise for the purpose of advancing loans or making investments in the ordinary course of business.
PAKISTAN SOURCE INCOME
Pakistan source income means an income which is earned in Pakistan. Examples are:-
- Salary income under section 101 (1).
- Business income under section 101 (2)(3).
- Dividend income under section 101 (6).
- Profit of Debt under section 101 (7).
- Royalty income 101 (8).
- Rental Income under section 101 (9 & 10)
- Fee for technical services under section 101 (12)
- Pension or annuity under section (101 (11)
- Capital Gain under section 101 (13)
Q 3: Answer:
Perquisites mean facilities or benefits provided by the employer to his employee. For examples:-
- Value of rent free accommodation provided by the employer to his employer;
- Value of an accommodation provided by employer at concessional rate.
- Insurance premium paid by employer to effect life insurance for the benefit of employee.
- A debt of employee paid by employer.
- Value of conveyance facility provided by the employer.
VALUATION OF PERQUISITES AND ALLOWANCES AND BENEFITS
To determine the values of perquisites, allowances and benefits, the following terms must be understood:-
MINIMUM TIME SCALE (MTS)
Minimum time scale means the amount from where the salary scale of the taxpayer starts. But if there is no MTS then basic salary of a particular post is considered as MTS.
Basic salary means the pay and allowances payable monthly but does not include:-
- Dearness allowance
- Entertainment allowance
- Special allowance
- Medical allowance
- Employer contribution to provident fund.
- Utilities allowance
- And conveyance allowance etc.
- Basic salary.
- Cost of living allowance
- Overseas allowance.
- Bonus etc.
House Rent Allowance:-
If the employer provides any accommodation allowance the whole amount so received will be taxable.
If an employer provides a furnished or unfurnished accommodation, the following treatment will be:-
- The amount that would be have been paid by an employer in case such accommodation was not provided.
- 45% of MTS of basic salary, which ever of (a) or (b) is higher.
Treatment of Conveyance:-
- If an employer provides conveyance allowances to his employee, the whole allowance will be fully taxable.
- If an employer has provided a conveyance to employee for purely personal use, 10% of the cost which employer paid for acquiring the motor vehicle will be included in the taxable income of the employee every year.
- If a motor vehicle is provided by an employer to be used for the employee both for official and personal purposes, 5% of the cost paid by the employer for acquiring the motor vehicle will be included in the income of the employee.
Special allowance like T.A and D.A are provided to employee for meeting the expenses of official visits, the whole amount of this allowances is exempt from tax.
UTILITIES ALLOWANCE OR FREE PROVISION OF UTILITES
The term utilities includes the following:-
Gas, Water, Electricity.
Any amount paid by employer for meeting the above expenses is exempt upto 10% of MTS.
Q 04: Answer
Depreciation means a decrease in the value of an asset. The income tax law permits the deduction of depreciation subject to certain conditions while computing the taxable income:-
- ASSTS ELIGIBLE FOR DECPRECIATION UNDER SEC 22 (15)
Depreciation is allowed on tangible assets only such as building, machinery, plant and furniture. But land is not admissible for depreciation. Depreciation is also not allowed on intangible assets like copyrights, patents, and Goodwill etc.
- STRUCTURAL IMPROVEMENT
It means any building, road, park, railway lines, airport, wharf, pipeline, bridge etc.
- USE FOR BUSINESS OR PROFESSION
Depreciation is allowed only on those assets which are used for the purpose of business or profession.
- RATE OF DEPRECIATION.
Depreciation is allowed only according to rates prescribed in the part 1 of the third schedule of the income tax ordinance.
- ASSETS USED PARTLY FOR BUSINESS PURPOSES:- Then proportion of the depreciation shall be allowed as deduction which fairly relates to the business.
- DETERMINATION OF WRITTEN DWON VALUE:- Only this method should be used.
TYPES OF DEPRECIATION
- The initial depreciation is allowable deduction against the income from business. Following are the conditions for this depreciation:-
- This depreciation is allowed only in respect of depreciable assets.
- Initial allowance for depreciation is admissible in respect of the year, which is later out of the following:- (i) The year in which asset was used for the first time for the business or profession. (ii) The year in which commercial production started.
- Initial allowance for depreciation is allowed @ 50% of the cost of the assets.
- Initial allowance for depreciation is allowed in respect of depreciable asset, if the same is owned by the person.
Q 5: Answer
Mr. Jamil Javed
Tax Year Ended on: June 30, 2014
Tax Year 2014
Personal Status: Individual
Residential Status: Resident
Computation of Tax Liability:
Income from Salary 650000
Income from Business 200000
Income from Other Sources 150000
Total Income 1000000
Less Zakat 10000
Taxable income 990000
Computation of Tax Liability:
Tax as on Rs. 750000 17500
Tax on exceeding Rs. 240000 @ 10% 24000
Gross Tax 41500
Less: Tax reduction for senior citizen 50% of 41500 20750
Less: Tax deduction for full time teacher (Note-1) 4688
Less: Foreign Tax Credit 2434
Less: Tax Credit for Donation 275
Less: Tax deducted at source 10000
Total 17397 17397
Tax payable with return 3353
COMPUTATION OF TAX REDUCTIN FOR FULL TIME TEACHER:-
Income from Salary 650000
Gross Tax on salary 12500
Less: Tax reduction for senior citizen (50% of Salary) 6250
Tax reduction for full time teacher 75% of 6250 4688