Q No.
1
Muhammad Asghar
Computation of Taxable Income & Tax Liability
Tax Year 2025
Particulars Amount (Rs.) Reason
Profit before tax 2,468,000
Indamissible Expenses
Raw materials – No WHT disallowed upto 20% 1,560,000 Disallowed u/s 21(c)
Accounting depreciation 2,100,000 Replace with tax depreciation
Provision for slow inventory 1,800,000 Not allowable u/s 22
Fine for Violation of Contract - Admissible Not legal in nature – Allowed
Eid-Milan party for Employee - Admissible Entertainment – disallowed u/s 21(l)
Penalty for vaccine impurity - Admissible Contractual penalty – Allowed
Computer Software Purchased 975,000 Amortisation Allowed
Donation to hospital 2,300,000 Not to approved institution
Feasibility study 250,000 Preliminary Expenditures – capital in nature
Reward to salesman (cash) 500,000 Cash payment > Rs. 25,000 – disallowed u/s 21(m)
Installation cost of plant 375,000 Capital in nature – add back
Salary to brother - Admissible For Business Purpose
Cash Donation 2,064,000
Total Add Back 14,392,000
Admissible Deductions
Tax depreciation (excluding imported plant) (1,900,000) Allowable u/s 22
Initial allowance on imported plant @25% (718,750) Allowable u/s 23
Imported plant depreciation (Rs. 2.5M + 0.375M) × 15% (431,250) Allowable u/s 22
Amortization of pre-commencement expenses (680,000) 1/5th of Rs. 3.4M
Software amortization (12 years) (81,250) Rs. 975,000 ÷ 12
Dividend Received (174,000) Income from Other Source
Gain on Sale of Shares in APL (660,000) Capital Gain
Taxable Business Income 9,746,750
Income from other source
Dividend Income 240,000 (174,000+30,000)/0.85
Capital Gain
Gain on disposal of APL 660,000
Total Income 10,646,750
Less: Deductibel Allowances (30,000)
Taxable Income 10,616,750
Less: FTR & Separate Block of Income
Dividend Income (240,000)
Gain on disposal of APL (660,000)
Taxable Income as NTR 9,716,750
Tax Liability - Non Salaried Case
Tax on Rs. 5,600,000 1,610,000
Tax on Rs. Exceeding 5,600,000 1,852,538
3,462,538
Less: Tax Credit on donation
3,462,538 / 9,716,750 x (819,599)
Lower of:
a) 2,300,000
b) 30% of Taxable Income (2,915,025)
2,642,939
Tax on Dividend @ 15% 36,000 FTR @ 15%
Gain on Sale of Shares of Public Company 82,500 SBI @ 12.5%
2,761,439
Tax Deducted At Source
Advance Tax paid (200,000)
Withholding tax deducted (1,400,000)
Withholding tax deducted - dividend (36,000)
Tax collected at import stage (150,000)
Tax payable with return of income 975,439