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Taxation Managment

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Taxation Management ­ FIN 623
VU
MODULE 5
LESSON 5.19
EXERCISES ON RESIDENTIAL STATUS & TAXATION
Exercises on Determination of Income of Resident Person and Non- Resident Person
Exercise 1:
Determine Gross total income of Mr. A in the light of following particulars information pertaining to tax
year 2006.
Mr. A, employed in Pakistan, received Rs. 400,000/ as Salary. His income from other sources is given
under:
a.  Dividends received in Tokyo on 20th Aug 2005 from a Pakistani resident company: amounting Rs.
10,000;
b. Share of profit received in Tokyo on 10th May, 2006 from a business situated in Kuwait but
controlled through PE in Pakistan: amounting Rs. 60,000;
c.  Remittance from Tokyo on March 10, 2006 out of past profits earned and received there
amounting Rs.600,000;
d. Profit on debt received and earned in Pakistan on 1st Aug, 2006 Rs. 50,000. Calculate his gross
total income, if he is
a.  Resident
and
b. Non-Resident.
Solution to Exercise 1:
Computation of Gross total income of Mr. A for tax year 2006
Particulars
Gross total income if
Gross total income
resident
if non-resident
Dividend received
10,000
10,000
Share of profit received through PE of non-
60,000
Nil
resident
Remittance out of past profit
Nil
Nil
(Note1)
Profit on debt (Note2)
Nil
Nil
Total
70,000
10,000
Note 1:
Since remittance is not income, hence it is not included.
Note 2:
Profit on debt received on 1st Aug, 2006, the said date does not pertain to tax year 2006 hence this amount
shall not be added towards taxable income for tax year 2006.
Exercise 2 Determine Gross total income of Mr. Z in the light of following particulars information
pertaining to tax year 2006.
Royalty earned in Pakistan but received on April 01, 2006 in Sydney: Rs. 140,000: dividend from a foreign
company received in London on May 10, 2006: Rs.150,000; share of profit of business situated in Sydney,
received in Paris on Aug 14, 2005 but from PE in Pakistan: Rs. 250,000; and rent for tax year 2006 of a
house property situated in Sydney and received there on 01-01-2006: Rs.1,000,000.
a) if Z is resident
b) if Z is non­resident
28
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Taxation Management ­ FIN 623
VU
Solution to Exercise 2:
Particulars
Gross total income if
Gross total income
resident
if non-resident
a. Royalty
140,000
140,000
b. Dividend
150,000
Nil
c. Share of profit from PE in Pakistan
250,000
250,000
d. Rent for tax year 2006
800,000
Nil
Rs. 1,000,000 ­ 200,000 (Allowance for Repairs
being 1/5th of total rent subtracted)
Total
1,340,000
390,000
29
Table of Contents:
  1. AN OVERVIEW OF TAXATION
  2. What is Fiscal Policy, Canons of Taxation
  3. Type of Taxes, Taxation Management
  4. BASIC FEATURES OF INCOME TAX
  5. STATUTORY DEFINITIONS
  6. IMPORTANT DEFINITIONS
  7. DETERMINATION OF LEGAL STATUS OF A PERSON
  8. HEADS OF INCOME
  9. Rules to Prevent Double Derivation of Income and Double Deductions
  10. Agricultural Income
  11. Computation of Income, partly Agricultural,
  12. Foreign Government Officials
  13. Exemptions and Tax Concessions
  14. RESIDENTIAL STATUS & TAXATION 1
  15. RESIDENTIAL STATUS & TAXATION 2
  16. Important Points Regarding Income
  17. Geographical Source of Income
  18. Taxation of Foreign-Source Income of Residents
  19. Exercises on Determination of Income 1
  20. Exercises on Determination of Income 2
  21. SALARY AND ITS COMPUTATION
  22. Definition of Salary
  23. Significant points regarding Salary
  24. Tax credits on Charitable Donations
  25. Investment in Shares
  26. SALARY AND ITS COMPUTATION EXERCISES 1
  27. SALARY AND ITS COMPUTATION EXERCISES 2
  28. SALARY AND ITS COMPUTATION EXERCISES 3
  29. Tax treatment of Gratuity
  30. Gratuity Exercise
  31. PROVIDENT FUND
  32. Exemptions on Business income, Treatment of Speculation Business
  33. Deductions Allowed & Not Allowed
  34. Deductions: Special Provisions, Depreciation
  35. Methods of Accounting
  36. Taxation of Resident Company
  37. Taxation of Companies: Exercises
  38. Computation of Capital Gain
  39. Disposals Not Chargeable To Tax
  40. TAX RETURNS & ASSESSMENT OF INCOME UNIVERSAL SELF ASSESSMENT SCHEME
  41. Normal Assessment, USAS, Provisional Assessment, Best Judgment Assessment
  42. ADVANCE TAX COLLECTION & RECOVERY OF TAX PENALTIES & PROSECUTION
  43. What is Value Added Tax (VAT)?
  44. SALES TAX
  45. SALES TAX RETURNS