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Taxation Managment

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Taxation Management ­ FIN 623
VU
MODULE 6
LESSON 6.27
SALARY AND ITS COMPUTATION
Exercise 6:
Computation of taxable income and tax thereon in respect of Mr. Umar (a salaried individual) for the tax
year 2007 from the following information/ data:
Basic Salary
Rs 20,000 pm
Conveyance Allowance
Rs 1,000 pm
Medical Allowance
Rs 28,000 pa
Dearness Allowance
Rs 1,000 pm
Solution to Exercise 6:
Tax payer: Mr. Umar
Tax year: 2007
Residential Status: Resident
NTN: 000111
Computation of taxable income and tax thereon:
In Rs
Particulars
Total income
Exempt Income
Taxable Income
Basic Salary
240,000
Nil
240,000
Conveyance Allowance
12,000
Nil
12,000
Medical Allowance
28,000
24,000
4,000
Dearness Allowance
12,000
Nil
12,000
Total
268,000
Tax liability:
Tax rate of 0.75% percent as given at serial #4 for taxable income exceeding Rs.250,000 up to Rs.350,000
Income tax payable:
268,000 x 0.75%= Rs.2,010
Note:
Medical allowance exempt up to 10% of Basic salary, if free hospitalization services or reimbursement of
medical expenses not provided by employer
Exercise 7:
Computation of taxable income and tax thereon in respect of Mr. Umar (a salaried individual) for the tax
year 2007 from the following information/data:
Minimum Time Scale
Rs. 20,000-2000-30,000
Basic Salary@
Rs. 24,000 pm
Accommodation provided by the employer. The employee is entitled for house rent allowance@50% of
MTS
Computer Allowance
Rs. 1000 pm
Qualification pay
Rs. 1000 pm
Solution to Exercise 7:
Tax payer: Mr. Umar
Tax year: 2007
Residential Status: Resident
NTN: 000111
Computation of taxable income and tax thereon:
In Rs
Particulars
Total income
Exempt Income
Taxable Income
Basic Salary
288,000
Nil
288,000
Accommodation
---
---
144,000
Refer (note-1)
Computer Allowance
12,000
Nil
12,000
Qualification Pay
12,000
Nil
12,000
Total
456,000
Tax liability:
Tax rate of 3.50 percent as given at serial #7 for taxable income exceeding Rs.400,000 up to Rs 500,000
Income tax payable:
456000 x 3.5%=Rs.15,960
Note 1:
Accommodation: Amount that would have been otherwise provided under terms of employment but in no
case less than 45% of MTS or basic salary.
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Taxation Management ­ FIN 623
VU
Exercise 8:
Computation of taxable income and tax thereon in respect of Mr. Yasir (a salaried individual) for the tax
year 2007 from the following information/data:
MTS
Rs20,000-2000-30000
Basic Salary @
30,000pm
Accommodation provided to Mr. Yasir by employer. He is entitled for house rent allowance @60% of
Basic Salary
Motor vehicle provided by the employer exclusively for personal use. Cost of vehicle is Rs.1 million.
Solution to Exercise 8:
Tax payer: Mr. Yasir
Tax year: 2007
Residential Status: Resident
NTN: 000111
Computation of taxable income and tax thereon:
In Rs
Particulars
Total income
Exempt Income
Taxable Income
Salary
360,000
Nil
360,000
Accommodation
216,000
Nil
216,000
Refer (note-1)
Motor Vehicle for
---
---
100,000
personal use, Refer (n-2)
Total
676,000
Tax liability:
Tax rate of 6% percent as given at serial #9 for taxable income exceeding Rs 600,000 up to Rs 700,000
Income tax payable:
676,000 x 6%= Rs.40,560
Note 1: Accommodation -- Amount that would have been otherwise provided under terms of employment
but in no case less than 45% of MTS or basic salary.
Note 2:
Valuation of Conveyance:
For personal use only
10% of cost or 10% of FMV of Vehicle, in case
of lease
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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