Post on 10-Apr-2018
8/8/2019 TM Cid # 10141 (Session 5)
1/23
1
Chapter 05
8/8/2019 TM Cid # 10141 (Session 5)
2/23
2
INCOME FROM PROPERTY
Property means: Building , Land
Income from Property means: Rent
Rent means :-
Amount Received / Receivable by the owner of building for its use.
Any forfeited deposit paid under a contract for the sale of land/build
Un-adjusted advance received by the owner (10 equal proportion).
Subsequent recovery of irrecoverable unpaid rent.
8/8/2019 TM Cid # 10141 (Session 5)
3/23
3
INCOME FROM PROPERTY EXEMPTED
Income from Agriculture.
Income from Property held by Trust .
Self occupied Residential Property.
Self occupied Business Property.
RATES OF TAX
Up to Rs: 150,000/- P.A Nil
150,001/- to 400,000/- 5% of exceeding Rs: 150,000/-
400,001/- to 1,000,000/- 12,500/- + 7.5% of exceeding Rs: 400,000/
Exceeding 1,000,000/- Rs:57,500/- + 10% of exceeding
Rs: 1,000,000/-
8/8/2019 TM Cid # 10141 (Session 5)
4/23
4
Chapter 06
8/8/2019 TM Cid # 10141 (Session 5)
5/23
5
CAPITAL AND REVENUE RECEIPT /
EXPENDITURE
Necessity :-
Income Tax is levied on revenue receipts and not on capital.
Expenditure of revenue nature are deducted from income toascertain profit. The difference in capital and revenue receipt/
expenditure is must
8/8/2019 TM Cid # 10141 (Session 5)
6/23
6
CAPITAL EXPENDITURE
A transaction which increases the assets.
Examples :-
Balance Sheet effect.
Purchasing of assets.
Commencement of business expenditure.
Extension of business.
Increase in earning capacity.
Acquiring Rights / Patents.
8/8/2019 TM Cid # 10141 (Session 5)
7/23
7
REVENUE EXPENDITURE
Operational expenditure.
Examples :-
Income statement (P & L A/c) effect.
Salaries.
Rent & Utility Bills.
Legal expenses.
Repair & Maintenance.
Payment for use of Right , Patent , Trade Mark etc.
8/8/2019 TM Cid # 10141 (Session 5)
8/23
8
Chapter 07
8/8/2019 TM Cid # 10141 (Session 5)
9/23
9
INCOME FROM BUSINESS
Business means:- Trade
Commerce
Manufacturing
Profession
Vocation
Adventure in the nature of Trade
Concern in the nature of Trade
8/8/2019 TM Cid # 10141 (Session 5)
10/23
10
DEDUCTIONS
Operating Expenditure relating to business
Pre-Commencement Expenditure
Scientific Research Expenditure
Expenditure on Education and Health of Employees / Families
Training of Employees
Mark up on debt
Financial cost of Lease
Bad Debts
8/8/2019 TM Cid # 10141 (Session 5)
11/23
11
DEDUCTIONS NOT ALLOWED
Cess, Rate, Taxes
Tax Deducted at Source
Payment to Non-Resident
Expenditure on Entertainment in Excess of prescribed Limits Sum Paid to Unrecognized or Unapproved Fund
Fine or Penalty Paid or Payable for Violation of Law
Personal Expenditure Incurred by the Person
Amount Transferred to Reserve Fund or Capitalized
Remuneration Paid to a Member of the Association
8/8/2019 TM Cid # 10141 (Session 5)
12/23
12
COMPUTATION OF TAXABLE INCOME
N
et Profit or EBT. (Earning Before Tax)
ADD
Inadmissible Expenses (about Property or Capital Gain )
Expenses not relating to Business
(Personal Exp or Other Business exp)
Income not included
(Recovery of Bed Debts pertaining to previous year)
LESS
Expenses relating to Business (Omitted/not included)
Income not relating to Business (Income from Property)
8/8/2019 TM Cid # 10141 (Session 5)
13/23
13
CALCULATION OF TAX
No tax on taxable income up to :-
Rs: 100,000/- Male
Tax as per Schedule Tax Relief.
Gross Tax
Taxable Income
X Amount admissible as Tax Relief
( Max 40% of Taxable Income)
Rs: 125,000/- Female
Condition
Not salaried person or income from salary should be 50%
or less of total income
8/8/2019 TM Cid # 10141 (Session 5)
14/23
14
QUESTION
Following Income Statement relates to M/s. QR Traders ( Business Individual),
for the year ended June 30, 2008.
Income
Less: Expenses- Salaries & allowances
- Electricity charges
- Telephone expense
- Rent expenses
- Printing & stationery
- Traveling & conveyance- Vehicle running expenses
- Legal & professional charges
- Misc. expenses
- Accounting depreciation
EBT
Tax Year 2008
Rupees
221,000
500,000
48,000
24,000
18,000
60,000
14,000
12,000
19,000
12,000
6,000
8,000
279,000
8/8/2019 TM Cid # 10141 (Session 5)
15/23
15
Following expenses are not fully verifiable, as such 15% of each shall be
disallowed :
Misc. expenses unverifiable.
Tax depreciation allowed Rs. 6,000/-
Printing & stationery Rs. 14,000/-
Vehicle running expenses As. 19,000/-
Required : Find out taxable income and tax payable thereon.
QUESTION (Cont)
N
otes:
8/8/2019 TM Cid # 10141 (Session 5)
16/23
16
Chapter 08
8/8/2019 TM Cid # 10141 (Session 5)
17/23
17
DEPRICIATION
Definition:-
A decrease in the value of asset through wear & tear.
KINDS OF DEPRICIATION
ALLOWANCE
Initial First year NormalAccelerated
8/8/2019 TM Cid # 10141 (Session 5)
18/23
18
KINDS OF DEPRICIATION
ALLOWANCE
Initial Allowance (I A) is allowed in the year asset is used for the
purpose of business in Pakistan first time or tax year in which
production starts which ever is later.
Rate is 50% of the cost of Asset.
8/8/2019 TM Cid # 10141 (Session 5)
19/23
19
FIRST YEAR ALLOWANCE
(FYA)
Allowance on Plant , Machinery & Equipment forIndustry.
Assets installed in under developed / Rural areas (Specified by Govt.)
Assets be owned and managed after 01st July, 2008.
Rate is 90% of the cost .
In lieu ofInitial Allowance (I A is not admissible) .
Objective :-
To Accelerate industrial process in under developed areas.
8/8/2019 TM Cid # 10141 (Session 5)
20/23
20
ACCELERATED DEPRECIATION
Admissible on Plant, Machinery and Equipment installed
for generation of Alternate Energy.
Must be installed by an industrial undertaking set up
any where in Pakistan.
The asset is put to use after July 01, 2009.
Rate is 90% of the cost .
In lieu ofInitial Allowance (I A is not admissible) .
Objective :-
To overcome the energy crisis being faced in the country.
8/8/2019 TM Cid # 10141 (Session 5)
21/23
21
NORMAL DEPRICIATION
ALLOWANCE
As per rate specified in section 22 part I 3rd schedule.
Class Rate
Building 10%
Furniture & Fixture,
Plant & Machinery,
Vehicle , Ships 15%Computer Hardware 30%
Offshore Platforms 20%
Below ground installation 100%
8/8/2019 TM Cid # 10141 (Session 5)
22/23
22
AMORTISATION OF INTANGIBLE
ASSETS
Intangible means:-
Any Patent, Invention, Design, Model, Secret Formula, Copyright,
Trade Mark, Technical or Scientific Knowledge, Franchise, License. Any expenditure that provides benefit for more than one year.
Formula :
Cost of Assets / Useful Life of Assets (Whole Year)
Maximum Allowable Life - Ten Years.
8/8/2019 TM Cid # 10141 (Session 5)
23/23
23
DISPOSAL OF ASSETS
No Depreciation is charged in disposal year.
Sale proceeds is :
Income if more than written down value
(Gain on Disposal of Assets)
Expenditure if less than written down value
(Loss on Disposal of Assets)