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 + + Usman Attari + + thanks for sharing ur file 

Attention Related Final Term papers Spring 2013: All Fellows You don’t need to go at any other site for current Final Term papers Spring  2013, Because All discussed data/sharing of our members in this discussion are going from here to other sites. (Other sites Admins/mods Copy from here & posted at their sites with fake IDs or original name: p). you can judge this at other sites yourself. So don’t waste your precious time with different links.

FIN-623

SUBJECTIVE FINALTERM

By: USMAN ATTARI

0321-6265346

 

What does the term turnover stands for a company?
Turnover under this section means:

  • the gross receipts, exclusive of sales tax and central excise duty or any trade discounts shown on invoice or bills, derived from the sale of goods;
  • the gross fees for the rendering of services or giving benefits, including commissions;
  • the gross receipts from the executions of contracts; and
  • the company’s share of the amounts stated above of any association of persons of which the company is a member


Who are required to file the return of Income Tax?
Any one must file a federal income tax return if your income is above a certain level; which varies depending on your filing status, age and the type of income you receive.


What is the tax treatment of Pension under clause 16 and 17 of Part 1 of second schedule related to “Shaheeds”?
Pension granted to a public servant or personnel of Armed Forces on injuries or body disability and to families and dependents of ‘Shaheeds’ belonging to civil or Pakistan Armed Forces; or public servant or member of Armed Forces, who dies during service is exempt as provided in part I of Second Schedule.

Any payment in the nature of commutation of pension [Clause (12), Part I, 2nd Schedule] is Exempt from tax:

Any payment in the nature of commutation of pension received from the government or under any pension scheme approved by the Central Board of Revenue under clause (12), Part I, Second Schedule is exempt from tax.


Compute taxable income and tax liability from the following information of Mr. Usman an employee of B Company for tax year 2012.
Basic salary Rs 250,000 p.a
House Allowance Rs 120,000 p.a.
Tax Deducted at Source Rs 1,000
                        
250,000 + 120,000 + 1000 = 371,000 taxable income

Tax rate of 2 percent shall apply as given at serial #2 where the taxable income does not exceed Rs. 400,000.

Income tax payable = 771,000 x 2% = 7420

 

Mr. Ghaus is employed in a company after his retirement from army. Details of his income for the year ended 30th June 2012 are as under:
Basic salary from company Rs. 20, 000 per month
Entertainment allowance Rs. 1,000 per month
Pension received from army Rs. 48,000 per annum
Calculate the total taxable income of Mr. Ghaus.

                            240,000 + 1000 = 241,000 income taxable

Under what conditions a commissioner of Income Tax may ask for the filing of returns by notice?

  1. Where the return of income furnished is not complete, the Commissioner shall issue a notice to the taxpayer informing him of the deficiencies (other than incorrect amount of tax payable on taxable income, as specified in the return, or short payment of tax payable) and directing him to provide such information, particulars, statement or documents by such date specified in the notice.
  2. Where a taxpayer fails to fully comply by the due date, with the requirements, of the notice under sub-section
  3. The return furnished shall be treated as an invalid return as if it had not been furnished.

 

List down examples of Income from Agriculture under Section 41 of Income Tax Ordinance 2001 (Any Five).

  1. Any rent or revenue derived by a person from land which is situated in Pakistan and is used for agricultural purposes;
  2. Any income derived by a person from land situated in Pakistan from – Agriculture;
  3. Any income derived by a person from land situated in Pakistan from the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by such person to render the produce raised or received by the person fit to be taken to market;
  4. Any income derived by a person from land situated in Pakistan from the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by such person, in respect of which no process has been performed other than a process of the nature described in sub-clause.
  5. Any income derived by a person from any building owned and occupied by the receiver of the rent or revenue of any land described in clause.

 

Zero Rated Supply

In economics, zero-rated supply refers to items that are taxable, but the rate of tax is nil on their input supplies. The term is applied to items that would normally be taxed under valued-added systems such as Europe's Value Added Tax (VAT) or Canada's Goods and Services Tax (GST). Examples of these items include: most exports, basic groceries, and prescription drugs.

 

Sec 61 Donation

“[Any] amount paid as donation to the following institution, foundations, societies, boards, trusts and funds, namely:

1. Any Sports Board or Institution recognized by the Federal Government for the purposes of promoting, controlling or regulating any sport or game;

2. Fund for Promotion of Science and Technology in Pakistan

3. Fund for Retarded and Handicapped Children; Proviso, Individual 30,Co.15p.c

 

How this Tax credit is calculated?

Each calculation of tax credits involves a series of steps which in brief are:

  1. Determine the number of relevant periods
  2. Calculate maximum entitlement for each relevant period by adding together the WTC and CTC elements that are applicable to the claimant’s circumstances.
  3. Apportion the income figure and the relevant threshold for each relevant period on a daily basis.
  4. Calculate the ‘excess income’ figure (the amount that the person’s income exceeds the threshold for that relevant period).
  5. Calculate the ‘reduction due to income’ by multiplying the ‘excess income’ figure by the first taper percentage (currently 41%).
  6. Take Step 5 away from the figure in Step 2 to find the tax credits for the relevant period.
  7. Add the amount due for each relevant period to find the entitlement for the tax year.

 

What is VAT (Value added tax)? 3

VAT is a specific turnover tax levied at each stage in the production and distribution process. VAT, ultimately has its incidence on the individual consuming the goods and availing the services. However, liability for VAT is on the supplier of goods and services. In this type of tax, VAT system of Tax Credit is available for all the intermediaries (suppliers of goods and services) and burden of tax lies on final consumer.

 

What do you mean Intangible and cost of Intangible as per define in Sec 24? (5)

Intangibles (Sec. 24):

A person shall be allowed an amortization deduction in a tax year for the cost of intangibles; ı 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

 

Define with sections

Salary represents amount received by an employee from an employment.

Employee sec 2(20): means any individual engaged in employment.

Employer sec 2(21): means any person who engages and remunerates an employee.

 

What is Pension? What is the treatment of Pension as per IT ordinance 2001? 5

Pension

Pension is the amount received on account of past services/employment

Tax treatment of Pension

  • Pension Totally Exempt

 

Draw a chart for the understanding of taxation structure in Pakistan (5 Marks)?

Taxation Structure of Pakistan:

ı Federal Taxes

Federal taxes are the taxes which can be levied by the federal government and include among others the followings:

  • Income tax
  • Corporate tax
  • Customs duties/Tariffs
  • Sales tax

ı Provincial Taxes:

  • Stamps Duty
  • Registration Tax
  • Motor vehicle tax

 

In what ways a return of Income is filed? (3 Marks)

(a) Prescribed form along with required documents.

(b) Fully state all relevant particulars or information as specified in the form of return, including a declaration of the records kept by the taxpayer; and

(c) Shall be signed by the person, being an individual, or the person’s representative where section 172 applies.

A return of income can also be filed electronically. (e- Filing of return)

 

What is the tax treatment of Speculation business as per section 19 of Income Tax Ordinance 2001? 3

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”.

 

What does the word Market Value means as per rule 11 sub rules 3 of Income Tax Rule 2002? (3  

The word “Market Value” [sub-rule (3) of Rule 11] shall be:

a) Where agricultural produce is ordinarily sold in the market in its raw state or after application of any process ordinarily employed by a cultivator or receiver of agricultural income as rent-in-kind to render it fit to be taken to market, the market price for the produce at the time it is used as raw material in the person’s business;

OR

b) In any other case, the sum of the following amounts, namely:

  • the expenses of cultivation; and
  • The land revenue rent paid for the area in which the produce is grown.

 

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

a) No amount shall be chargeable to tax under the head Salary until the earlier of

I. the time the employee has a free right to transfer the shares; or

II. 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.

 

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 amount = 100,000 x 2.5% = Rs. 2,500

Any amount received as flying allowance by:

a) pilots, flight engineers and navigators of Pakistan Armed forces, Pakistani Airline or Civil Aviation Authority; and

b) Junior commissioned officers of Pakistan Armed Forces.

Shall be taxed @ 2.5% as a separate block of income

 

Give five examples of disposal.

Some Examples of Disposal:

  1. Transfer of capital asset by a subsidiary company to a parent company or vice versa
  2. Any transfer, in a scheme of amalgamation, or a capital asset by the amalgamating company to the amalgamated company.
  3. Transfer of share by a share holder in a scheme of amalgamation of companies.
  4. Any transfer of a capital asset by a wholly-owned subsidiary company to its Pakistani holding company.
  5. 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
  6. Museums, National Art Gallery, National Archives or any other such public museum or institution.

 

Un explained investment under section 111

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
  • A person has made an investment,
  • Any amount credited to person’s books of account
  • A person has incurred expenditure.

Immune (Exempted) Investments/Income

  • Private foreign Currency Accounts
  • Three years Foreign Currency Bearer Certificates
  • Rupees withdrawn or assets created out of:
    • Withdrawal from US Dollar Bearer Certificates,
    • Withdrawal from F.C. Accounts
  • Encashment of foreign exchange bearer certificates

 

Write basic contents 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.

 

Who is liable to pay Capital Value Tax on capital value of certain assets?

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

 

Explain different types of taxes. (Any five)

Type of Taxes:

  • 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

 

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 for failure to maintain records Sec. 185

a. In case of first failure, two thousand rupees

b. In the case of second failure, five thousand rupees

c. In the case of third and subsequent failure, ten thousand rupees

Penalty for non-compliance with notice: Sec 186

a. In case of first failure, two thousand rupees

b. In the case of second failure, five thousand rupees

c. In the case of third and subsequent failure, ten thousand rupees

 

Nice and good sharing.  

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