FIN623 Assignment no 2 Solution-Semester Fall 2021-vu-Taxation Management
FIN623 Assignment no 2 Solution-Semester Fall 2021-vu-taxation Management
#Fin623, #VU, Semester Fall 2021, FIN623 Assignment no 2 Solution,-taxation Management, virtual university, ITO 2001, Income Tax Rule 2002,
income tax ordinance 2001, taxable income, residential status,
tax liability,
Question
Mr. Anonymous the Manager of a Multinational Company in Pakistan was deputed on the official task in Italy in 2016. He returned to Pakistan in June 2021 and remained in Pakistan for the period of 1 year. For the tax year 2022, the following are the details of his incomes and other particulars:
Monthly basic salary 120,000
2. Bonus 90,000
3. Adhoc allowance 50,000
4. Furnished accommodation provided by employer 200,000
5. Utilities paid by employer 80,000
6. Monthly medical allowance 50,000
7. Conveyance provided for personal use
Value of car purchased by the employer 2,150,000
8. Interest-free loan is taken from employer 4,000,000
9. Rental income from building 550,000
10. Non- adjustable advance received 100,000
11. Zakat paid 50,000
12. Investment in shares of a public company listed on
Stock Exchange of Pakistan 100,00
Requirement:
For the tax year 2022, determine for Mr. Anonymous:
a) Residential status (1 Mark)
b) Taxable income (6.5 Marks)
c) Tax liability (2.5 Marks)
FIN623 Assignment no 2 Solution-Semester Fall 2021-vu-taxation Management
#Fin623, #VU, Semester Fall 2021, FIN623 Assignment no 2 Solution,-taxation Management, virtual university, ITO 2001, Income Tax Rule 2002,
income tax ordinance 2001, taxable income, residential status,
tax liability,
Question
Mr. Anonymous the Manager of a Multinational Company in Pakistan was deputed on the official task in Italy in 2016. He returned to Pakistan in June 2021 and remained in Pakistan for the period of 1 year. For the tax year 2022, the following are the details of his incomes and other particulars:
Monthly basic salary 120,000
2. Bonus 90,000
3. Adhoc allowance 50,000
4. Furnished accommodation provided by employer 200,000
5. Utilities paid by employer 80,000
6. Monthly medical allowance 50,000
7. Conveyance provided for personal use
Value of car purchased by the employer 2,150,000
8. Interest-free loan is taken from employer 4,000,000
9. Rental income from building 550,000
10. Non- adjustable advance received 100,000
11. Zakat paid 50,000
12. Investment in shares of a public company listed on
Stock Exchange of Pakistan 100,00
Requirement:
For the tax year 2022, determine for Mr. Anonymous:
a) Residential status (1 Mark)
b) Taxable income (6.5 Marks)
c) Tax liability (2.5 Marks)
Category
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LearningTranscript
00:00bismillahirrahmanirrahim assalamu alaikum dear students and viewers welcome to my youtube channel dj learner pod
00:05in today video or lecture we are going to cover the solution of assignment number
00:11two associated with the subject labor taxation management with subject code
00:192623 before going to the depth of the question I'm going to share with you
00:24that it is a very technical assignment and I have devoured my best efforts to
00:31find out this version if someone find some lags or weaknesses regarding the
00:37rules and sections please come up with your suggestions and along with the
00:43reference in comment sections that we will get all benefits of all the
00:49combined efforts so let's start on the questions and then we are going to our
00:55solutions question Mr. Anonymous the manager of a multinational company of
01:03Pakistan was deputed on the official task in Italy in 2016 he returned to
01:10Pakistan in June 2021 and remained in Pakistan for the period of one year
01:15please circle this this is very important one year or the tax year 2022
01:25following are the details of his income and other particulars from this
01:29statement we are going to conclude that this tax assessment is related to the
01:35individual person okay and it is related to the private company so is a private
01:40individual person's salary assessment for tax purposes so these are the
01:47information that we have from the questions monthly basic salary
01:54120,000 bonus 90,000 ad hoc allowances 50,000 furnished accommodation
02:01provided by employer 200,000 utility paid by employees 80,000 monthly medical
02:10loans 50,000 conveyance provided for personal use value of car purchased by
02:17the employer is 2.15 million interest-free loan taken from the
02:23employer 4 million general income from building 550,000 non-adjustable
02:33advance received 100,000 Scott paid 50,000 investment in shares of a public
02:41company district on stock exchange of Pakistan 100,000 so let's move to the
02:47requirements and requirement sections contains three a sub requirement that we
02:52are going to be solved first one is registered status we have to identify
03:00the status of the manager of this company it has one marks second task is
03:08about the competition of taxable income and the last one is taxable tax
03:13liability sorry so read this carefully and understand you must provide all the
03:18calculation in details as each calculation carry marks you must
03:22mention the relevant section seat element section clause of the ito 2001
03:27and income tax ordinance or income tax rules and this is income tax ordinance
03:342001 and rule 2002 for the tax year 2020 to support your answers and calculations
03:41as these carry marks the most difficult and technical part of this question is
03:48this quoting section clauses in accordance with the income tax ordinance
03:552001 and income tax rules 2002 so let's move to the solution without wasting
04:00further time so first answer is and part of the first answer is the second 82
04:07stage says that if the stay period is for 183 days or more that is resident so
04:16he has stay in the Pakistan for one year so it exceeds the limit under the second
04:2182 183 so we can we conclude that the concerned person is resident enjoy the
04:32national status in Pakistan are qualified by the registration status so
04:40for the rest two sections apart BC we are going to move our excel sheets once
04:47again I'm going I'm going to clarify it it here that this is a most technical
04:54assignment and I have tried my best to provide concerned clauses section if
05:02somebody or someone found it that it is not relevant so I request you please
05:09come up with your suggestions is relevant section clause and parts all
05:14together in comment section as that we will get all benefits his suggestion or
05:20his or suggestions so let's move item details monthly basic salary so we are
05:28going to multiply it by 12 to get the annual number of the basic salary
05:36because we are going to assess the taxable income on yearly basis assumption
05:40is nil so when we are going to multiply 120 by 20 so here I want 12 into g5 this
05:47is a given information so our annually a basic salary amount is 1.44 million now
05:59bonus come to the second item of the salary sheet I have given information
06:06under class 19 part 1 of the second schedule I think it's the second
06:12schedule bonus it is taxable so there is no exemption in nil I have written in
06:19the column of exemption 90,000 a dog LLC's so from my point of view I make a
06:28lot of research to get some information regarding the ITO 2002 or ITO 2001 and
06:35income tax rule 2002 I didn't get if some have information about this
06:40particular item please provide us in the comment section so I take it as
06:50unaccepted item so I will put place all the amount here now come to the fourth
06:58item which is furnish accommodation provided by employer it comes under the
07:04IT rules income tax rule 2002 to rule 4 valuation of accommodations so amount
07:13entitled as per this relevant sections and information amount entitled and get
07:19the rent clause in absence of MTS is 45% of basic salary pick up the one which is
07:28higher so he is getting 200,000 but we are going to get a 45% of this basic
07:36salary which I have mentioned as 0.45 E5 so we will get 648,000 so we are going
07:43to select that one which is higher so it is clear from the two figures that 648,000
07:50is bigger one so we take it as a taxable amount so we place in the column of
07:56taxable income 648,000 now come to the duties paid by the employer it is
08:03belong the subsection 6 of section 13 which confirm that these are 100% taxable
08:11so we are going to be put in the columns of taxable income the amount 80,000 and
08:17now move to the next item which is monthly medical allowance for year is 12,000
08:2612,050 something like that so sorry 12 means this is monthly 12 means annually
08:37we are going to calculate the medical allowance for year so when I am going to
08:43multiply this with 12 which is 50,000 then next one amount so I will get the
08:50medical allowance amount is for the year 600,000 this is related to the clause 139
08:55part one of the second schedule so again we are going to be as per this
09:01class we have exemptions allowed is 10% the basic salary so basic salary is this
09:09one 1.44 million so what we get by multiplying 0.1% with this 144,000
09:16so we have this exemption this amount in exemption so we will subtract it from
09:24the received amount in the head under the head of medical allowance for the
09:28year so the net amount after subtraction is 456,000 which is taxable and we are
09:36going to return in and the column of taxable income now we are move to the
09:42next item conveyance so make it little bit like this IT rule income tax rule
09:592002 to rule 5 value of conveyance under this section or rules conveyance provided
10:09for personal use value of car purchased by employer at 10% so there are three
10:19categories here if it is purely used for business there is no tax there is no
10:24exemption sorry if it is partly used for personal use and business as well so we
10:30are going to apply the rate of 5% personal use the rate is 10% so we are
10:34going to be take 10% of the amount which is 10% of the asset amount here
10:44asset is called and its amount is cost or price is 2.15 million so 10% of 2.15
10:51million is 215,000 which become the part of taxable income so interest free loan
10:57taken from employee at 10% I get this information someone someone who make a
11:06video but he didn't give any reference so I just quote it 10% I have taken the
11:1310% of the amount of the loan 4,400,000 once again I'm
11:19every student and viewers please if it if he he or she has relevant information
11:27please drop this information with relevant references with along with the
11:33rules sections subsection whichever is there in comment section for the benefit
11:40of all including me so now move to the rental income from building treatment of
11:46income from property under section 15 so rental income is how much is he is
11:55receiving 550,000 now we are going to calculate this one as per the clear
12:01information as per the given slabs gross amount is brown to slap 400,000 to 1
12:07million so up to 4,000 we are going to take this amount lump sum 12,500 plus we
12:13are going to apply the rate 0.075 on the amount exceeding 400,000 but below
12:23the 1 million so this is 550,000 minus 400,000 we will
12:34accept 150,000 so we are going to multiply this 0.075 so we will get
12:4123,750 amount in the column of internal tax now we are coming and no non
12:48adjustable advance received class 59 of part 1 of second schedule on income from
12:55property section 15 module 4 so what we are going to do we are going to divide
13:02this amount by 10 on the basis of years 10 means 10 years not any percentage so
13:11we are going to discuss this amount over the period of 10 years so that's why I
13:15am going to divide 100,000 with number 10 and we will get 10,000 now we have
13:23the cost because we have paid so it is detectable so we will detect it so I
13:30have apply a formula here look at this this is a sum which is equal to 33.4
13:38million approximately so after God we have paid is 50,000 so after detecting
13:45this we read the taxable amount 3.36 million so now we are going to move with
13:53the third part which is a tax liabilities let's move to the tax
13:57liability and further there is the one atom investment in the stock shares of
14:02the stock market listed in the public listing the stock market so applicable
14:12slab and that we are going to be used for this income is taxable income is 22.5
14:22million to 3.5 million because our taxable income calculated as income is
14:28belong to this slab so rate apply on amount exceeding 2.5 million is 17.50%
14:35or 0.3 so let's start taxable income this amount exceeding the
14:43lower range you can find out this amount by subtracting and this amount 2.5
14:53million lower bracket from the taxable income I show you C14 this is C14 minus
15:03C1 and we will get the exceeding amount but lies between the this slab or range
15:07tax liability fixed tax detectable amount up to 2.4 similar to non-advance
15:15advance I will show you similar similar like this 12,500 so we are going to
15:22cover this up to 25,195,000 and we are going to apply this rate on exceeding
15:30amount 862,750 so we will get 150,981.25 by adding both we will get 345,981
15:44so I am going to shift this rate here to keep it separate it's just for
15:52information in decimal and this is the percentage form now let's rebate the
15:59last statement that we has dropped in calculating the taxable income here we
16:05treat it as a rebate and we will subtract our tax liability so let's move
16:15it and discuss it investment in shares of the company listed in the stock
16:20market is there's two scenario scenario here where you are going to invest in
16:26share or provident fund or mutual fund something else as it is invested in the
16:31shares of the company public company listed in the stock market so we are
16:36going to be use this information actual amount is 100,000 10% of taxable income
16:52this we are going to this second option 336,275 or 300,000 if there is a provident
17:01fund or mutual fund something else so this rate raises to 20% and this 300,000
17:09raises to 2 million so what is the rule? Rule is that after calculating all these
17:19three figures go with the lowest one in taxable income where it is going to be
17:25increased we are going to the pick up the highest one as we already discussed
17:31648,000 here we are going to pick the lowest one so lowest one is 100,000 so
17:36we are keeping it here formula for tax rebate tax rebate gross tax payable or
17:44liability divided by taxable income into rebate so we have calculated this one
17:52let's see the formula D9 this is D9 and C4 this is taxable income C4 C4 into C17
18:11this is C17 lowest one so we will get the value 10,288.64 so as this is a
18:24rebate and we are going to deduct it from the tax liability amount
18:30345,981 so next taxable liability is 335,692.61 I hope you will enjoy the solution and I hope it is almost correct with some weaknesses that I have left upon your shoulders
18:54please come up and share your opinions with us on remaining or left portion so
19:01we appreciate your efforts in this regard thank you so much take care of
19:05yourself God bless you