Certificate in Accounting and Finance Stage Examination

Tax Practices
Mock
Total Marks: 100
Time Allowed: 3 Hours
Prepared By: Ali Imran ACA

Instructions:
(i) Answer all questions.
(ii) Answer in black pen only.
(iii) Start a new question on a new page
(iv) Write the page number on top of your answer scripts.

Q1.
Bilal, a resident individual, is employed as a senior researcher at Noor Research Institute (NRI), a
recognized non-profit research organization under the Higher Education Commission. NRI is fully owned
and funded by Zain Limited (ZL), a company listed on the Pakistan Stock Exchange. Details of his monthly
remuneration during the year ended 30 June 2025 are given below:
Particulars Amount (Rs.)
Basic Salary 550,000
House Rent Allowance 220,000
Utility Allowance 55,000
Research Incentive 70,000
In addition to the above, Bilal was also provided with the following benefits:
• Health insurance (as per terms of employment) for himself and his dependents, paid by NRI, with an
annual premium of Rs. 95,000.
• Provident fund contribution of Rs. 35,000 per month to a recognized provident fund. An equal
contribution was made by Bilal to the fund.
Additional Information:
• In May 2025, Bilal developed an e-learning platform, managed by a company based outside Pakistan.
On 20 May 2025, he received USD 6,200 in his dollar account from course sales. The foreign country
deducted 10% withholding tax from the payment.
• Relevant exchange rates:
Date Exchange Rate (USD to PKR)
20 May 2025 298
30 June 2025 305
Average rate for May 2025 270
• On 10 February 2025, he sold a commercial plot in Islamabad for Rs. 32,000,000. The plot was
inherited from his uncle in January 2020, and its original purchase price was Rs. 21,000,000.
• On 5 August 2024, he sold an apartment in Lahore for Rs. 18,000,000, which he had purchased on 1
September 2022 for Rs. 24,000,000 (of which Rs. 8,000,000 was paid in cash).
• On 1 August 2024, Bilal was granted an option to acquire 12,000 shares in ZL at Rs. 130 per share. He
paid Rs. 240,000 to NRI for acquiring the option when its fair market value was Rs. 290,000. He
exercised the option on 30 November 2024 when the fair market value was Rs. 165 per share. As per
the scheme, he could not sell or transfer the shares before 31 January 2025. On 31 January 2025, the
fair market value of shares was Rs. 180 per share. On 10 April 2025, he sold 6,000 shares at Rs. 160
per share.
• On 1 July 2024, Bilal obtained an interest-free loan of Rs. 3,000,000 from ZL. In exchange, he agreed
to waive interest receivable on his provident fund balance. The provident fund balance earned an
interest of 9% for the year.
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 • On 30 September 2024, Bilal received Rs. 250,000 as leave encashment for the previous year.
• During the year, Rs. 280,000 was deducted at source by NRI.
• On 5 June 2025, Bilal donated Rs. 4,200,000 to a non-profit organization listed in the 13th Schedule
of the Income Tax Ordinance, 2001.
Required:
Compute the taxable income and net tax payable or refundable by Bilal for the tax year 2025. Show all
relevant exemptions, exclusions, and disallowances. (18)

Q2.
Javed Afridi, a tax filer, made the following disposals during the tax year 2025:
(i) On 30 June 2025, he received an insurance claim of Rs. 3,450,000 as a lump sum payment for
the destruction by fire of two antique Turkish Tables. Table 1 was purchased on 1 July 2024 for
Rs. 1,850,000, and Table 2 was purchased on 15 July 2024 for Rs. 1,640,000. At the time of the
fire, the fair market value of Table 1 and Table 2 were estimated at Rs. 1,950,000 and Rs.
1,800,000 respectively.
(ii) On 14 February 2025, he exported a cutting machine to the Dhaka against proceeds of Rs.
7,000,000. This machine was used in manufacturing goods sold domestically in Pakistan. The
cost and tax written down value of the machine were Rs. 4,400,000 and Rs. 1,900,000
respectively.
(iii) On 15 June 2025, he sold a German Shepherd for Rs. 600,000. The German Shepherd was
purchased on 1 July 2023 at a price of Rs. 450,000 for his minor son.
(iv) On 1 April 2025, he sold a Mixing machine for Rs. 1,800,000. The machine was exclusively used
for mixing products exported to the Africa. The machine was purchased on 1 January 2024 at a
special discounted price of Rs. 1,584,000. The book value of the machine at the time of sale was
Rs. 1,392,440.
Required:
Under the provisions of the Income Tax Ordinance, 2001 and the Rules made thereunder:
Compute the amount chargeable to tax for the tax year 2025, specifying the relevant head of income.
Also, state the reason for ignoring gain / loss, if any.
(08)
Q3.
On 1 July 2024, Ayesha joined a local newspaper as an investigative journalist at a salary of Rs. 500,000 per
month. Tax deducted u/s 149 from her salary amounted to Rs. 65,000 per month.
Following are the details of her income received from Canada; tax paid thereon and brought forward foreign
losses for tax year 2025:

Heads of Income Foreign Income / Foreign Tax Paid Foreign Losses

(Loss) (Rs.) (Rs.) Brought Forward
(Rs.)
Speculation Business 900,000 160,000 (500,000)
Non-Speculation 2,000,000 270,000 -
Business
Other Sources (2,200,000) - -
Capital Gain 1,400,000 110,000 (2,400,000)

On 1 May 2025, Ayesha resigned from her job and joined Global Times (GT), an English newspaper in
London, UK, as Editor-in-Chief on a monthly salary equivalent to Rs. 2,000,000. GT paid 50% of her salary
in London and remitted the remaining 50% to her bank account in Pakistan through normal banking
channels. Ayesha remained in London for the rest of tax year 2025.
Required:
Under the provisions of the Income Tax Ordinance, 2001 and the Rules made thereunder, compute:
1. Taxable income
2. Net tax payable or refundable for Ayesha for tax year 2025
3. The amount of foreign losses or foreign tax credit, if any, to be carried forward (06)
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Q4.
Daniyal is a resident filer who owns a single-story bungalow in Karachi, including a basement. He solely uses
the basement portion of the bungalow which constitutes 20% of the total bungalow area, for storing his personal
belongings.
On 1 October 2021, he rented his bungalow, excluding the basement portion, to Ahmed under a three-year
rental agreement. Other details of the rental agreement are given below:

Rupees
Monthly rent 300,000
Non-adjustable security deposit 3,500,000
Monthly security charges 40,000

In addition to the above, Daniyal also provides Ahmed with backup electricity from a generator during load
shedding at a fixed monthly charge of Rs. 50,000. The electricity connection of the basement is separate from
the rest of the bungalow.
On 30 September 2024, the rental agreement concluded, and Daniyal agreed to sell the entire bungalow to
Ahmed. The non-adjustable security deposit was retained as a down payment for the purchase.
On 25 October 2024, Ahmed backed out of the deal and declined to purchase the bungalow. As per the
agreement, Daniyal forfeited the non-adjustable security deposit.
On 1 November 2024, Daniyal rented the bungalow to a new tenant, Rashid, under a rental agreement with the
same terms as above.
During the year, Daniyal paid salary of Rs. 360,000 to the security guard of the bungalow and incurred Rs.
450,000 for running the electricity generator.

Required: Under the provisions of the Income Tax Ordinance, 2001 and Rules made thereunder, compute
the total income of Daniyal under appropriate heads of income for the tax year 2025. (06)

Q5.
Golden Burgers (GB) is a Fast Food business owned by Hamza and his two cousins, Ahmed and Zain, who
share profits in the ratio of 55:25:20, respectively. GB operates three retail outlets in Islamabad and also owns
agricultural land that is rented to a poultry farmer. GB is registered with sales tax authorities as a Tier-1
retailer.
The following information has been extracted from the records of GB for the year ended 30 June 2025:

Particulars Rs. In Million

Net Sales 650
Less: Cost of Sales (460)
Gross Profit 190
Less: Operating Expenses (92)
Profit before Tax 98

Additional information:
(i) Cost of sales include:
• Purchase of various raw materials worth Rs. 28 million, on which no withholding tax was deducted at
the time of payment. GB made total purchases of Rs. 220 million during the year.
• Purchase of milk powder worth Rs. 11 million, of which 12% is delivered to the homes of the three
partners for personal use.
• Salaries of Rs. 10 million, Rs. 8 million, and Rs. 6 million to Hamza, Ahmed, and Zain, respectively.
• Purchase of a new bakery plant worth Rs. 20 million.
(ii) Operating expenses include:
• Payment of Rs. 7 million on 1 January 2025 to a software company for the development of a mobile
application for online orders. The useful life of this application is expected to be five years, and it
became operational from 1 July 2025.
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 • Purchase of POS machines worth Rs. 0.6 million, which were installed on 1 July 2024 in all outlets to
integrate with FBR’s computerized system for real-time reporting of sales.
(iii) On 1 April 2025, Hamza contributed his personal vehicle to the business, which he had purchased at a
cost of Rs. 8 million on 1 March 2023. The fair market value of the vehicle at the time of transfer was Rs. 11
million.
(iv) Net sales include rental received from the poultry farmer, as detailed below:
• A monthly payment of Rs. 0.55 million.
• Supply of 110 crates of eggs (agriculture produce) every month. Each crate holds a market value of Rs.
6,800. GB consumed these eggs in the production of various bakery items, but they are not accounted
for in the above-mentioned cost of sales.

Requirement:
Under the provisions of the Income Tax Ordinance, 2001, and Rules made thereunder, compute, under the
correct head of income, the total income, taxable income, and tax liability of GB for the tax year 2025.
• Ignore minimum tax under section 113.
• Show all relevant exemptions, exclusions, and disallowances. (20)

Q6.
(a) In the light of the provisions of the Income Tax Ordinance, 2001: Identify the circumstances under which
the Comm. of Income Tax may require a person to furnish a return of income for a period of less than twelve
months. (03)
(b) What is Special Audit Panel? Briefly discuss its provisions under Income Tax Ordinance. (04)
(c) What is Pecuniary Jurisdiction in Appeals. (03)

Q7.
(a) Under the sales tax Act 1990 describe temporary sales tax registration. Also state the rights obligations and
responsibilities of a person holding temporary registration
(b) Explain Cottage Industry
(06)
Q8.
AIM Enterprises (AE) is engaged in the manufacturing and supply of household cleaning products. It is
registered with the sales tax authorities as a manufacturer, importer, and distributor. The following
information has been extracted from AE’s records for the month of March 2025:
(i) Purchases from registered suppliers:
• Raw materials for manufacturing taxable and exempt supplies of Rs. 9,600,000 and Rs. 650,000,
respectively.
• 750 kg of liquid detergent, purchased for Rs. 950,000. The retail price of detergent is Rs. 1,350 per kg.
• Goods worth Rs. 430,000, purchased from Alpha Traders, with payment made in cash.
(ii) Purchases of taxable goods from unregistered suppliers, valued at Rs. 4,200,000.
(iii) Import of 2,800 packs of dishwashing bars from Malaysia, valued at Rs. 2,700,000. The retail price of
each pack is Rs. 2,200.
(iv) Acquisition of machinery under a hire purchase agreement, valued at Rs. 3,250,000, inclusive of a 10%
mark-up. A down payment of Rs. 650,000 was made during the month, with the remaining amount to be paid
in 24 equal monthly installments starting from March 2025.
(v) Supplies to registered persons:
• Hand wash bottles, valued at Rs. 295,000, supplied to a factory in the Export Processing Zone for use
by staff.
• 450 kits of shaving foam, supplied for consumption on-board a flight from Lahore to Toronto. These
kits were purchased on credit from a distributor for Rs. 530,000 on 1 July 2024. The retail price of
each kit is Rs. 1,600. Payment for these kits is still outstanding.
• Goods valued at Rs. 370,000, supplied to a creditor in final settlement of a debt of Rs. 390,000.
• Goods valued at Rs. 8,900,000, sold to Nexus Retailers (NR), a registered retailer, on 18 March 2025.
92% of the goods were delivered during the month, with the remaining 8% to be delivered in April
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 2025 due to storage issues at NR's warehouse. As per the agreement, NR makes payment to AE at the
time of delivery.
(vi) Supplies to unregistered persons:
• 650 packs of imported dishwashing bars, sold for Rs. 950,000 to a wholesaler.
• Goods valued at Rs. 670,000, supplied to end consumers.
(vii) Exports comprised 2,000 packs of imported dishwashing bars sold for Rs. 4,500,000 to a departmental
store in Saudi Arabia.

Additional Information:
• An electricity bill of Rs. 400,000, including sales tax of Rs. 60,000, was paid in cash.
• In May 2024, AE purchased taxable goods worth Rs. 520,000. The input tax of Rs. 93,600 on these
goods was inadvertently left unclaimed.
Unless specified otherwise, all payments were made by crossed cheque or pay order. Moreover, all the above
figures are exclusive of sales tax, except where specified otherwise. Sales tax is payable at the rate of 18%.

Required:
Under the provisions of the Sales Tax Act, 1990, and the Rules made thereunder, compute the amount of sales
tax payable by or refundable to AE and the amount of input tax to be carried forward, if any, for the tax period
March 2025.
(Show all relevant exemptions, exclusions, and disallowances). (18)

Q9. (a) State the duties of National Finance Commission (04)

(b) Briefly explain the key principles of tax administration that protect taxpayers’ rights and prevent
misuse of authority by tax administration (04)

Tax Rates
Division1. For individual non-salaried case/AOP i.e. where taxable salary is less than or equal to 75% of taxable
income and for AOP

Taxable Income Rate of Tax

1. Up to Rs. 600,000 0%
2. Rs. 600,001- Rs. 1,200,000 15% of the exceeding Rs. 600,000

3. Rs. 1,200,001 - Rs. 1,600,000 90,000 + 20% of the amount exceeding Rs. 1,200,000

4. Rs. 1,600,001 - Rs. 3,200,000 170,000 + 30% of the amount exceeding Rs 1,600,000

5. Rs. 3,200,001 - Rs. 5,600,000 650,000 + 40% of the amount exceeding, Rs. 3,200,000

6. Over Rs. 5,600,000 1,610,000 + 45% of the amount exceeding Rs 5,600,000

Tax Rate for a Professional Firm: If an AOP is a professional firm that cannot incorporate due to legal or regulatory rules, tax rate of
45% listed in Slab 6 above will be reduced to 40%.
Division 2 For individual salaried case i.e Where taxable salary exceeds 75% of taxable income
Taxable Income Rate of Tax

1. Up to Rs. 600,000 0%

2. Rs. Rs. 600,001- Rs. 1,200,000 5% of the exceeding Rs. 600,000

3. Rs. Rs. 1,200,001- Rs. 2,200,000 30,000 + 15% of the amount exceeding 1,200,000

4. Rs. Rs. 2,200,001- Rs. 3,200,000 180,000 + 25% of the amount exceeding 2,200,000

5. Rs. 3,200,001 - Rs. 4,100,000 430,000 + 30% of the amount exceeding, 3,200,000

6. Exceed Rs. 4,100,000 700,000 + 35% of the amount exceeding 4,100,000

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Surcharge for High Earners: 10% on Gross Tax Liability for Income Exceeding Rs. 10 Million A surcharge shall also be payable by
every individual (including salaried) and Association of person (AOP) @ 10% of the Gross tax liability where taxable income exceeds
Rs.10 million.

Initial allowance 25% Depreciation rates

P& M 15%
Computer 30%
Motor Vehicle 15%
Building 10%
Minimum tax under section 113. The minimum tax as percentage of the person’s turn over for the year is 1.25%
Capital gains arising on disposal of securities Tax year 2024 - Where securities acquired on or after 01 July 2022

Holding period Rate of Tax

Less than one year 15%
More than one year but less than two years 12.5%
More than two years but less than three years 10%
More than three years but less than four years 7.5%
More than four years but less than five years 5%
More than five years but less than six years 2.5%
More than 6 years 0%

[Link] Holding period Open plot Constructed property Flats

1. does not exceed 1 year 15% 15% 15%

2. Exceeds 1 year but up to 2 years 12.5% 10% 7.5%
3. Exceeds 2 years but up to 3 years 10% 7.5% 0%
4. Exceeds 3 years but up to 4 years 7.5% 5% -
5. Exceeds 4 years but up to 5 years 5% 0% -
6. Exceeds 5 years but up to 6 years 2.5% - -
Exceeds 6 years 0%

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