PE-III Tax Solution Mohsin

Prepared By: Md.
Mohsin
May-June 2003 Question-1 Mr. Suruj Miah Computation of Total Income Assessment year 2002-2003 (Income year 2001-2002) Non-resident (Bangladeshi) Taka
OK
Resident Taka
Non-resident (Non Bangladeshi) Taka
a b
Income from Salary (u/s-21): Agricutural income Less: Cost of production@60% of agricultural income
124,000 40,000 (24,000) 16,000 70,000 210,000 (25,000) 185,000
124,000
124,000
c d
Debenture interest recived from Nepal* Share of partnership firm income due from Pakistan** Total Income before setting off business loss excluding house property income Loss of business in Bangladesh*** Total Income after setting off business loss excluding house property income Income from house property[u/s-24 & 25] Less:Repairs &Maintenance [1/4 for residential purpose] 60,000 (15,000)
16,000 140,000 (25,000) 115,000
16,000 30,000 170,000 (25,000) 145,000
45,000 Total income 230,000
45,000 160,000
45,000 190,000
Computation of tax liabilities For being Resident: On first Tk. On balance Total Slab Rate 180,000 @ 0% 50,000 @ 10% 230,000 Gross tax liability Tax 5,000 5,000
For being Non-Resident Bangladeshi: Since the total income of Mr. Suruj Mia is tk. 180,000 which is below taxable limit of tk. 180,000, his tax liability is nil. For being Non-Resident non-Bangladeshi: On total income in BD Total 190,000 190,000 @ 25% 47,500 47,500
* Here we assumed that Mr. Suruz Mia is a Bangladeshi Citizen. And as per SRO-216/2004, irrespective of residential status if any Bangladeshi Citizen brought money from abroad in proper channel then it would be exempted from tax. ** As per section-17 of the Income Tax Ordinance 1984, Any income of a resident accrue or arise outside Bangladesh during the year, shall be included in the total income. *** As per proviso of section-37 of the Income Tax Ordinance 1984, any loss from business or profession shall not be so sett off, or be carried forward to succeeding assessment year or years for set off, against any income from house property.
Page 1
Prepared By: Md. Mohsin
May-June 2003 Question-3 John Morris Inc. Computation of Total Income Assessment year 2002-2003 (Income year ended 30 June 2002) Taka Income from business or Profession (u/s-28): Income Shown in the return for the assessement year 2002-2003 Add: Expenditure to be considered as per provision of law afterwards Head office expense for separate consideration as per u/s-30(g) Accounting depreciation for consideration as per 3rd schedule Inadmissible expenses as per provision of law: Director's salary Tk 330,000 [Due to non deduction of tax @25% on salary as well as absence of infromation that Head Office at Califronia has deducted tax from the said salary that will be covered under DTAA. As u/s-50, no tax has been deducted from the salary payment to Director which is fully disallowable u/s-30(aa)]. Fine Tk. 11,000 [Fines paid for violation of customs law is fully disallowable.] Commission to local agent Tk 1,000,000 [As the Company did not deduct tax @ 10% us/53(E) while making payment of commssion will be fully disallowable u/s-30(aa).] Donation to unrecognised school Tk.15,000 [Donation to unrecognised school is considered as non-business expense and hence is disallowed fully.] Miscellaneous expenses Tk 72,000 [Salaries paid to servant of MD is considered out of contractual obligation of the Company and hence it would be disallowed fully for being personal expenses of MD.] Conveyaance expense of Tk 220,000 related to plane fare [This is personal expenses of the director, not business expense and so disallowed fully (see note-1).] Excess perquisites [Excess perquisites to MD as per note-2] Interest on bank loan Tk 3,350,000 [ As per section-29(1)(iii) of ITO 1984, interest on bank loan is proportionately allowable for the loan amount used for the business purpose. Total interest not for business purpose=(3,350,000/21,000,000)*7,500,000=Tk 1,196,429.] 330,000 Taka
OK
3,000,000
1,100,000 900,000 2,000,000
Add:
11,000
1,000,000
15,000
72,000
220,000
42,000
1,196,429
2,886,429
Page 2
Add:
Deemed income on sale of motor vehicle(u/s-19(16)) Cost price(A) Net proceeds from sale of machine(B) Less: Written Down value ( C ) Net gain on sale of machine (B-C) Deemed income on sale of motor vehicle(u/s-19(16)) Profit before charging separate considerable expenses 525,000 465,000 325,000 140,000 140,000 8,026,429
Less:
Admissible expenses as per provision of law: Fiscal depreciation: Two Motor vehicle (Nissan Petrol Jeeps) purchased Cost allowable for two motor vehicles (para-11(6) 3rd Schedule) Fiscal depreciation @20% onTk 4,000,000 (under para-3(1)(b) 3rd Schedule) Profit before charging head office expenses 4,500,000 4,000,000 (800,000) 7,226,429 (722,643) 6,503,786
Less:
Head office expense as per u/s-30(g) 10% on Tk 7,226,429 Income from business or Profession (u/s-28):
Calculation of Tax Liability Total income & Tax Liability Total Total income 6,503,786 6,503,786 Gross tax payable Less: Tax credit: Tax deducted at source Advance tax paid u/s 64 tax rate 37.50% Tax liability 2,438,920 2,438,920 2,438,920 2,438,920
Net Tax payable u/s-74 Note 1 Minimum tax:
As we are not provided any information related to gross reciept, it would not be possible for us to calculate minimum tax. 2 Foreign travel for holiday recreation Tk 220,000 Name of Basic per Actual 3/4th of 3 months Basic Admissible Inadmissible Employee month travelling actual salary expense expense expenses expense MD 220,000 165,000 220,000 As per Rule-65A(1) expenditure on foreign travel for holiday recreation of employee and his dependants allowed upto lower one of 3/4 of actual expense and 3 months basic salary. This amount is allowable for once in every 2 years. The amount is disallowed u/s 65A(2) as the payment exceeding Tk.10,000 has considered been paid in cash rather than in cross cheque or cross bank draft. This calculation is not sufficient enough to consider because lack of information. Further this is personal expense so disallowed fully.
Excess perquisites u/s-30(e) Conveyance House Other Designation / Rent allowances utilities MD 220,000 72000
Total perquisites Allowable limit 292,000 250,000
Excess perquisites 42,000
Page 3
May-June 2003 Question-5
OK
Textile unit
XYZ Limited
Computation of Total Income Assessment year 2002-2003 (Income year ended 30 June 2002) Note Income from business or Profession (u/s-28): Profit before tax as per profit and loss account Less:
Non-business income included in P&L A/c for consideration at appropriate heads of income:
Taka
2,015,000
Income from house property Add: Inadmissible expenses as per provision of law: Undervaluation of stock Excess amount paid for purchase of goods from relative of a Director Preliminary expenses written off Provision for bad and doubtful debt General charges Salary expenses Insurance premium Miscellaneous expenses Advertising expenses Interest on borrowing Munincipal tax
90,000 1,925,000 200,000 80,000 25,000 120,000 6,000 400,000 65,000 15,000 400,000 15,000 30,000 1,356,000
a b c e g h i j k l m
Add:
Less:
Deemed income u/s-19 Balancing charge(revenue gain) on sale of machine Unclaimed wages Profit before charging separate considerable expenses Admissible expenses as per provision of law: Income from business or Profession (u/s-28):
d f
200,000 25,000 225,000 3,506,000
Income House Property (u/s-24): Actual Rental Municipal value Annual Value (higher one of actual rental and municipal value) Less: Admissble expenses(u/s-25) Repair and maintenance (1/4 of Annual Value) Municipal tax Income House Property (u/s-24): Income from Capital Gain(u/s-31): Capital gain on sale of machine Income from Capital Gain(u/s-31): Total income
90,000 90,000 22500 30000 52,500 37,500
200,000 200,000 3,743,500
Page 4
Tax Liability Total income excluding capital gain Capital gain tax @ 15% (under para-2 Second schedule) Total Total income 3,543,500 200,000 3,743,500 tax rate 37.50% 15% Tax liability 1,328,813 30,000 1,358,813
Gross tax payable Less: Tax credit: Tax deducted at source Advance tax paid u/s 64
1,358,813
Tax adjustable from any refund (u/s 152) Net Tax Payable Notes (a) Minimum tax:
1,358,813
As we are not provided any information related to gross reciept, it would not be possible for us to calculate minimum tax. (b) Under valuation of stock Opening stock as per account Opening stock under valued by 10% (A) Closing stock as per account Closing stock under valued by 10% (B) Net profit understated (B-A) 2,700,000 300,000 4,500,000 500,000 200,000
The opening and closing stock of cloths were valued 10% less than their costs. As a result the net profit of the Company has been understated for charging higher COGS in P/L account for the undervalued closing stocks. And net profit has been overstated for charging lower COGS in P/L account for undervalued opening stocks. So total net profit has been understated for net amount Tk. 200,000 which has been add back to the profit. Here, market price is higher than costs. (c) Purchase of goods from relative of a Director Tk. 490,000 Goods purchased from a relative of a Director at price (Tk 490,000) higher than the market value (410,000). The profit is reduced by excess amount of Tk 80,000 has been added back with the net profit because this amount not expended wholly and exclusively for the business purpose u/s-29(1)(xxii). Preliminary expenses written off Tk. 25,000 Preliminary expense written off which is considered incurred for the business purpose and was allowed in the year when amount paid. Balancing charge(revenue gain) on sale of machine(u/s-19(16)) Cost price(A) Net proceeds from sale of machine(B) Written Down value (C ) Net gain on sale of machine (B-C) Capital gain[u/s-32(1) & (2)](B-A) Balancing charge(revenue gain) on sale of machine(net gain-capital gain)
(d)
(e)
300,000 500,000 100,000 400,000 200,000 200,000
Page 5
(f)
Provision for bad and doubtful debt Tk 120,000 Disallowed fully being no provision for bad and doubtful debt is allowable u/s-29(xv) unless the debt become irrecoverable and actually been written-off in the books of accounts. So total provision added back with profit. Unclaimed wages Tk. 25,000 Unclaimed wages Tk. 25,000 not paid within 3 years of expiration of income year in which expenses were allowed for and legal claim for wages is unavailable. So this trading liability is added back u/s-19(15)(c ).
(g)
(h)
General charges Tk. 6,000 The Company did not complied with the legal formalities for termination of employee by serving notice as per job agreement. This is incurred not for the purpose of business and disallowed fully u/s-29(1)(xxii).
(i)
Salary expenses Tk 400,000 No tax has been deducted from the salary payment to Engineer which is fully disallowable u/s-30(aa). The non deduction of employer can not remediable by compliance of the employee. Insurance premium Tk. 65,000 The insurance premium against the loss of profit during strike is considered non-business expenditure and hence disallowed u/s-29(1)(xxii) Miscellaneous expenses Tk. 15,000 Salary paid for MD's residence is not a contractual obligation of the company and considered as personal expenses of MD. So it is fully disallowed. Advertising expenses Tk. 500,000 Advertising expenses paid for cinema slides assumed been capitalized being deferred revenue expenses and are distributed within 5 years is allowable expenses. Interest on borrowing Tk 15,000 Interest has been paid to director at free of interest is fully disallowable since in this case the loan assumed to have been borrowed for non-business purposes. Municipal tax Tk 30,000 House property A Assumed house property A has been let out to employees as per contractual obligation with the company and is considered as business expenses and the municipal taxes will be considered as business expenses (Tk 60,000 and Tk. 25,000 for rental and municipal taxes of A respectively). House property B House property B has been let out to outsiders for Tk. 90,000 which is considered as income under "Income form House property" u/s-24. The property is considered as let out for residential purpose.
(J)
(k)
(l)
(m)
(n)
Page 6
Nov 2003 Q-3 Mr. M Computation of Total Income Assessment year 2003-2004 (Income year ended 30 June 2003) Note Income from Salary (u/s-21): Basic salary (25,000 *12) a Dearness allowance (20% of Basic salary) b Bonus (one month Basic salary) c House Rent allowance(Rule-33A)[35% of basic] d Less: Exemption 50% of Basic salary or Tk 15,000 per month Lower one of the above e Medical allowance(Tk 500 per month) Less: Exemption(Rule-33I): Actual expense(assumed allowance are expended) Taka
OK
300,000 60,000 25,000 105,000 150,000 180,000 150,000 6,000 6,000 -
Conveyance allowance [1,200 per months] Less: Exemption( actual expense) [Assumed fully expended]
14,400 24,000 -
Leave travel concession Tk 60,000 Less: actual expense Entertainment allowance Tk 1,500 per month As u/s-33H total allowance is added with the salary income. Employer's Contribution to RPF(10% of Basic) Interest on RPF Para-25 Part-A 6th schedule): Interest on RPF Less: Exemption 1/3 of salary[(300000+60000)/3]=Tk 206133 (As per definition of salary under 1st schedule, part-B of ITO 1984, "salary includes dearness allowance if the terms of employment so provides, but excludes all other allowance and perquisites.")
60,000 51,500 8,500 18,000
i j
30,000
96,000
120,000
14.5% of cumulative RPF(Tk 96,000/.16)*14.5% [higher one exempted as per high court verdict for benefit of doubt goes to assessee]
87,000
120,000 Total Income from Salary (u/s-21): 441,500
Page 7
Income from interest on securities (u/s-22 &23): Interest on 14% debenture (200,000*14%) Interest on 12% debenture of PQ Ltd (200,000*12%) Less: Commission (4,000/2) Interest on 8.5% National Bond [200,000*8.5%] Income from interest on securities (u/s-22 &23):
28,000 24,000 (2,000) 22,000 17,000 67,000
[ As per section-22 of ITO 1984, interest on securities shall be computed on receivable amount. However there is a case reference between Lal pat Vai Vs. Dol pat Vai where it was established that interest on securities shall be computed on cash basis. Here we assumed that interest was paid on yearly basis. That's why interest on 12% debenture and interest on 8.5% national bond computed on yearly basis rather than using 11.5 months and 10 months respectively.] Income from house property (u/s-24): Annual value(AV): Rental income (Tk 2,000*12) Municipal value(not given) Higher one of above Less: Admissible deduction(u/s-25): Repair & maintenance[1/4 of AV] u/s-25(1)(h) Municipal tax([Tk40,000/2] u/s-25(1)(a)) Insurance premium([Tk 12,000/2] u/s-25(1)(b)) Total Income from house property Income from Agriculture (u/s-26): Sale of paddy Less: Admissible deductions (u/s-27) Production costs [As no books of accounts is maintained 60% of Market value of the produce allowable as admissible deductions. But land given as adhi system, so no deduction is allowable u/s-27(1) ( C )(3).] Income from Capital gain[u/s-31&32] Sale of land property Income from Other sources (u/s-33): Dividend income[45000/.9] Interest on savings account[5400/.90] Sale of tree of spontaneous growth Income from Business or profession (u/s-28): Share of Income from partnership firm Total income 6,000 10,000 6,000 (22,000) 2,000
24000 24,000
125,000 125,000
4,000,000
50,000 6,000 20,000 76,000 75,000 4,786,500
Page 8
Calculation of investment allowance(under Part B 6th schedule): Payment of Life insurance premium(as per para-1 of 6th Schedule, Part-B) 50,000 [Allowed for assessee, spouse, minor child only upto 10% of policy] Employee and employer's contribution to RPF(10% of salary each) 60,000 (allowable as per para-5 of 6th Schedule, Part-B) Actual investment Allowable investment allowance(u/s-44): Actual investment 110,000 25% of total income [excluding employer's contribution to RPF, interest on RPF 1,189,125 (considering the exemption of interest under para-25 of 6th schedule Part-A), income u/s-82C]. So 25% on Tk. 1,189,125 (4,786,500-30,000). Maximum allowable investment Allowable investment (lower of the above) Computation of tax liabilities 1 On total income incluing Capital gain Particulars On first Tk. On next Tk. On next Tk. On next Tk. On balanceTk. Total Income Amount 180,000 300,000 400,000 300,000 3,606,500 4,786,500 Rate @ @ @ @ @ 0% 10% 15% 20% 25% Gross tax liability (A) 786,500 10,000,000
110,000
110,000
Tax 30,000 60,000 60,000 901,625 1,051,625
2 Total income excluding capital gain is tk. (4,786,500-4000,000) Particulars On first Tk. On next Tk. On next Tk. T. Income excluding capital gain Tax on capital gain Total Income
Amount Rate 180,000 @ 0% 300,000 @ 10% 306,500 @ 15% 786,500 Tax liability excluding capital gain 4,000,000 @ 15% 4,786,500 Gross Tax Liability (B)
Tax 30,000 45,975 75,975 600,000 675,975 675,975 (10,592) (11,000) 654,383
Less: Less: Less:
Gross tax liability [As per 2nd schedule lower between (A) and (B)] Average rate tax rebate on firm's share of income [(675,975/4,786,500)*75000]=Tk. 10,592 10% Rebate on investment Tk. 110,000 Tax deducted at source On dividend On interest on bank deposit Net tax liability
5,000 600 (5,600) 648,783
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May 2004 Q-4 ABC Firm Computation of Total Income Assessment year 2003-2004 (Income year ended 30 June 2003) Taka Income from house property(u/s-24): Annual value(AV): Rental income [10,000*12] Municipal value(not given) Higher one of above Add: Owner's expense(municipal tax) paid by tenant Annual Value (AV): Less: Admissible deduction (u/s-25): Repair & maintenance [30% of AV assuming used for commercial purpose] u/s-25(1)(h) Municipal tax Total Income from house property (A) Income from Business or Profession (u/s-28): Gross income as per trading account Less: Operating expenses (depreciaton & other expenses) Net Profit as per profit & loss account Less: Non-business income included in P&L A/c for consideration at appropriate heads of income: Claim received for breach of contract Inadmissible expenses as per provision of law: Understatement of closing stocks Net stocks in trading account[600,000-500,000] Value of net stocks should be shown[100,000/(1-.125)] Undervaluation of net stocks =[114,286-100,000] Repair to let out portion Tk. 8,000 [considered not for business purpose. Hence fully disallowable.] Annual Contribution to Cotton Dealers Association Tk. 2,000 [The business is related to cotton textiles. Hence we assumed the annual contribution to Cotton Dealers is business expenditure. So nothing shall be added to the income.] Contribution to Prime Minister Relief Fund 5,000 [As per SRO-125/91, contribution to Prime Minister's Relief Fund is exempted from income tax. So nothing shall be added to the income.] 1,000,000 (400,000) 37,200 4,000 (41,200) Taka
OK
120,000 120,000 4,000 124,000
82,800
600,000
(10,000) 590,000
Add:
100,000 114,286 14,286 8,000
Page 10
Salaries to partners Tk 1,44,000 [Being salaries, commission, interest, remuneration by firms/association to partners/members is fully disallowable u/s-30(b).] Interest on loan Tk. 75,000 [Interest paid on loan for installing accounting system in the firms premises. Since it is related to business nothing shall be added to the income.] Loss on speculation business Tk.150,000 [Loss on speculation business was charged in P7L a/c which should be set off against any other speculation business of the firm as per section-37& 39. Here it is being non-business expense disallowed fully.] Total Inadmissible Expenses Income from business or Profession (B) Income from Other sources (u/s-33): Advertisement Claim received for breach of contract Total Income from Other sources ( C ) Total income (A+B+C) Computation of firm's tax liabilities On first Tk. On balanceTk. Total Allocation of profit to partners: Salary Share of profit[2:2:1] Total A 24,000 101,006 125,006 B 48,000 101,006 149,006 C 72,000 50,503 122,503 180,000 @ 216,514 @ 396,514 Gross tax liability 0% 10% 21,651 21,651
144,000
150,000
316,286 273,714
30,000 10,000 40,000 396,514
Total 144,000 252,514 396,514
Computation of total income from BCD Firm: Net loss allocated to partners Add: Admissible items: Salary Interest Total income/(loss) Taka (150,000) 60,000 20,000 (70,000)
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Allocation of profit to partners: B Salary Interest Share of profit[1:1:1] Total Assessment of partners: A The entire amount of income from partnership is tax free income as firms paid the tax and further tax is not imposed on his only such sources of income. Partner A can not claim any refund. Minimum tax liability Tk 2,000 for having total income exceeding maximum exemption slab for tax liability. C d 60,000 20,000 (50,000) 30,000 Total 60,000 20,000 (150,000) (70,000)
(50,000) (50,000)
(50,000) (50,000)
B & C Calculation of total income of B & C: B Income from ABC firm Income from BCD firm House property income Other income Total Income Computation of B's tax liabilities On first Tk. On next Tk. On next Tk. On balanceTk. Total 180,000 @ 300,000 @ 400,000 @ 19,006 @ 899,006 Gross tax liability 0% 10% 15% 20% 30,000 60,000 3,801 93,801 149,006 (50,000) 800,000 899,006 C 122,503 (50,000) 50,000 122,503
Average tax rate[(93,801/899,006)*100]=
10.43%
Less: Double Taxation Avoidance Agreement (DTAA) tax relief [25% or or 10.43% whichever is lower.So DTAA tax relief for House property income from London=[800,000*10.43%]=Tk 83,471] Less: Tax rebate at average rate for ABC firm's share taxed Income [149,006*10.43%]=Tk 15,547 Net tax refundable Computation of C's tax liabilities Since the total income of C is below the taxable limit, he is not be liable to pay tax.
(83,471)
(15,547) (5,217)
Page 12
May-2004 Q-7 OBL Limited Computation of Total Income Assessment year 2004-2005 (Income year ended 31 December 2003) Tax Exempted Taka Income from business or Profession (u/s-28): Profit before tax as per profit and loss account Less: Non-business income included in P&L A/c for consideration at appropriate heads of income: Dividend income (Assumed that dividend was received after taxholiday period and wrongly booked only cash received amount (net of tax) in P & L). Insurance claim received Capital gain on sale of land Other income 3,000,000 18,000,000 7,000,000 25,000,000 3,000,000 Taxable Taka Total Taka
2,700,000 5,000,000 1,500,000 9,200,000 8,800,000
300,000 5,000,000 8,300,000 (1,300,000)
3,000,000 10,000,000 1,500,000 17,500,000 7,500,000 11,071,178 18,571,178
Add:
Expenditure to be considered as per provision of law afterwards Accounting depreciation Inadmissible expenses as per provision of law: 1 Rental expenses Tk 2,400,000 [No tax has been deducted u/s-53A from the rent payment which is fully disallowable u/s-30(a). Under SRO-205 dated 6 July 2005 any deemed income u/s19 or disallowed expense u/s-30 will not be treated as final settlement of income u/s-82C for exporting RMG & Knit wear producer. But this will not applicable in this case because for IY from 1 July 2008 to 30 June 2010 it is applicable.]
5,535,589 14,335,589
5,535,589 4,235,589
Add:
1,200,000
1,200,000
2,400,000
Less:
Admissible expenses as per provision of law: Fiscal depreciation as per 3rd schedule Income from business or Profession (u/s-28):
(2,507,500) 13,028,089
(2,507,500) 2,928,089
(5,015,000) 15,956,178
Capital gain (u/s32 & 33): Capital gain on land[TDS=(10,000,000*2%)=200,000/.15=1,333,333] [ Assumed that Tk50 lac out of Tk 1 crore of capital gain has reivested in his business or profession within 1 year after or before the transfer of the assets which is not taxable u/s-32(5). Rest of the capital gain amount is taxable as a capital gain income] Income from Other sources (u/s-33) Dividend income (3,000,000/.8) Interest on FDR [500,000/.1] Other income Total income
1,333,333
1,333,333
1,500,000 14,528,089
3,750,000 5,000,000 13,011,422
3,750,000 5,000,000 1,500,000 27,539,511
Page 13
Computation of tax liabilities 1 Total export business income: Less: 50% of export business income to be excluded Total Taxable export business income (Being non listed trading Company) [ 50% of export business income to be excluded under para-28 Part-A 6th schedule for which reduced rate of tax @15% under SRO-207 dated 30.6.2008 will not be applicable] 2 On capital gain[u/s-82C] 3 On Income from other sources excluding dividend income 5 On dividend income @ 20% Gross tax liability Less: Tax credit: TDS on dividend (3,750,000*20%) TDS on interest on FDR (5000,000*10%) TDS @2% on transfer of land[u/s-53H] for which capital gain arisen. Net Tax liabilities Note 1 Calculation of fiscal/tax depreciation: Assets Factory building Plant & machinery Furnitures & Fixtures Motor vehicles WDV(TK) Rate 20% 7,000,000 15,750,000 20% 950,000 10% 1,850,000 20% Total fiscal depreciation Fiscal dep. 1,400,000 3,150,000 95,000 370,000 5,015,000 750,000 500,000 200,000 Income 2,928,089 1,464,044 1,464,044 Tax Total
37.5%
549,017
1,333,333 9,261,422 3,750,000 15,808,800
15% 37.5% 20%
200,000 3,473,033 750,000 4,972,050
(1,450,000) 3,522,050
2 Calculation of accounting depreciation: Assumed that the Company commenced operations from July 1999, acquired all the above assets on that date and made no addition thereafter.
Year
Particulars
2003 Tax WDV Tax WDV [2003 WDV/.8 & .9 for 2002 FF] Tax WDV [2002 10,937,500 24,609,375 WDV/.8& .9 for 2001 FF] Tax WDV [2001 13,671,875 30,761,719 WDV/.8& .9 for 2000 FF] Tax WDV [2000 17,089,844 38,452,148 WDV/.8 & .9 for 1999 FF] 3,076,172 6,921,387 Accounting dep@18% on WDV(1999) Total accounting depreciation 3
Factory building @20% 7,000,000 8,750,000
Plant & Machinery @20% 15,750,000 19,687,500
Assets (Tk.)'000 Furniture & Motor vehicle fixture @10% @20% 950,000 1,055,556 1,850,000 2,312,500
1,172,840
2,890,625
1,303,155
3,613,281
1,447,950
4,516,602
260,631
812,988 11,071,178
Minimum tax: As we are not provided any information related to gross reciept, it would not be possible for us to calculate minimum tax.
Page 14
Nov-2004 Q-4 M/s Arzoo Textile Mills Limited Computation of Total Income Assessment year 2005-2006 (Income year ended 30 June 2004) Note Income from business or Profession (u/s-28): Profit before tax as per profit and loss account Less: Non-business income included in P&L A/c for consideration at appropriate heads of income: Export subsidy Sale of waste Rent of Bunglows Dividend income Interest on PSP 407,687 121,508 57,902 17,400 15,000
OK
Taka
1,069,339
(619,497) 449,842 Add: Expenditure to be considered as per provision of law afterwards 1 Entertainment (for consideration as per Rule-65) 3 Rates, insurance & repairs to buildings [1800+2500+7544] Inadmissible expenses as per provision of law: Replacement of plant & machinery Tk 20,39,000 [Being capital nature expenditure disallowed fully. Depreciation on this capital expenditure will be allowed as per 3rd schedule] Purchase of two paintings for MD's Office Tk 30,000 [Being personal expenditure of MD which is not for business purpose, so disallowed fully] X-Mass gift to foreign technician Tk 10,000 [Gift given considered as non-business expense. So disallowed fully. Full amount for gift is added back .] Refreshment, food drinks etc. at one of its business meetings [Assumed incurred for the business, so allowable fully] Catering & refreshments for shareholders & guest at AGM [Assume that this expended not for business purpose and might have been avoided by Company] Donations Tk 10,000 [Assumed that Donations amounting Tk 5,000 given to Zakat fund which is not established under Zakat Fund Ordinance, 1982 and not approved by NBR. Regarding the rest of the amount i.e. remaining tk. 5,000, we have no information by which we can consider for CSR rebate.] 2,039,000 249,700 11,844 261,544 711,386
Add:
30,000
10,000
50,600
10,000
Page 15
Trade penalties, legal expenses & professional charges Tk 120,000 [Trade penalties and legal expenses Tk 20,000 is disallowable for violation of laws. Amount Tk 50,000 spended for defending the allegation of black marketing which become succesful. So it is allowable expense for business purpose. Moreover, ITP paid Tk 20,000 to present the cases to DCT which is allowable for considering business purpose. Income taxes paid up to Appellate Tribunal is allowable under omnibus clause.] Contribution to Staff provident fund Tk 75,500 [PF is recognised, so allowable as Part-B 1st schedule] Provision for gratity Tk 150,000 [No provision for gratuity is allowed under ITO, 1984. Only payment portion of gratuity is allowed which will be consider afterwards. So full amount is added] Reserve for meeting contingent liabilities Tk 30,000 [No such reserve is allowable except those become certain liabilities]
20,000
150,000
30,000 2,339,600 3,050,986
Add:
Deemed income u/s-19 Trading liabilities Tk 350,000 [Any trading liabilities not paid within 3 years after expiry of the inocme year in which such liabilities arisen, be deemed to be income during the income year immediately following the expiry of such 3 income years. So it is deemed income u/s-19(15)(c)]
350,000
3,400,986 Less: Admissible expenses as per provision of law: Garuity paid Fiscal depreciation as per 3rd schedule Profit before charging separate considerable expenses Entertainment as per Rule-65 upto Tk 1,000,000 4% of profit before charging entertainment exp. 2% On rest of balance of profit before charging entertainment exp. Allowable limit Actual entertainment expense claimed Allowable lower one of actual and allowable limit Income from business or Profession (A) Income from house property(u/s-24): Annual value(AV): Rental income from Bunglows Municipal value(not given) Higher one of above Less: Admissible deduction(u/s-25): Repair & maintenance[1/4 of AV] Rates & Insurance[1800+2500] Income from house property(B) u/s-25(1)(h) 14,476 4,300 (18,776) 39,127 100,000 551,710 (651,710) 2,749,276
40,000 34,986 74,986 249,700 (74,986) 2,674,290
57,902 57,902
Page 16
Income from Other sources (u/s-33) Dividend income Sale of waste Export subsidy Interest on Paribar Shanchayapatra (PSP) Income from other sources ( C ) Total income (A+B+C) Computation of tax liabilities 1 On income from business of Textile Mills @15% under SRO-207 dated 30.6.2008 [for which exclusion of 50% export income from total Business income will not applicable as already taken advantage of reduced rate of tax] (Being non listed trading Company) 2 On Income from house property @ 37.5% being non listed trading company 3 On income from other sources excluding dividend income@37.5% 4 On dividend income @ 20% Gross tax liability Less: Tax credit: TDS on dividend TDS on cash subsidy[@5% was deducted upto 30 June 2009 and now no TDS on cash subsidy from 1 july 2009]
17,400 121,508 407,687 1,500 548,095 3,261,512
Income Rate 2,674,290 15.0%
Tax 401,144
39,127 37.5%
14,672
407,687 37.5% 17,400 20.0% 3,138,504
152,883 3,480 572,179
3,480 (3,480) 568,699
Net Tax liabilities Minimum Tax Calculation: Gross Reciepts: Sale of yarn Sale of textile products Export subsidy/incentive received in cash Sale of waste Rent of bungalows Dividend Interest on PSP Minimum tax @.5% on gross receipts Note:
10,811,956 10,926,425 407,687 121,508 57,902 17,400 15,000 22,357,878 111,789
Minimum tax of tk. 111,789 is lower than the tax payable of tk. 568,699. Hence no implication of minimum tax.
Page 17
May 2005 Q-5 ABC Bank Limited Computation of Total Income Assessment year 2005-2006 (Income year ended 31 December 2003) Taka Income from business or Profession (u/s-28): Profit before tax as per profit and loss account Less: Non-business income included in P&L A/c for consideration at appropriate heads of income: Dividend income Expenditure to be considered as per provision of law afterwards Entertainment expenses Accounting depreciation for consideration as per 3rd schedule 4,000,000 14,000,000 Taka
OK
390,000,000
(5,000,000) 385,000,000
Add:
18,000,000 403,000,000 Add: Inadmissible expenses as per provision of law: Excess perquisites u/s-30(e) Printing & Advertisement expenses Subscriptions and donations Sundry expense Provisions for bad and doubtful debts (1,000,000+10,000,000) Total Inadmissible expenses 4,000,000 1,000,000 250,000 450,000 11,000,000 16,700,000 419,700,000 (25,000,000) 394,700,000
Less:
Admissible expenses as per provision of law: Fiscal depreciation as per 3rd schedule Profit before charging separate considerable expenses Entertainment as per Rule-65 upto Tk 1,000,000 4% of profit before charging entertainment exp. 2% On rest of balance of profit before charging entertainment exp. Allowable limit Actual entertainment expense claimed Allowable lower one of actual and allowable limit Total Business income
40,000 7,874,000 7,914,000 4,000,000 (4,000,000) 390,700,000
Page 18
Income from Other sources (u/s-33) Dividend income (assumed gross amount) Total income Computation of Tax Liability: Total income Business income: Total Income excluding dividend income Dividend income Total income Add: 15% Excess profit tax [u/s-16C] Less: 390,700,000 5,000,000 395,700,000
5,000,000 395,700,000
tax rate 42.50% 20%
Tax liability 166,047,500 1,000,000 167,047,500 15,780,000 182,827,500 (1,000,000) 181,827,500
Tax credit: Tax deducted at source on Divedend income@20% Advance tax paid u/s 64 Net Tax payable Calculation of Excess profit tax [u/s-16C]: Capital and Reserves Paid up capital Statutory reserve Retained profit-opening Exchage equilization fund Total Capital and Reserves 50% of Capital and Reserves [A] Assessed Profit as per computation [B] Excess profit [B-A] 15% Tax on excess profit [u/s-16C]
408,000,000 130,000,000 42,000,000 1,000,000 581,000,000 290,500,000 395,700,000 105,200,000 15,780,000
Minimum tax: As we are not provided any information related to gross reciept, it would not be possible for us to calculate minimum tax.
Page 19
Nov-Dec 2005 Messers Orion Limited Computation of Total Income Assessment year 2005-2006 (Income year ended 30 June 2005) Taka Income from business or Profession (u/s-28): Profit before tax as per profit and loss account Add: Expenditure to be considered as per provision of law afterwards Technical fees Accounting depreciation for consideration as per 3rd schedule 210,000 2,979,211 Taka
OK
837,413
3,189,211 4,026,624 Add: Inadmissible expenses as per provision of law: Excess perquisites u/s-30(e) Salary & allowances Tk 176,200 No tax has been deducted from the salary payment Tk 176,200 which is fully disallowable u/s-30(a). Registration expenses & fees Tk 215,701 [Being personal entertainment expenses and not for business purpose which is disallowed fully u/s-29(1)(xxvii)] Fines Advertisement and Publicity expenses [Doantion to unrecognised local sports club which is disallowed fully] 145,000 176,200
215,701
125,000
Gratuity provision [No provision for gratuity is allowed under ITO, 1984. Only payment portion of gratuity is allowed. So full amount is added] Rent, rates & taxes Tk 368,212 [No tax has been deducted u/s-53A from the rent payment Tk 214,640 out of Tk 368,212 which is fully disallowable u/s-30(a)] Total Inadmissible expenses
677,937
214,640
1,554,478 5,581,102
Page 20
Less:
Admissible expenses as per provision of law: Gatuity paid Fiscal depreciation as per 3rd schedule[assuming same as last years]
276,434 3,726,422 (4,002,856) 1,578,246 (126,260)
Profit before charging separate considerable expenses Less: Fees for Technical now how fee u/s-30(h) [8% of profit before charging entertainment exp.] Total Business income Tax Liability Total income Business income: Income from export@10%[of which 50% income will be excluded from this total export income under Part-A 6th schedule]. So (1,451,986*10%/2)=tk. 72,599 shall be subject to income tax from export income. Income from local sale @ 90% Total income Less: Less: 72,599 tax rate 27.50%
1,451,986
Tax liability 19,965
1,306,788 1,379,387
27.50%
359,367 379,331 (37,933) 341,398 341,398
10% tax rebate for declaring more than 20% dividend for the year which has been paid as per law. Tax credit: Tax deducted at source Advance tax paid u/s 64 Tax adjustable from any refund (u/s 152) Net Tax payable
Note: 1 Minimum tax: As we are not provided any information related to gross reciept, it would not be possible for us to calculate minimum tax.
Page 21
May-June 2006 Q-5 XYZ Limited Computation of Total Income Assessment year 2006-2007 (Income year ended 31 December 2005) Note Income from business or Profession (u/s-28): Profit before tax as per profit and loss account Less: For separate consideration Profit on sale of imported goods Tk 800,000 Expenditure to be considered as per provision of law afterwards 1 Entertainment (for consideration as per Rule-65) 2 Accounting Depreciation (for consideration as per 3rd schedule) 3 Fess for technical know how
OK
Taka
2,510,000
(800,000) 1,710,000 120,000 1,200,000 300,000 1,620,000 3,330,000
Add:
Add:
Inadmissible expenses as per provision of law: 1 Preliminary expenses written off Tk 50,000 [Assumed that preliminary expenses which has been allowed in the year of payment. So disallowed fully.] 2 Over & under provision Net Tk 200,000 [Over provision Tk 500,000 and under provision Tk 300,000 for certain expenses adjusted in retained earnings during the year. Assuming all the provisions were disallowed fully in last year, net provision which was adjusted this year with R/E not in net profit. So nothing added back .] 50,000
50,000 3,380,000 Less: Admissible expenses as per provision of law: Tax depreciation as per 3rd schedule [Tk 1,200,000-Tk 200,000-Tk 500,000+(Tk 2,000,000*20%)]=Tk 900,000. As per para-11(6)a of 3rd schedule cost is allowed for Nissan Jeep car (motor vehicle) upto Tk 2,000,000.] Interest on loan waived by Sonali Bank [as per proviso of section 19(11)] Lease rental Profit before charging separate considerable expenses
(900,000)
(400,000) (150,000) 1,930,000
Page 22
Entertainment as per Rule-65 upto Tk 1,000,000 4% of profit before charging entertainment exp. 2% On rest of balance of profit before charging entertainment exp. Allowable limit Actual entertainment expense claimed Allowable lower one of actual and allowable limit Fees for Technical now how fee u/s-30(h) [8% of profit before charging entertainment exp.] Income from business or Profession (u/s-28)[Manufactured Jute goods]: Income from sale of imported Jute goods which is considered u/s-82C [200,000/27.5%] Total income Computation of tax liabilities 1 On income from imported Jute goods @27.5% [for which exclusion of 50% export income from total income will not applicable as export of goods from imported jute products] (Being non listed trading Company) 2 On Income from manufactured Jute goods [As per SRO-206/2008 the applicable tax rate for locally manufactured jute goods is 15%.] Gross tax liability Less: Tax credit: AIT on Import Net Tax liabilities Notes:
40,000 18,600 58,600 120,000 (58,600) (154,400)
1,717,000 727,273 2,444,273
Income Rate 727,273 27.5%
Tax 200,000
1,717,000 15.0%
257,550
457,550 (200,000) 257,550
1 Income u/s-82C(6) and Income u/s-82C(7): As per new requirements in Finace Act 2011, it would not be possible for us to compute income u/s-82C(6) and 82 C(7). The reason behind that is, we donot have enough information related to shown income and disallowances u/s30 of Income Tax Ordinance 1984. 2 Minimum tax: As we are not provided any information related to gross reciept, it would not be possible for us to calculate minimum tax.
Page 23
Nov-Dec2006 Q-2 Mr. Azgar Computation of Total Income Assessment year 2010-2011 (Income year ended 30 June 2006) Note Income from Salary (u/s-21): Basic salary (10,000 *12) Festival Bonus (two month Basic salary) Rent free accomodation(Rule-33B) 25% of Basic salary or Rental valueTk 25,000 Lower one of above Less: Concessional rate by employee@7.5% of basic Medical allowance(Tk 3600) Less: Exemption(Rule-33I): Actual expenseTk 5000 (allowed upto allowance) Conveyance allowance Tk 500 per month Less: Exemption Rule-33C Upto Taka
OK
120,000 20,000 30,000 25,000 25,000 9,000 16,000 3,600 3,600 6,000 24,000 -
Employer's Contribution to RPF(10% of Basic) Total Income from Salary (u/s-21) Total income
12,000 168,000 168,000
Calculation of investment allowance(under Part B 6th schedule): Purchase of ICB certificate(allowed as para-10) Payment of insurance premium(as para-1) Allowed for assessee, spouse, minor child only (5,000+4,000) Group Insurance & benevolent fund(allowed as para-17) Allowed for assessee, spouse, child and dependent only Employee and employer's contribution to RPF(10% of salary each) (allowable as per para-5) Actual investment Allowable investment allowance(u/s-44): Actual investment 20% of total income [excluding employer's contribution to RPF, interest on RPF (excluding interest para-25, part-A 6th schedule), income u/s-82C]. So 20% on Tk 156,000 (168,000-12,000). Maximum allowable investment
5,000 9,000 200 24,000 38,200 38,200 31,200
10,000,000 Allowable investment (lower of the above) Computation of tax liabilities
31,200
As per Finance Act 2011, if the total income of an individual assesse exceeds 180,000 then he will be liable to pay tax. Here the total income of Mr. Azgar is below the taxable limit. Thats why he will not be liable to pay any tax.
Page 24
Nov-Dec 2006Q-5 Marine Fisheries Computation of Total Income Assessment year 2006-2007 (Income year ended 31 July 2005) Note Income from business or Profession (u/s-28): Profit before tax as per profit and loss account Less: Non-business income included in P&L A/c for consideration at appropriate heads of income: Dividend (for consideration at income from other source) Taka
OK
10,362,924
(760,760) 9,602,164
Add:
Expenditure to be considered as per provision of law afterwards 1 Entertainment (for consideration as per Rule-65) 2 Depreciation (for consideration as per 3rd schedule)
125,321 4,681,665 4,806,986 14,409,150
Add:
Inadmissible expenses as per provision of law: 1 Refund of VAT on cost of diesel Tk 8,002,241 As VAT Tk 8,002,241 paid for cost of diesel which has been refunded for export earning Tk 94,446,822 is disallowable because already refunded for export. 2 Salary expense Tk 9,344,035 No tax has been deducted from the salary payment Tk 3,540,000 out of Tk 9,344,035 which is fully disallowable u/s-30(a). 3 Import duty on packing material & fishing gear Tk 240,500 Import duty paid allowed as tax credit as AIT. So nothing to add from this custom duty. 4 WASA bill Tk 30,000 Disallowed for being not business expense rather personal expense of Director. 5 Excess perquisites Tk 360,300 Excess perquisites disallowed u/s-30(e). 6 Salary & allowances of Crew, captain Tk 360,000 Tax paid by company on salary is allowable fully as job agreement and expended for business. It will be part of perquisites of company.
8,002,241
3,540,000
30,000
360,300
7 Insurance expense Tk 218,500 Disallowed for being not business expense rather personal expense of Director.
218,500
Page 25
8 Miscellaneous expense Tk 25,000 As per SRO-229/2011 (which is related to CSR), donation to local orphanage will be considered for claiming rebate assuming all of the condition of the above SRO was met by the company. 9 Office rent Tk 1,026,647 60000*12=Tk720,000 disallowed for non tax deduction u/s-53A. 10 Picnic expense Tk 150,000 Incurred for sister concern so disallowed as non business expense u/s29(1)(xxvii). Total Inadmissible expenses Less: Admissible expenses as per provision of law: Tax depreciation as per 3rd schedule (assumed same as previous year dep) Profit before charging separate considerable expenses
25,000
720,000
150,000
13,046,041 27,455,191 (3,390,000) 24,065,191
Entertainment as per Rule-65 40,000 upto Tk 1,000,000 4% of profit before charging entertainment exp. 461,304 2% On rest of balance of profit before charging entertainment exp. 501,304 Allowable limit Actual entertainment expense claimed 125,321 Allowable lower one of actual and allowable limit Income from business or Profession before considering exemption on export income Income from Other sources (u/s-33) Dividend income (gross) Total income before considering exemption on export income Calculation of proprtionate income on export: Total sales 154,283,278 Export sales 94,465,822 Fiscal Income on export sales [94,465,822/154,283,278)*23,939,870]=Tk 14,658,099 50% of export income to be excluded from total income=[14,658,099/2]=Tk 7,329,049 [50% of Export income to be excluded from total income as per para-28 Part-A of 6th schedule.] Business Income other than export income[Total incomeTk23,914870-7,321,396] Total Business Income after considering exemption on export income Computation of tax liabilities 1 Business income after considering exemption on export income (Being non listed trading Company) 2 On dividend income @ 20% Gross tax liability Less: Rebate on CSR (25,000*10%) Tax liablity Less: Tax credit: TDS on dividend Tk 760,760 @15%, but now it is 20%(u/s-54) AIT on Import Net Tax liabilities Minimum Tax Calculation: Gross Reciepts: Sales Dividend Income Rate 23,939,870 37.5% 760,760 20.0%
125,321 23,939,870
760,760 24,700,630
14,658,099 7,329,049
16,610,821 23,939,870
Tax 8,977,451 152,152 9,129,603 (2,500) 9,127,103
114,114 240,500 (354,614) 8,772,489
154,283,278 760,760 155,044,038 775,220
Minimum tax @.5% on gross receipts Note:
Minimum tax of tk. 775,220 is lower than the tax payable of tk. 9,127,103. Hence no implication of minimum tax.
Page 26
May-June 2007 Q-3 Mr. Arman Computation of Total Income Assessment year 2010-2011 (Income year ended 30 June 2006) Note Income from Salary (u/s-21): Basic salary (50,000 *12) a b c Festival Bonus(two month Basic salary) Conveyance facilities @7.5% on basic salary For both official and private purpose. Driver's salary and other expenses of the car were borned by company. Thats why, nothing shall be added considering general practice of company for solely business purpose. Rent free accomodation(Rule-33B) 25% of Basic salary or Rental valueTk 25,000 p.m Lower one of above e Foreign travel expenditure Tk 250000 Assuming that the passage provided in accordance with terms of service contract & arranged in yearly trip basis. The money provided by the company to meet the expenditure in abroad shall be added to the income. Taka
OK
600,000 100,000 45,000
150,000 300,000 150,000 250,000
Entertainment allowance Tk 3,000 per month As u/s-33H total allowance is added with the salary income. Medical allowance(Tk 150,000) Less: Exemption(Rule-33I): Actual expense (assumed allowance are expended) 150,000 150,000
36,000
Other allowance Tk 100,000 Assuming U/s-33J the allowances has not been expended wholly, necessarily and exclusively in the performance of the duties of the office paid to him in cash. So fully disallowed. Employer's Contribution to RPF(10% of Basic) Income from Salary (u/s-21)
100,000
60,000 1,341,000
Page 27
Income from agricuture(u/s-26): Income from agricuture(nothing prod. Cost as barga u/s-27(1)(c)(iii) Income from Other sources (u/s-33): Income from Lecture Total income
280,000
150,000 1,771,000
Calculation of investment allowance(under Part B 6th schedule): Employee and employer's contribution to RPF(10% of salary each) (allowable as per para-5) Actual investment Allowable investment allowance(u/s-44): Actual investment 120,000 20% of total income [excluding employer's contribution to RPF, interest on 342,200 RPF (excluding interest para-25, part-A 6th schedule), income u/s-82C]. So 20% on Tk (1771,000-60,000)=342,200. Maximum allowable investment 10,000,000 Allowable investment (lower of the above) Computation of tax liabilities 1 On total income 180,000 @ On first Tk. 300,000 @ On next Tk. 400,000 @ On next Tk. 300,000 @ On next Tk. 591,000 @ On balanceTk. 1,771,000 Gross tax liability Total
120,000 120,000
120,000
0% 10% 15% 20% 25%
30,000 60,000 60,000 147,750 297,750
Less: Less:
10% Rebate on investment Tk 120,000 TDS Net tax liability
12,000 285,750 285,750
Page 28
May-June 2007 Q-6 XYZ Limited Computation of Total Income Assessment year: (Income year ended 30 June 2006) Note Income from business or Profession (u/s-28): Profit before tax as per profit and loss account Less: Non-business income included in P&L A/c for consideration at appropriate heads of income: a) Dividend (for consideration at income from other source) 30,000 b) Share premium ( for consideration under section 83C.) 30,000 c) Sundry income ( for consideration at Income from Other sources) 13,000 (73,000) Add: Expenditure to be considered as per provision of law afterwards 1 Entertainment (for consideration as per Rule-65) 2 Depreciation (for consideration as per 3rd schedule) 92,300 Taka
OK
7,500 46,600 54,100 73,400
Add: 1
Inadmissible expenses as per provision of law: Type writer Tk. 5,948 Type writer machine is capital nature expenditure. As it is chareged at P&L A/c as a revenue expenditure so disallowable fully. Bad debt provision Tk 4,400 Disallowable fully being no provision other than actual bad debt is allowable u/s-29(1)(xv).
5,948
4,400
10,348 83,748 Less: Allowable deductions as per ITO: Fiscal depreciation as per 3rd schedule: Type Writer [5,948*20%] Others Profit before charging separate considerable expenses
1,190 46,600 (47,790) 35,958
Page 29
Entertainment as per Rule-65 Allowable limit upto 4% of profit before charging entertainment exp. [Here the actual expenditure is Tk 7,500. As it is higher than the ceiling of Rule-65 Tk 1,438 (35,958*4%), so the allowable expenditure is lower one i.e. Tk 1,438.] Income from business or Profession (u/s-28): Income from Share Premium (u/s-82C): Tax @ 3% was collected by SEC and it is final settlement of tax liability. The applicable tax rate is also 3% i.e.tk. (30,000*3%)=900. So income will be tk. (900/.03)=30,000. Income from Other sources (u/s-33) a Dividend income(gross assumed) b Sundry income Total income
(1,438)
34,520
30,000
30,000 13,000 43,000 107,520
Computation of tax liabilities 1 2 3 Less: On total income other than share premium and dividend income (Being non listed trading Company) On Share Premium account On dividend income Gross tax liability Tax credit Tax deducted at source on dividend @ 20%(u/s-54) Tax deducted at source on share premium @ 3%(u/s-53L) Net Tax liabilities Income 47,520 30,000.0 30,000 Rate 37.50% 3% 20% Tax 17,820 900 6,000 24,720 6,000 900 17,820
Note: Minimum tax: As we are not provided any information related to gross reciept, it would not be possible for us to calculate minimum tax.
Page 30
Nov-Dec 2007 Q-3 Mr ABC Company Limited Computation of Total Income Assessment year 2008--2009 (Income year ended 30 June 2007) Note Income from business or Profession (u/s-28): A) Ready mix concrete Batching plant: Net profit (loss) as per P&L account Add: Expenditure to be considered as per provision of law afterwards Accounting depreciation Entertainment as per Rule -65 Inadmissible expenses as per provision of law: Medical Expenses [As medical expenses are given as per desire of the management, so it is disallowed for not being paid in line with a defined Company policy.] Excess perquisite Tk 226,500: Gross profit GP ratio Excess perquisites Less: Ready mix 15,019,207 20.68% 46,838 Real estate 57,611,581 79.32% 179,662 Total 72,630,788 100.00% 226,500 46,838 89,058 Taka
OK
(174,801)
4,688,318 30,500 4,718,818
Add: 1
135,896 Allowable Deductions as per ITO: Fiscal Depreciation as per 3rd schedule Profit before charging separate considerable expenses a Entertainment as per Rule -65 [Since there is no profit before charging enteratinment expenses, so no entertainment is allowed as per ITO] (5,030,200) (350,287) -
(350,287) B) Real Estate: Net profit as per P&L account (GP tk. 57,611,581+Int. on short term deposit tk. 705-total debit side of tk. 56,792,378) Add: Non-business income included in P&L A/c for consideration at appropriate heads of income: Interest on Short Term Deposit Add: Expenditure to be considered as per provision of law afterwards Accounting depreciation Entertainment as per Rule -65 (Tk 295,755+Tk 105,000) 819,908
705 820,613
3,683,514 400,755 4,084,269
Page 31
Add: 1
Inadmissible expenses as per provision of law: Medical ExpensesTk 280,728 [As medical expenses are given as per desire of the management, so it is disallowed for not being paid in line with a defined Company policy.] Directors remuneration & allowances Tk 1563,300 No tax has been deducted from directors remuneration which is fully disallowable u/s30(aa). Excess perquisite Tk 226,500: Gross profit GP ratio Excess perquisites Ready mix 15,019,207 20.68% 46,838 Real estate 57,611,581 79.32% 179,662 Total 72,630,788 100.00% 226,500 280,728
1,563,300
Less:
179,662 25,000
Membership subscription Tk 25,000 [As it is personal expense of directors not business expense, so disallowed fully] Aduit fee Tk 40,000 No tax has been deducted from audit fee which is fully disallowable u/s-30(aa).
40,000 2,088,690 6,993,572
Less:
Allowable Deductions as per ITO: Fiscal Depreciation as per 3rd schedule Profit before charging separate considerable expenses Entertainment as per Rule -65 On first Tk. 1,000,000 @ 4% On remaining balance i.e (2,243,272-1,000,000)*2% Set off Losses: Income from Ready mix concrete Batching plant Income from Real Estate Income from business or Profession (u/s-28):
(4,750,300) 2,243,272
Less:
40,000 24,865
64,865 2,178,407 (350,287) 2,178,407 1,828,120
Income from Other sources (u/s-33): Interest on Short Term Deposit Total Income Computation of tax liabilities: On total income @ 37.5% Gross tax liability Less: Tax credit On Interest on Short term deposits[u/s-53F(Tk 705*10%)] Net tax liability Note: Minimum tax:
705 1,828,825
685,809 685,809
(71) 685,739
As we are not provided any information related to gross reciept, it would not be possible for us to calculate minimum tax.
Page 32
May-June 2008Q-4 Mr Rahman Computation of Total Income Assessment year 2008--2009 (Income year ended 30 June 2007) Note Taka
OK
Income from business or Profession (u/s-28): Surplus of income over expenditure Less: 1 2 3 Non-business income included in income & expenditure A/c for consideration at appropriate heads of income: Dividend from pvt. co(for consideration at income from other source) 50,000 Interest free govt securities 40,000 Rent from sub-let of premise 36,000 (126,000) Add: Expenditure to be considered as per provision of law afterwards Entertainment as per Rule -65 Purchase of books Tk 12000 (Being capital nature expenditure as plant defined in ITO disallowed fully). Inadmissible expenses as per provision of law: Fines for breaking custom rule Tk 20,000 [For violation of law it is disallowed fully u/s-30(i)]. Loan to client Loss of investment in shares Tk 18,000 [As it is not realised on disposal, actual loss, if any treated as u/s-32] 20,000 193,000
10,000 12,000 22,000
Add: 1
2 3
40,000 18,000
78,000 Less: Allowable Deductions: Depreciation on books & periodicals [12000*30% as per 3rd schedule] Profit before charging separate considerable expenses a Entertainment as per Rule -65 @4% on Tk 163,400 Income from business or Profession (u/s-28): (3,600) 163,400 (6,536) 156,864
Page 33
Interest on Securities(u/s-22): Interest free govt securities Less:exempted under para-24 Part-A schedule Income from Other sources (u/s-33) 1 Dividend income from pvt. company 2 Rent from sub-let Total income Computation of tax liabilities
40,000 40,000 50,000 36,000 86,000 242,864
On first Tk. On next Tk. Total Income
180,000 62,864 242,864
@ @
0% 10% Gross tax liability
6,286 6,286
Less: Tax credit On Professional fees[u/s-52A(650,000*10%)] 65,000 5,000 On Dividend income[u/s-54(50,000*10%)] On rental income from sub-let Here we assumed that tenant is an individual who has no right to deduct tax at the time of making payment. Net tax refundable
(70,000) (63,714)
Page 34
May June 2008 Q-3C Mr X Computation of Total Income Assessment year 2000-2010 (Income year 2007-2008) Note Income from Agriculture (u/s-26): Sale of rice(200 maunds*Tk 600) Sale of rabi crops Lease of agricultural land Income from tea garden and sale of tea[60000*60%] Income from sale of palm juice Income from cattle rearing Income from sale of pump machine(Tk 12000-Tk10000) Less: Admissible deductions (u/s-27) Production costs [ 60% on (120000 +25,000)] [As no books of accounts is maintained 60% of Market value of the produce allowed as admissible deductions] Interest on agricultural loan(50,000*8%) UP tax Land revenue Income from Agriculture (u/s-26): Income from Business or Profession (u/s-28): Income from tea garden and sale of tea [60,000*40%] Income from other sources(u/s-33): Income from sale of bamboo(assumed forest bamboo) Total income Calculation of investment allowance(under Part B 6th schedule): Life insurance premium for son (Tk4,000) (as per para-1 LIP allowable only for assessee, spouse and minor child). Actual investment Allowable investment allowance(u/s-44): Actual investment 20% of total income [excluding employer's contribution to RPF, interest on RPF (excluding interest para-25, part-A 6th schedule), income u/s-82C]. So 20% on Tk 231,000=(Tk 231000-0-0-0). Maximum allowable investment 87,000 120,000 25,000 40,000 36,000 18,000 40,000 2,000 Taka
OK
281,000
4,000 2,000 1,000 94,000 187,000
24,000
20,000 231,000
4,000 4,000 4,000 46,200
10,000,000 Allowable investment (lower of the above)
4,000
Computation of tax liabilities On first Tk. On next Tk. Total Less: Less: Tax credit Net tax liability 180,000 51,000 231,000 @ @ 0% 10% Gross tax liability 5,100 5,100 (400) 4,700 4,700
10% Rebate on investment Tk 4,000
Page 35
Nov-Dec 2008 & Application level Oak Limited Computation of Total Income Assessment year 2008--2009 (Income year ended 31 December 2007) Note Taka
OK
Income from business or Profession (u/s-28): Profit before tax as per profit and loss account Less: 1 2 3 4 5 6 Non-business income included in P&L A/c for consideration at appropriate heads of income: Dividend (for consideration at income from other source) 6,000,000 Interest income(for consideration at interest on securities) 800,000 Capital gain on sale of listed company's shares(As per SRO-269 dated 1 1,000,000 July 2010, It is taxable income from AY 2011-12) Share income from partnership firm(it is tax free and for consideration 6,000,000 u/s-43(3), u/s-37 and para-16 part-B 6th schedule). Keyman life insurance proceeds(for consideration at income from other 25,000,000 source u/s-33(c)). Tax refund(tax cannot be income or expenses rather it is an appropriation of profit. So it will not be considered as income and tax 500,000 credit taken afterwards) (39,300,000) (19,600,000) Add: 1 a Inadmissible expenses as per provision of law: Salaries and wages Tk 26,000,00 Salary to finance manager Tk 600,000 (being not paid by cheque or bank transfer disallowed fully u/s-30(i). 19,700,000
600,000
Compensation to Voluntary Retirement Scheme Tk 1,500,000 (assume govt approved this is not taxable in the hand of recipient as para26 part A 6th schedule. So if I assume it is govt. approved, so no need to TDS. As a part of salary it is allowable u/s-29(1)(xvii) and nothing is to be added). Gratuity provision(unrecognised) Tk 1,500,000 (no provision either recognized/unrecognised is allowed at tax law. So disallowed fully).
c(i)
1,500,000
c(ii) Actual gratuity payment disallowed for unrecognised Tk1,000,000 (Only payment by employees to recognised/approved gratuity fund is allowable as per para-6 part-C 1st schedule. As it is unrecognised so fully disallowable). d Incentive bonusTk 2,000,000(for consideration as per u/s-30(j)) (10% of disclosed profit=(19,700,000*10%)=1,970,000 is allowable limit u/s-30(j). So the excess amount (20,000,000-19,700,000)=Tk 30,000 is disallowable. We see at note-12 that no tax deducted at source. So as part of salary incentive bonus is fully disallowable u/s-30(a).
1,000,000
30,000 2,000,000
Page 36
Doubtful accounts Tk 2,000,000 (After allowing only actual bad debt Tk 1,100,000 u/s-29(1)(xv) out of 2,000,000 and the rest is added with profit. Tax Tk 9000,000 Here taxes was only Payroll taxes. No tax deducted at sources and as part of salary & assuming employee tax is paid by the employer as terms of employment. So there is nothing to be disallowed u/s-30(aa).
900,000
Security service [disallowed fully u/s-30(aa) for non deduction of tax and VAT] Audit, accountancy & advisory services [disallowed fully u/s-30(aa) for non deduction of tax and VAT] Office rent [disallowed fully u/s-30(aa) for non deduction of tax] Car rental [disallowed fully u/s-30(aa) for non deduction of VAT] Interest on working capital allowed as business exp. u/s-29(1)(xxvii) Donation to DU (It would be considered as CSR activities.) Board meeting attendance fee(only applicable for VAT which is not deducted, so disallowable fully u/30(aa). Depreciation Tk 8,000,000(as it is calimed as per 3rd schedule so nothing to add back.) Other expenses Life insurance premium on LIP of controller ( as per u/s-29(1)(vii) insurance premium is only allowable against risk of damage, destruction or loss building, machinery, plant, furniture, stocks & stores; not any life insurance premium. So disallowable fully being not business related expenditure. Rather it may be allowed u/s34(2) while computing life insurance proceed of Tk 25,000,000 as income from Other Sources u/s-33(e). Entertainment expense Tk 500,000 This is personal expense CEO not related to business. So rather allowing it as business expense u/s-65 disallowed fully being not covered u/s-29.
300,000
500,000
6 7 8 9 10
600,000 100,000 1,800,000 300,000
11
12 a
1,500,000
500,000
Overseas travelling Tk 800,000 ( It is allowable u/s-30(k) upto 1% of disclosed turnover Tk 90,000,000. As claims is within the allowable limit Tk 900,000 nothing is added back from here.) Corporate income tax Tk 4,500,000 (Income tax is not an expense rather appropriation of profit that is why it is not a part of P&L a/c. As it is calimed at P&L a/c as expenses, so disallowed fully).
13
4,500,000
Page 37
14
Dividend paid Tk 9,000,000 (disallowed u/s-30(aa) for non deduction of TDS.
9,000,000 25,130,000 5,530,000
A) Income from business or Profession (u/s-28): B) Interest on Securities(u/s-22): Interest on govt bond
800,000
C) Income from partnership firm: Income from partnership firm(gross/before tax) [Capital loss can not be set off against business income. So ordinary business income from partnership firm (before tax) is taken as share income as par section-43(3)]. D) Income from Capital Gain from sale of share E) Income from Other sources (u/s-33) 1 Dividend Income: from local company from Singapore based company(net) from Russian based company(net)
7,900,000
1,000,000
2,000,000 2,000,000 2,000,000 6,000,000 25,000,000 (1,500,000) 23,500,000
Keyman life insurance proceed Tk 25,000,000 Less: LIP premium Tk 1,500,000
Share capital raised through cash Tk 1,000,000 Share capital raised through cash not received by cross cheque or bank transfer disallowed u/s-33(d) & treated as notional income u/s-19(24).
1,000,000
Total income Break down of total income Income from business or Profession (u/s-28): Less: set off previous loss Business income after setoff of Carried forward loss Interest on Securities(u/s-22): Income from partnership firm: Income from capital gain Income from Other sources (u/s-33) Total income 5,530,000 (1,000,000) 4,530,000 800,000 7,900,000 1,000,000 30,500,000 44,730,000
30,500,000 45,730,000
Page 38
Computation of tax liabilities Income 1 37,730,000 On total income excluding dividend income and capital gain @27.5%(listed Company) Less: Rebate @10% on Tk 10,375,750 for declaring more than 20% dividend Less: Rebate @10% on Tk 1,800,000 for CSR activities 2 3 On dividend income @ 20% On Capital gain on sale of share @ 10% 6,000,000 1,000,000 44,730,000 Tax 10,375,750 (1,037,575) 9,338,175 (180,000) 9,158,175 1,200,000 100,000 10,458,175
Less: Credit against tax payable in Bangladesh on dividend from Singapore as U/s-144(4) and 7th schedule as para-4 appying average rate of tax as there is DTAA between Bangladesh and Singapore. Average rate of tax comes at(10,458,175/44,730,000)*2,000,000=Tk.467,613. Foreign tax Tk 200,000. Tax Credit restricted upto foreign tax Tk 200,000. Less: Tax relief as per section-145 for tax on dividend on Russian based company (as there is no DTAA): Average rate of tax comes atTk.467,613. Foreign tax amount Tk 400,000 But restricted upto lower of foreign tax & average rate of tax . 467,613 400,000
467,613 200,000 200,000
400,000 (600,000) 9,858,175
Less: Tax at average rate on taxed share income of partnership firm(9,858,175/44,730,000)*7,900,000=Tk 1,741,104. Net tax liability Minimum Tax Calculation: Gross Reciepts: Sales Dividend Interest Gain on sale of shares Equity earnings of Tech Partnership Keyman life insurance proceeds Insurance proceeds from fire loss claim Minimum tax @.5% on gross receipts Note:
(1,741,104) 8,117,071
90,000,000 6,000,000 800,000 1,000,000 6,000,000 25,000,000 1,500,000 130,300,000 651,500
Minimum tax of tk. 651,500 is lower than the tax payable of tk. 8,117,071 . Hence no implication of minimum tax.
Note 1
Assume loss on fire Tk 1,000,000 was properly accounted for and allowed as expense last year. So insurance claim Tk 1500,000 is income of this year. As it is shown at P&L a/c. So nothing to interfere here.
Here there is no treatment of accounts receivables as on accrual basis sale includes both cash and credit sales.
Page 39
Nov-Dec 2008 Q-6 Mrs Rahim Computation of Total Income Assessment year 2008-2009 (Income year ended 30 June 2008) Note Income from Salary (u/s-21): a From XYZ Company: Basic salary(20,000 *12) House rent allowance(11,000*12): Less: Exemption(Rule-33A): 50% of Basic salary 120,000 or Tk 15,000 per month 180,000 Lower one exempted Medical allowance(Tk 2000 p.m*12) Less: Exemption(Rule-33I): Actual expense(assumed allowance expended fully) Conveyance allowance(per month Tk1,000*12) Less: Exemption(rule-33) b From ABC Company: Basic salary(20,000 *12) House rent allowance(9000*12): Less: Exemption(Rule-33A): 50% of Basic salary 120,000 or Tk 15,000 per month 180,000 Lower one exempted Conveyance allowance(per month Tk1,000*12 Less: Exemption(rule-33) Taka
OK
240,000 132,000
120,000 12,000 24,000 24,000 12,000 24,000 240,000 108,000
120,000 12,000 24,000 24,000 480,000 50,000
Entertainment allowance (Tk. 2,000 per month*12) Bonus(per month Tk 40,000*12) Honorarium as BOD from Rupali bank As per rule 33 there is no bar to allow exemption on house rent allowance twice, conveyance allowance twice, the only restriction of allowing allowance from more than one company is in case of share holder director as per rule 33 (2) (b). So all benefit of rule 33 is applicable for her. Income from Salary (u/s-21) Interest on Securities(u/s-22): Income from house property(u/s-24): Annual value(AV): Rental income(Tk. 25,000*12) Municipal value(not given) Higher one of above
1,046,000 -
300000 300,000
Page 40
Less: Admissible deduction(u/s-25): Repair & maintenance[1/4 of AV] u/s-25(1)(h) Municipal tax(Tk. 40,000 u/s-25(1)(a)) Insurance premium(Tk. 15,000 u/s-25(1)(b)) Land revenue Vacancy allowance(Tk. 25,000*2 months) Income from house property(u/s-24) Income from Agriculture (u/s-26); Sale of crops Less: 60% Cost of production(u/s-27) [as no books of accounts maintained] Income from business or Profession (u/s-28): Consultancy fee from UNDP-BD Consultancy fee from World Bank-Bhutan & Nephal) (Note: UNDP & WB are the organisation of UN. Only the salary categorized person employee at UN is tax free. As Mrs Rahim is not salaried person of UNDP & WB, so her income from there is not tax free. Moreover, there is no DTAA with Bhutan and Nephal. So all income will be taxable in our country). 75,000 40,000 15,000 2,000 50,000 (182,000) 118,000
25,000 (15,000)
10,000
400,000 300,000
Less: Membership fee to ICAB Less: Depreciation on professional books(Tk10,000*30%)[as per 3rd schedule]
700,000 (4,800) (3,000) 692,200 -
Income from partnership firm: Income from Capital Gain(u/s-31): 1 Sale of shares Gain on sale of share is tax free as per SRO-269 dated, 1 July 2010 and there is no relation with section 32 (12), so entire gain of tk. 200,000 is exempted. 2 Sale of appartment (u/s-82C) (Sale of property which is treated u/s-82C i.e. final settlement of tax liability. At the time of registration in August 2007, TDS @5%(after 1 September 2009 @2%) of sale proceeds. The appartment sold after 7 years(from August 2000 to August 2007). For person other than Company, capital gain should be taxed including in total income or 15% on capital gain whichever amount is lower (2nd schedule). In this problem assessee reached highest slab of total income including capital gain. So tax 15% on this capital gain will be lower. So the equivalent income u/s-82C will be as [(10,000,000*5%)=Tk 500,000/.15] = Tk 3,333,333.But in our next exam there has possiblility to mention the date of sale after 1 September 2009. in that case the gain from sale of asset will be 1000,000*2%=200,000/.15-1333,333.
1,333,333
3 Money Received from real estate Money received from the real estate company against a contract which is relinquishment of right which is defined as transfer in the definition of transfer u/s-2(66). So here Tk 2,000,000 is treated as part of capital gain. Income from Capital Gain(u/s-31):
2,000,000
3,333,333
Page 41
Income from Other sources (u/s-33): Dividend received (from which TDS u/s-54)[50,000/.9] Interest on post office savings bank account Income from part time lecture Lecture Articles publication Question settings Less: Actual expense to earn above part time income Income from Other sources (u/s-33): Total income Calculation of investment allowance(under Part B 6th schedule):
55,556 15,000 60,000 25,000 12,000 97,000 (3,000) 94,000 164,556 5,364,089
Life insurance premium for son (Tk5,000*4) (as per para-1 LIP allowable only for assessee, spouse and minor child). Actual investment Allowable investment allowance(u/s-44): Actual investment 20% of total income [excluding employer's contribution to RPF, interest on RPF (excluding interest exempted as per para-25, part-A 6th schedule), income u/s82C]. So 20% on Tk. 4,030,756 (Tk 5,364,089-0-0-1,333,333). Maximum allowable investment
20,000 20,000 20,000 806,151
10,000,000 Allowable investment (lower of the above)
20,000
Computation of tax liabilities 1 On total income including Capital gain(excluding capital gain ofTk. 3,333,333) 200,000 On first Tk. 300,000 On next Tk. 400,000 On next Tk. 300,000 On next Tk. 830,756 On balanceTk. 2,030,756 Total On Capital gain of Tk 3,333,333 @ 15% @ @ @ @ @ 0% 10% 15% 20% 25% 30,000 60,000 60,000 207,689 357,689 500,000 857,689 (2,000) 855,689 5,556 200,000 1,500 Net tax liability 2,030,756
Gross tax liability Less: 10% Rebate on investment Tk 20,000
Less: Tax deducted at source On dividend income@10% on Tk 55,556 On sale of apartment@2% on 10,000,000 On Interest on savings instrument @10% on tk. 15,000
207,056 648,633
Page 42
May-June 2008 (Q-5) & 2009 (Q-9) ABC Limited Computation of Total Income Assessment year 2010-2011(Income year 2009--2010 ) Note Income from business or Profession (u/s-28): Profit before tax as per profit and loss account Less: Non-business income included in P&L A/c for consideration at appropriate heads of income: Dividend 20,000 Interest on bank deposit 12,000 Profit on sale of machineries 30,000 Interest on tax free govt securities 10,000 Sundry income 5,000 Refund of income tax(it is not an income. So only considered for tax 30,000 credit afterwards). Interest on investment outside Bangladesh 20,000 Taka
OK
573,000
(127,000) 446,000 Add: Expenditure to be considered as per provision of law afterwards Depreciation (for consideration as 3rd schedule) Inadmissible expenses as per provision of law: Salary & allowance Tk 250,000 No tax has been deducted from salary amounting Tk 50,000 which is fully disallowable u/s-30(aa). Excess perquisitess Tk 20000 Excess perquisitess Tk 20000 over allowable income tax rate paid fully added here u/s-30(e). Conveyance allowance Tk 20000 Paid to General Manager for overseas travelling as representative of chamber (who as a trade delegation sponsored by Govt.) which is allowable u/s-29(1)(xxv). So nothing shall be added back. Legal expense Tk 14,000 Income taxes related legal expense Tk 10,000 is allowable upto appeal to the appellate Tribunal. So as it is allowable expense nothing shall be added back from here considering rest amount incurred for business purpose. Charity Tk. 10,000 Assumed that paid to unapproved institution so disallowed fully. Income Tax paid in advanceTk 200,000 Tax is not an expense. So it not chargeable in P/L a/c and disallowable fully being non business expense. Fines paid to Customs authorityTk 20,000 Disallowed assuming that Company committed offences as Customs Act, 1969. Contribution to Provident Fund Tk 20000 Assume that Provident fund is recognised and allowable fully. 50,000 180,000
Add: a
20,000
10,000
200,000
20,000
480,000
Less:
Admissible expenses as per provision of law: Fiscal depreciation as per 3rd schedule
(115,000)
Page 43
Add: Deemed income- Revenue gain U/s-19 Profit on sale of machine Tk 800,000 Sale price(Tk 40,000+profit Tk 30,000) Less: Written down value Total gain Less: Capital gain=(saleTk 70,000-costsTk60,000) Revenue gain (total profit-capital gain) Income from business or Profession (u/s-28):
70,000 70,000 (10,000) 60,000 871,000
Income from Capital Gain(u/s-31): Capital gain on sale of machine=(saleTk. 70,000-costsTk. 60,000) Interest on Securities(u/s-22): Interest on tax free govt securities Tk 10,000 Less: fully exempted under para-24 part A 6th schedule Income from Other sources (u/s-33) Dividend income (gross amount in P&L A/c) Interest on bank deposit(gross amount in P&L A/c) Sundry income Interest on investment outside Bangladesh(gross in P&L A/c) (Lack of proper information in the given problem. Assume that interest received from country which is not under DTAA & company did not claim for average rate tax rebate). Total income Computation of tax liabilities 1 On total income excluding capital gain and dividend income @ 37.5% (assuming not publicly traded listed Company) 2 On capital gain@15%(para-2(a) 2nd schedule 3 On dividend income @20% Total Less: Income 968,000 10,000 20,000 998,000
10,000
10,000 (10,000) 20,000 12,000 5,000 20,000
57,000 998,000 Tax 363,000 1,500 4,000 368,500 (200,000)
Income tax paid in Advance (assuming it has paid AIT installment on the basis of last assessed income u/s-64 & 66. So there is no question of charging simple interest). TDS on dividend income(Tk 20,000*20%) TDS on interest(12,000*10%)
Less: Refund of income tax(u/s-152) Net tax liability Minimum Tax Calculation: Gross Reciepts: Sales Dividend Interest on bank deposit Profit on sale of machineries Interest on tax free govt securities Sundry income Interest on investment outside Bangladesh Minimum tax @.5% on gross receipts Note:
(4,000) (1,200) 163,300 (30,000) 133,300
4,980,000 20,000 12,000 70,000 10,000 5,000 20,000 5,117,000 25,585
Minimum tax of tk. 25,585 is lower than the tax payable of tk. 368,500. Hence no implication of minimum tax.
Page 44
Nov-Dec 2009
Question-3 Mr Khan & Co Limited Computation of Total Income Assessment year 2008--2009 (Income year 2007-2008) Note Taka
OK
Income from business or Profession (u/s-28): Profit before tax as per profit and loss account Add: Expenditure to be considered as per provision of law afterwards Depreciation(for consideration as 3rd schedule) Inadmissible expenses as per provision of law: Salary to Mr X Tk 755,375 (Salaries for installation of machineries as part of capital expenditure production of which was not started withihin the year. So it is disallowed fully u/s-29(1)(xxvii) and depreciation will be allowed from the year of production. Goods damaged in store Tk 125,000 As normal course of business goods cannot be damaged in store. In case of accident like flood, it is allowable expenditure because its out of human comntrol. But as there is no such indication it assumed that it was damaged due to negligence. So disallowed fully. 37,500,525
4,000,000
Add: a
755,375
125,000
OR it is allowable expenditure because it was occurred in the normal course of business. It is not essential to ensure everything. Moreover it is not personal not capital and related to business which was continured at the time of damage. So nothing to add back from here.
Tax deducted at source from Dividend Tk 1,275,850 Tax is not an expense. So it not chargeable in P/L a/c and disallowable fully being non business expense. Late fine for renewal of trade license Tk 35,450 Disallowed fully as incurred for violation of law Commission to Abul & Co Tk 2,000,000 As commission incidental to loan granting, not capital expense & incurred for business so allowable fully u/s-29(1)(xxvii). Depreciation of leasehold assets Tk 5,00000 As accounting depreciation was disallowed earlier in which this depreciation was included no need to diallowed futher. Rather lease rent tk. 125,000 will be considered as expense afterwards. Money looted on the way Tk 5,000,0,00 Loss of money by theft is allowable expense as it is incurred during the course of business. Here money looted Tk 5,000,000 & recovered was Tk 3,500,000. So the net loss Tk 1,500,000 is actual loss. So allowing actual loss the recovered amount is added with profit as per section 19(15)(a).
1,275,850
35,450
3,500,000
5,691,675
Page 45
Less:
Admissible expenses as per provision of law: Leased rental(assuming it was operating lease) Fiscal depreciation as per 3rd schedule Business gain on sale of car as per 3rd schedule (para-11) cost price of car deemed to have been taken tlk. 10,00,000 or 20,00,000 depending on the year of purchase and tax depreciation will be allowable accordingly. Profit on sale of motor car Tk 800,000 Written down value Sale= WDV TK1200,000+Total profitTK 800,000 Total Profit Less: Capital gain(saleTk 2,000,000-costsTk
1,800,000)
125,000 3,500,000 (3,625,000)
Add:
1,200,000 2,000,000 800,000 200,000 600,000
Revenue gain(total profit-capital gain)
Income from business or Profession (u/s-28): Income from Capital Gain(u/s-31): Capital gain on sale of motor car Income from Other sources (u/s-33) Dividend income (gross) Total tax deducted at source@20% on dividend income. So total dividend income=(1275850/0.2)=Tk. 6,379,250 Total income Computation of tax liabilities 1 On total income excluding capital gain and dividend income @27.5% on (listed Company)=Tk50746,450-200000-6,379,250=Tk 44,167,200.
44,167,200
200,000
200,000
6,379,250
6,379,250 50,746,450
12,145,980
2 3 Less:
Less: Rebate @10% on Tk 12,145,980 for declaring more than 20% dividend (assuming this is paid as per ITO). On capital gain@15%(para-2(a) 2nd schedule On dividend income @20% Advance tax paid( assuming it has paid on the basis of last assessed income as per section64. So there is no question of charging simple interest). TDS on dividend income Net tax liability
(1,214,598) 10,931,382 30,000 1,275,850 12,237,232 (5,000,000) (1,275,850) 5,961,382
Note 1 Export Income Export of garments is within the coverage of TDS which is also to be treated as final settlement of tax liability. Income from garments export are not identfiable from the information given, so 50% rebate as per para-28 Part-A 6th schedule not allowable. Moreover no information about TDS indicates for equivalent income for final settlement of tax liability. 2 Indenting Commission No information regarding TDS on indenting commission is given. So Credit @ 3.5% (now7.5%) regarding such commission has been given. Minimum tax: As we are not provided any information related to gross reciept, it would not be possible for us to calculate minimum tax.
Page 46
Nov-Dec 2009 Q-4 Mr. Azim Computation of Income from House property Assessment year -------------- (Income year ended -------) Note Income from house property(u/s-24): Annual value(AV): Rental income (Tk25,000*12) Municipal value (220,000/2) Higher one of above Less: Admissible deduction(u/s-25): Repair & maintenance[1/4 of AV] u/s-25(1)(h) Municipal tax(u/s-25(1)(a))[5000/2] Insurance premium(u/s-25(1)(b))[4000/2] Interest on mortgage[4000/2] Land revenue[2000/2] Income from house property(u/s-24) 75,000 2,500 2,000 2,000 1,000 (82,500) Taka
OK
300,000 110,000 300,000
217,500
Notes 1 Half of house used by his son in law who is not dependant on him. Annual value is determinable only in case of let out property (not for used by assessee) as per u/s-2(3). As the 50% of the house was not let out(to son in law) rather assessee used it free, so there is no scope of determining annual vaue. If the owner of the house received token rental, which is lower than reasonable then it was possible to determine annual value considering reasonable rent. 2 Repair & maintenance(Statutory deduction) includes water and swerage charge , white wash & repair, service charges. So there is no scope to consider it again. It is assumed that cost of alteration is a capital nature expenditure. So it is not admissible expense. As full house was not let out and annual value was determined on 50% of the property. So all related deduction was allowed proportinately. Interest on loan Tk 20,000 for alteration and expansion of self occupied house at Uttara is not considered here as it is deductible from total income not from House property income. It is required in question to calculate House property income only not total income.
3 4
Page 47
May-June 2010 Q-3 (a) Mr. Alam Computation of Income from House property Assessment year -------------- (Income year ended -------) Note Income from house property(u/s-24): Annual value(AV): Rental income(Tk60,000*12) ( Rental value is taken here as Annual value considering reasonable as reasonable rent is not given in the question and municipal value is lower than rental value.) Taka
OK
720,000
Higher one of above Less: Admissible deduction(u/s-25): Repair & maintenance[1/4 of AV] u/s-25(1)(h) Municipal tax(u/s-25(1)(a))[20000/2] Insurance premium(u/s-25(1)(b))[5000/2] Interest [50000/2] 1/3 interest on house building loan during consruction period ( 321,000/3)/2 Vacancy allownce (60,000*3) Income from house property(u/s-24) Notes 1 180,000 10,000 2,500 25,000 53,500 180,000
720,000
(451,000) 269,000
as the full house not let out and annual value was determined on part of the property. So all related expenditure was allowed proportionately. it was instructed in the question to compute house property income only not to compute total income. So interest on loan of self occupied portion was not considered. As full house was not let out and annual value was determined on 50% of the property. So all related deduction was allowed proportinately.
2 3
Page 48
May-June 2010 X Limited Computation of Total Income Assessment year 2010-2011 (Income year ended 30 June 2010) Note Sources of income: 1 Income from business or Profession (u/s-28): 2 Capital gain (u/s-31) 3 Income from Other sources (u/s-33) Income from business or Profession (u/s-28): Profit before tax as per profit and loss account Less: Non-business income included in P&L A/c for consideration at appropriate heads of income: a) Dividend (for consideration at income from other source) 30,000 b) Share premium ( For consideration under section 82C) 30,000 c) Sundry income( for consideration at Income from Other sources) 13,000 d) Capital gain on sale of machine(for consideration at capital gain head) 40,000 Taka
OK
232,300
(113,000) 119,300 Add: Expenditure to be considered as per provision of law afterwards 1 Entertainment(for consideration as per Rule-65) 2 Depreciation(for consideration as per 3rd schedule) 9,500 46,600 56,100 175,400 Add: Inadmissible expenses as per provision of law: 1 Rent & Taxes Tk 24,500 As VAT Tk 4,200 paid for importing machines is charged at P&L A/C, so disallowed Tk. 4,200 being part of value of machine(capital expenditure). As the machine was not used during the year, so no tax depreciation is allowable. 2 Repair and operating expense Tk 27,300 Tk. 6,000 disallowed for being not business expense rather personal expense of MD. 3 Legal expense Tk 14,500 Income taxes related legal expense is allowable upto Taxes Appellate Tribunal. So as it is allowable expense nothing to added back from here.
4,200
6,000
4 Compensation for termination of staff Tk 10,000 Assuming compensation paid for violation of job agreement. So disallowable fully, 5 Type writer Tk. 5,948 Type writer machine is capital nature expenditure. As it is chareged at P&L A/c as a revenue expenditure so disallowable fully. 6 Bad debt provision Tk 4,400 Disallowable fully being no provision other than actual bad debt is allowable u/s-29(1)(xv).
10,000
5,948
4,400
30,548 205,948
Page 49
Add:
Deemed income u/s-19 Bad debt recovered is to be treated as business income u/s-19(15)(a) Admissible expenses as per provision of law: Tax depreciation Profit before charging separate considerable expenses Entertainment as per Rule-65 Allowable limit upto 4% of profit before charging entertainment exp. Here the actual expenditure is Tk 9,500 out of which Tk 2,000 is unexplained and Tk 5,276 is personal expnditure. So after deducting those two, calims remains for Tk 9,500--Tk 2,000-Tk 5276=Tk 2224. As it is lower than the ceiling of Rule-65 Tk 5982, so it is allowable expenditure. Income from business or Profession (u/s-28):
2,000 207,948 (58,400) 149,548
Less:
5,982 (2,224)
147,324 30,000
Income from Share Premium (u/s-82C): Tax @ 3% was collected by SEC and it is final settlement of tax liability. The applicable tax rate is also 3%. So income will be tk. 30,000
Income from Capital Gain(u/s-31): Capital gain on sale of machine (Assuming it was calculated as per tax law)
40,000
Income from Other sources (u/s-33) a Dividend income(gross assumed) b Sundry income Total income
30,000 13,000 43,000 260,324
Computation of tax liabilities 1 Total income other than Capital gain, share premium and dividend income (260,324-40,000-30,000-30,000)*37.5% 37.5% 60,122
On Capital gain tax @ 15% (under para-2 Second schedule) On Share Premium @ 3% (30,000*3%) On dividend income @20% (30,000*20%) Gross tax liability Less: Tax deducted at source On dividend @20% (u/s-54) Share Premium @ 3% Net Tax liabilities
2 3
6,000 900 6,000 73,022 6,000 900
6,900 66,122
Note 1 Minimum tax: As we are not provided any information related to gross reciept, it would not be possible for us to calculate minimum tax.
Page 50
Nov-Dec-2010 & May-June 2006 Mr. Rahman Computation of Total Income Assessment year 2010-2011 (Income year 2009-2010) Note Income from Salary (u/s-21): Recognized Basic salary(9,000 *12) Dearness allowance(20% of Basic salary) Bonus(Two months Basic salary) Rent free accommodation(Rule-33B): Rental value(annual value) or 25% of Basic salary Lower one Medical allowance(Tk 300 p.m) Less: Exemption(Rule-33I): Actual expense(assumed wholly expended) Conveyance facilities(u/s-33D)[1200*12] Less: Actual expenses 3,600 2,500 1,100 14,400 14,400 10,800 1,100 108,000 21,600 18,000 30,000 27,000 27,000 27,000 Provident Fund Unrecognized 108,000 21,600 18,000 Taka
OK
Government 108,000 21,600 18,000
27,000
1,100
Employer's Contribution to PF(10% of Basic) (Since para-4(1) part-A 6th schedule excludes govt PF income for PF registered only under PF Act, 1925. Employee contribution in RPF exempted in Para-6 Part-B 1st schedule).
Interest on Provident Fund: (for RPF Para-25 Part-A 6th schedule) Interest on RPF Less: Exemption 1/3 of salary (here salary means as per definiton of Part-B of 1st Schedule of ITO 1984) [(108000+21600)/3]=Tk 43,200 14.5% of cumulative RPF(Tk. 2,500/.15)*14.5% In para 25 of 6th schedule there has no indication whether exemption will be higher or lower one between 1/3 of salary and 14.5% of accumulated balance. However high court verdict was benefit of doubt goes in favor of assesse. So we consider here the higher one as exemption. For GPF (exempted for income PF which is under PF Act 1925 as per Para-4(1) Part-A 6th schedule) For UPF [ All UPF will be taxed at the time of withdrawal. So nothing to be added back now]
2,500 43,200
2,417
43,200 -
Income from Salary (u/s-21)
186,500
175,700
175,700
Page 51
Calculation of investment allowance(under Part B 6th schedule): Life insurance premium Tk 5000 (as per para-1 LIP allowable upto 10% of policy value for individual assessee, spouse, minor child). Purchase of compnay's share Tk 4000 (assumed purchased listed company's share which allowed as per para-8) . Employee contribution to PF (allowable for RPF as per para-5, only employee cont. allowable for GPF as para-4 and nothing allowed for UPF). Employer contribution to PF (allowable only for RPF as per para-5, but not allowed for GPF as para-4 and for UPF). Actual investment Allowable investment allowance(u/s-44): Actual investment 25% of total income [excluding employer's contribution to PF, interest on PF]. So 25% on (Tk 186500-10800);(175700-0);(175700-0). 5,000 5,000 5,000
4,000
4,000
4,000
10,800
10,800
10,800
30,600 30,600 43,925
9,000 9,000 43,925
19,800 19,800 43,925
Maximum allowable investment Allowable investment (lower of the above) Computation of tax liabilities Total income for Provident Fund Recognized Unrecognized Government 165000 165000 165000 On first Tk. 21,500 10,700 10,700 On next Tk. 186,500 175,700 175,700 Total income Less: 10% Rebate on investment
1,000,000 30,600
1,000,000 9,000
1,000,000 19,800
Total tax for Provident Fund Recognized Unrecognized Government 2,150 1,070 1,070 2,150 1,070 1,070 3,060 (910) 2,000 900 170 2,000 1,980 (910) 2,000
Net tax liability Tax liability[Minimum tax liability for individual for having taxable income above maximum exemption limit].
Page 52
APPLICATION LEVEL (NOVEMBER-DECEMBER 2010) QUESTION 2 (B)
OK
Here Mr. Ahmed is a director of Prime Bank Limited. So the transfers by way of gift 1,000 shares will be subject to tax deducted at source under section 53 M of the Income Tax Ordinance 1984.
According to section 53 M of 1984, SEC will collect tax at the rate of five percent on the difference between transfer value and cost of acquisition of the securities. or mutual fund units. Now the question, how SEC will determine the transfer value. According to 53 M of ITO 1984, 'transfer value' of a security or a mutual fund units shall be deemed to be the closing price of securities or mutual fund units prevailing on the day consent according by the Securities and Exchange Commission or the Stock Exchange, as the case may be, or where such securities or mutual fund units were not traded on the day such consent was accorded, the closing price of the day when such securities or mutual fund units were last traded.
If we assume that Mr. Rahim open his BO account with the option of trading in the Dhaka Stock Exchange then closing price would be the closing price of DSE. No prime bank share was traded on the day of consent accorded by DSE . So the closing price will be the closing price of 9 November i.e tk. 840 So tax would be (840-100)*5%= 37
If we assume that Mr. Rahim open his BO account with the option of trading in both the Dhaka Stock Exchange & Chittagong Stock Exchange or only in CSE then closing price would be the closing price of CSE since no prime bank shares was traded in DSE on the day of consent accorded by SEC. So the closing price will be the closing price of CSE on 8 November i.e tk. 855. So tax would be (855-100)*5%= 37.75
Page 53
May-June 2010 Application level Question 5(a) To: Mr. Rahman From: Mr. X Date: .. CC: w, y,z Subject: Advice on different issues related to tax and VAT. Dear Mr. Rahman This is in reference to your e-mail of and further discussion with you regarding the various issues related to tax and VAT. You have asked to us for our opinion regarding deduction of income tax and VAT and issuance of required certificate, challan, mushak etc. in support of such deductions and deposits. Our considered opinion are as follows: We have reviewed the invoices forwared to us and appears that the following deduction of tax and VAT would be applicable.
Invoice No. i. ii. iii. iv. Total
Date of Invoice Invoice Amount 1-Dec-10 1,000,000 3-Dec-10 150,000 5-Dec-10 100,000 14-Dec-10 200,000 1,450,000
Applicable VAT Invoice Withholding TDS under amount including VAT Tax section 40,000 1,040,000 25,000 52 22,500 150,000 7,500 53 A 4,500 104,500 10,000 52 A (3) 30,000 230,000 20,000 52 A (3) 97,000 1,524,500 62,500
Withholding VAT Service Code 40,000 S. 037 S. 033 4,500 S. 034 30,000 S. 007 74,500
Net Payment 975,000 142,500 90,000 180,000 1,387,500
The following certificates required to be issue: Mushak-11 As per general order no. 09/Mushak/2011 dated 12 October 2011, you have to withheld VAT whether your suppliers will provide Mushak-11 or not. Challan: After deduction of tax and VAT you have to deposit it to the government treasury. As per Rule-13 of the Income Tax Rules-1984, Withholding tax shall be paid to the government treasury within three weeks from the date of such deduction or collection and as per Rule-18 Kha(1) of the VAT Rules-1991, the withholding VAT shall be deposited to the government treasury within 15 working days from the date of such deduction. Certificate As per section 58 of the Income Tax Ordinance 1984, You have to issue certificates in favor of your suppliers for deduction of tax and as per Rule-18 kha(2) of VAT Rules-1991, you have to prepare certificates in the form Mushak-12 Kha triplicate. Among those, one copy shall be submitted to the concerned circle within five working days from the date of deposit, one copy shall be issued to the supplier and another one shall be documented in your premises for 6 years.
Please be noted that the rate of VAT on house rent has reduced to 9% from 10 January 2011 and you are responsible for payment of VAT in this case. Previously it was 15%. The rate of VAT in case of advertising firm is 15% from 1 July 2010. So you should request to your service provider to revise the said invoice. Please let us know if you have any further queries. yours truly Mr. X
Page 54
Application level (ques 6(b)) particulars Purchase of raw materials Direct wages Electricity (rebate 80%) Telephone (rebate 60%) dep other prod other adm selling Add: opening fin Less: Closing fin Add: margin 25% on cost less: dis@5% Add: VAT @ 15% Sales price
OK Amount 2,000,000 250,000 60,600 10,600 30,000 40,000 70,000 20,000 30,000 (20,000) 2,491,200 622,800 3,114,000 (155,700) 2,958,300 443,745 3,402,045
VAT current Account Input stage VAT paid (Bank) Balance Tk. Output stage 303300 VAT on sales 140,445 443,745 tk. 443,745
443,745
Page 55

PE-III Tax Solution Mohsin

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Prepared By: Md.

Non-resident (Non Bangladeshi) Taka

124,000 40,000 (24,000) 16,000 70,000 210,000 (25,000) 185,000

16,000 140,000 (25,000) 115,000

16,000 30,000 170,000 (25,000) 145,000

45,000 Total income 230,000

Prepared By: Md. Mohsin

1,100,000 900,000 2,000,000

Prepared By: Md. Mohsin

Net Tax payable u/s-74 Note 1 Minimum tax:

Total perquisites Allowable limit 292,000 250,000

Excess perquisites 42,000

Prepared By: Md. Mohsin

May-June 2003 Question-5

200,000 25,000 225,000 3,506,000

90,000 90,000 22500 30000 52,500 37,500

200,000 200,000 3,743,500

Prepared By: Md. Mohsin

300,000 500,000 100,000 400,000 200,000 200,000

Prepared By: Md. Mohsin

Prepared By: Md. Mohsin

300,000 60,000 25,000 105,000 150,000 180,000 150,000 6,000 6,000 -

60,000 51,500 8,500 18,000

120,000 Total Income from Salary (u/s-21): 441,500

Prepared By: Md. Mohsin

28,000 24,000 (2,000) 22,000 17,000 67,000

50,000 6,000 20,000 76,000 75,000 4,786,500

Prepared By: Md. Mohsin

Tax 30,000 60,000 60,000 901,625 1,051,625

Less: Less: Less:

5,000 600 (5,600) 648,783

Prepared By: Md. Mohsin

120,000 120,000 4,000 124,000

100,000 114,286 14,286 8,000

Prepared By: Md. Mohsin

30,000 10,000 40,000 396,514

Total 144,000 252,514 396,514

Prepared By: Md. Mohsin

Average tax rate[(93,801/899,006)*100]=

Prepared By: Md. Mohsin

2,700,000 5,000,000 1,500,000 9,200,000 8,800,000

300,000 5,000,000 8,300,000 (1,300,000)

3,000,000 10,000,000 1,500,000 17,500,000 7,500,000 11,071,178 18,571,178

3,750,000 5,000,000 13,011,422

3,750,000 5,000,000 1,500,000 27,539,511

Prepared By: Md. Mohsin

1,333,333 9,261,422 3,750,000 15,808,800

15% 37.5% 20%

200,000 3,473,033 750,000 4,972,050

Factory building @20% 7,000,000 8,750,000

Plant & Machinery @20% 15,750,000 19,687,500

Prepared By: Md. Mohsin

Prepared By: Md. Mohsin

30,000 2,339,600 3,050,986

40,000 34,986 74,986 249,700 (74,986) 2,674,290

Prepared By: Md. Mohsin

17,400 121,508 407,687 1,500 548,095 3,261,512

Income Rate 2,674,290 15.0%

407,687 37.5% 17,400 20.0% 3,138,504

152,883 3,480 572,179

3,480 (3,480) 568,699

10,811,956 10,926,425 407,687 121,508 57,902 17,400 15,000 22,357,878 111,789

Prepared By: Md. Mohsin