Taxation Management Practice Questions Rental Income

Question-1
Badar and Jamal jointly own a house in Karachi. Bashir has 75% share in the house. On 1 September 2013, the
house was let out at an annual rental value of Rs. 6,500,000. This amount includes Rs. 186,000 per month for
utilities, cleaning and security.

During the tax year 2014, the owners incurred the following expenditures in relation to the house:

Rs.
Utilities, cleaning and security 650,000
Repair and maintenance 810,000
Insurance premium 240,000
Collection charges 25,400

Badar and Jamal have no other source of income. All the above expenses were incurred by them jointly.

Required

Calculate tax liability of Badar and Jamal for the tax year 2014

Question-2
Mr. Sohail, a resident individual, owns a building in Clifton area of Karachi. On 1.10.2021 he rented out the building
to Mr. Baqir at an annual rent of Rs. 1,200,000. This amount include Rs. 15,000 per month for arranging two security
guards for the building. Following expenses were incurred by Mr. Sohail on the building during the tax year 2022:

Descriptions Rs.
Repairs and renovation 35,000
Property tax 20,000
Insurance premium 10,000
Rent collection charges 3,000

Mr. Sohail also paid a salary of Rs.4,000 per month to each of the two security guards at building.

Required:
Under the provision of Income Tax Ordinance, 2001 calculate the tax liability of Mr. Sohail under the
appropriate heads of income for the tax year 2022

Question-2

Prepared by Abdul Samad Page 1

The following information is provided by Mr. Azhar.

1. Azhar, a citizen of Pakistan, retired from the services of Anis Private Limited (APL) on 29 June 2007. On
retirement, Azhar was eligible to receive the following from APL:
i. A monthly pension of Rs. 20,000 payables from 1 July 2007.
ii. Rs. 100,000 in lieu of un availed privileged leave.
iii. Rs. 450,000 as a gratuity. The gratuity payable was under a gratuity scheme of APL, which is applicable to
all the company’s employees. The gratuity scheme has been approved by the Federal Board of Revenue.

The pension is deposited at the end of each month into Azhar’s bank account. The amounts for the leave pay (leave
encashment) and gratuity were paid by APL to Azhar on 5 July 2007. No taxes were deducted by APL from the above
payments.

2. Azhar commenced employment with Super Steel Ltd (SSL) on 1 July 2007 as the factory accountant. In
accordance with the terms of his employment the following remuneration and benefits were received by Azhar
for the year ended 30 June 2008:
i. A basic month salary of Rs. 200,000
ii. Monthly allowances of Rs. 20,000 for housing and Rs. 30,000 each for utilities and medical treatment.
iii. A company-maintained motor car for his business and private use.
iv. Reimbursement of all medical treatment or hospitalization charges for Azhar and his wife.
3. As a policy matter SSL, which is applicable to all employee, the basic salary for the month is deposited in to
each employee’s bank account on the first working day of the following month. The monthly allowances are to
be collected by the employees from the cashier on the last working day of each month.
4.
i. In order to provide the benefit of a car to Azhar, a new Toyota Saloon was taken on lease by SSL on 1 August
2007 from an approved leasing company, for the annual lease rental of Rs. 400,000 payable for four years.
If the car has been purchased outright by SSL, the cash price would have been Rs. 12,00,000.
ii. For the year ended 30 June 2008, SSL paid Rs. 210,000 as hospitalization charges for the treatment of
Azhar’s wife.
iii. During the month of June 2008, Azhar was on vacation. On resuming his duties on 7 July 2008, he collected
his monthly allowances from the cashier for the month of June 2008.
5. Due to the constantly fluctuating power supply, SSL agreed to supply electricity to the apartment rented by
Azhar from the factory generator. The electricity unites consumed during the year ended 30 June 2008 as per
the meter installed in the apartment, if purchased from an independent power company, would have cost Rs.
123,800.
6. Azhar paid Rs. 15,000 as Zakat under the Zakat and Ushr Ordinance, 1980 in the year ended June 2008.

Required

Calculate the taxable income of Mr. Azhar for the relevant tax year under the appropriate heads of income.

Prepared by Abdul Samad Page 2