MQ Notes Part 1 Flashcards
(499 cards)
1
Q
What are the five heads of income under the Income Tax Ordinance, 2001?
A
Salary, Income from Property, Capital Gain, Income from Business, Income from Other Sources.
2
Q
What is the purpose of the First Schedule?
A
Contains rates of tax applicable to various incomes.
3
Q
What does Part I of the Second Schedule cover?
A
Exemptions from total income.
4
Q
What does Part II of the Second Schedule cover?
A
Reduction in tax rates.
5
Q
What does Part III of the Second Schedule cover?
A
Reduction in tax liability.
6
Q
What does Part IV of the Second Schedule cover?
A
Exemption from specific provisions.
7
Q
How is tax liability computed under the Normal Tax Regime (NTR)?
A
Tax on separate block of income + tax on other taxable income - reductions (Part III, Second Schedule) - tax credits + MTR + FTR - WHT/advance tax.
8
Q
What is the Third Schedule used for?
A
Rates for depreciation, initial allowance, and pre-commencement expenditure.
9
Q
What does the Fourth Schedule cover?
A
Rules for computing profits and gains of insurance companies.
10
Q
What is covered in Part I of the Fifth Schedule?
A
Rules for computing profits and gains from exploration and production of petroleum.
11
Q
What is covered in Part II of the Fifth Schedule?
A
Rules for computing profits and gains from exploration and extraction of mineral deposits (other than petroleum).
12
Q
What does the Sixth Schedule address?
A
Recognized provident funds, approved superannuation funds, and approved gratuity funds.
13
Q
What is the Seventh Schedule for?
A
Rules for computing profits and gains of a banking company and tax payable thereon.
14
Q
What does the Eighth Schedule cover?
A
Rules for computing capital gains on listed securities.
15
Q
What is the Ninth Schedule used for?
A
Rules for computing tax payable on profits and gains of a trader.
16
Q
What does the Tenth Schedule specify?
A
Special provisions for persons not appearing on the Active Taxpayers List (ATL).
17
Q
What is covered in the Eleventh Schedule?
A
Rules for computing profits and gains of builders and developers and tax payable thereon.
18
Q
What does the Twelfth Schedule relate to?
A
Section 148, dealing with imports.
19
Q
What is the Thirteenth Schedule about?
A
Non-profit organizations, trusts, or welfare institutions.
20
Q
What does the Fourteenth Schedule cover?
A
Rules for computing profits and gains of Small and Medium Enterprises.
21
Q
What are Income Tax Rules, 2002?
A
Regulations supplementing the Income Tax Ordinance, 2001.
22
Q
What is the role of Notifications/SROs?
A
Extend the law and are binding on taxpayers and tax authorities.
23
Q
What are Circulars issued by FBR?
A
Clarifications of law, binding on tax authorities, optional for taxpayers.
24
Q
What are Circular Letters?
A
FBR clarifications against queries, binding on tax authorities, optional for taxpayers.
25
What is included in the computation of total income?
Sum of five heads of income plus exempt income.
26
How is taxable income derived from total income?
Total income minus exempt income and deductions under Part I of the Second Schedule.
27
What is a separate block of income?
Income taxed separately, e.g., capital gains, at specific rates.
28
What tax credits can reduce NTR tax liability?
Foreign tax credit (Section 103) and group tax credit (Part X, Chapter III).
29
What is Minimum Tax Regime (MTR)?
Tax on turnover when normal tax is less than a prescribed percentage (Section 113).
30
What is Final Tax Regime (FTR)?
Tax deducted at source treated as final tax liability (e.g., Sections 5, 6, 7).
31
What is Withholding Tax (WHT)?
Tax deducted at source, adjustable against total tax liability.
32
What components are included in salary income?
Wages, salary, commission, bonus, allowances, perquisites, and employer payments.
33
How are perquisites valued under Section 13?
Per prescribed rules, often at cost or fair market value (e.g., car valuation).
34
What exemption applies to employee share schemes?
Exempt up to Rs. 1M under Clause 38, Part I, Second Schedule.
35
Scenario: Salary Rs. 2M, perquisite Rs. 500K. What’s taxable?
Rs. 2.5M, unless exemptions apply.
36
What is the tax rate for salary income?
Progressive rates in Part I, First Schedule, based on taxable income slabs.
37
What is a common salary exemption?
Pension exempt under Clause 12, Part I, Second Schedule.
38
What section governs salary taxation?
Section 12 of the Income Tax Ordinance, 2001.
39
How is tax on salary computed?
Apply First Schedule rates to taxable salary after exemptions and credits.
40
Scenario: Salary Rs. 1.2M, exempt Rs. 200K. What’s taxable?
Rs. 1M (1.2M - 200K), taxed per slab rates.
41
What is income from property?
Rent received or receivable from owned property (Section 15).
42
What deductions are allowed for property income?
Repairs, insurance, ground rent, etc., per Section 15.
43
Scenario: Rent Rs. 600K, repairs Rs. 50K. What’s taxable?
Rs. 550K (600K - 50K), assuming no other deductions.
44
What is the tax rate for property income?
Part I, First Schedule rates, unless under FTR.
45
Is vacant property income taxable?
No, only actual rent received or receivable is taxed.
46
What section governs property income?
Section 15 of the Income Tax Ordinance, 2001.
47
Scenario: Rent Rs. 1M, deductions Rs. 150K. What’s taxable?
Rs. 850K (1M - 150K), taxed per applicable rate.
48
What is depreciation under Section 22?
Deduction for wear and tear of assets used in business or property.
49
What assets qualify for depreciation?
Tangible assets like buildings, machinery, per Third Schedule.
50
What is the initial allowance?
25% deduction in the first year for new assets (Section 23).
51
Scenario: Asset cost Rs. 1M, depreciation 10%. What’s claimable?
Rs. 100K annually, per Third Schedule rates.
52
What section covers asset depreciation?
Section 22 of the Income Tax Ordinance, 2001.
53
What is a capital gain?
Profit from disposing a capital asset, sale proceeds minus cost (Section 37).
54
How is capital gain taxed?
Under separate block at First Schedule rates.
55
Scenario: Asset bought Rs. 500K, sold Rs. 700K. What’s gain?
Rs. 200K (700K - 500K), taxable per rates.
56
What exemptions apply to capital gains?
Gain on personal assets like residence, per Clause 110, Second Schedule.
57
What section governs capital gains?
Section 37 of the Income Tax Ordinance, 2001.
58
What is capital gain on securities?
Gain from disposing listed securities (Section 37A).
59
How is holding period determined?
Time from acquisition to disposal, affecting tax rates (Eighth Schedule).
60
Scenario: Security bought Rs. 1M, sold Rs. 1.3M, held 2 years. What’s gain?
Rs. 300K, taxed per Eighth Schedule rates.
61
What rates apply to securities held over 6 years?
0% tax if acquired before July 1, 2016 (Eighth Schedule).
62
What section covers securities gains?
Section 37A of the Income Tax Ordinance, 2001.
63
What is income from other sources?
Income not under other heads, e.g., dividends, interest (Section 39).
64
What deductions are allowed for other sources?
Expenses to earn that income, per Section 20.
65
Scenario: Interest Rs. 300K, fees Rs. 20K. What’s taxable?
Rs. 280K (300K - 20K), if fees are deductible.
66
Is dividend income under FTR?
Yes, under Section 5, unless opted for NTR.
67
What section governs other sources?
Section 39 of the Income Tax Ordinance, 2001.
68
What is an exemption under Section 53?
Income exempt via Second Schedule, e.g., agricultural income.
69
What is a tax concession?
Reduced rates or liability, per Parts II and III, Second Schedule.
70
What tax credit is available under Section 61?
Credit for charitable donations, up to limits.
71
Scenario: Income Rs. 5M, donation Rs. 500K. What’s credit?
Up to Rs. 500K, limited to 30% of income.
72
What section lists tax credits?
Sections 61-65 of the Income Tax Ordinance, 2001.
73
What is tax accounting under Section 32?
Method to determine taxable income, cash or accrual basis.
74
What is the default accounting method?
Accrual basis, unless specified otherwise (Section 32).
75
Scenario: Cash basis, revenue Rs. 1M received. What’s taxable?
Rs. 1M, only when received.
76
What section governs tax accounting?
Section 32 of the Income Tax Ordinance, 2001.
77
What is income from business?
Profits and gains from any business (Section 18).
78
What deductions are allowed under Section 20?
Expenses wholly and exclusively for business.
79
Scenario: Revenue Rs. 10M, expenses Rs. 4M. What’s taxable?
Rs. 6M (10M - 4M), after allowable deductions.
80
What is an inadmissible expense?
Personal expenses or penalties (Section 21).
81
What section governs business income?
Section 18 of the Income Tax Ordinance, 2001.
82
What is loss carryforward under Section 56?
Business losses carried forward up to 6 years.
83
Scenario: Loss Rs. 2M in 2023. How long can it be carried?
Until 2029, set off against future profits.
84
What losses cannot be carried forward?
Capital losses, only set off against capital gains (Section 59).
85
What section governs loss treatment?
Section 56 of the Income Tax Ordinance, 2001.
86
What is minimum tax under Section 113?
Tax on turnover if normal tax is less than 1% (First Schedule).
87
Scenario: Turnover Rs. 100M, normal tax Rs. 900K. What’s payable?
Rs. 1M (1% of 100M), if higher.
88
What is Alternative Corporate Tax (ACT)?
Tax under Section 113C when normal tax is lower.
89
Scenario: ACT Rs. 2M, normal tax Rs. 1.8M. What’s payable?
Rs. 2M, higher of ACT or normal tax.
90
What section covers minimum tax?
Section 113 of the Income Tax Ordinance, 2001.
91
What is a foreign-controlled resident company (FCRC)?
A resident company where 50% or more ownership is held by a non-resident (Section 106).
92
What is foreign debt under Section 106?
Debt owed to a foreign controller where profit is deductible and untaxed or taxed lower.
93
What is the thin capitalization rule?
Debt-to-equity ratio exceeds 3:1, excess interest disallowed (Section 106).
94
Scenario: Foreign equity Rs. 600M, debt Rs. 2,400M, interest Rs. 240M. What’s disallowed?
Max debt = 1,800M (3*600M), excess = 600M, disallowed = Rs. 60M (600/2,400*240M).
95
What is Section 106A disallowance?
Foreign profit on debt exceeding 15% of taxable income before depreciation (Section 106A).
96
Who must pay quarterly advance tax under Section 147?
Taxpayers with income taxed in the latest year, excluding FTR, salary, and no-credit income.
97
What is the deadline for September quarter advance tax for companies?
On or before 25th September.
98
How is quarterly advance tax calculated?
(Tax assessed for latest year / Turnover for latest year) × Quarterly turnover - Tax paid in quarter.
99
Scenario: Tax Rs. 1.5M, turnover Rs. 4.2M last year, Rs. 1M this quarter. What’s advance tax?
Rs. 357,143 ((1.5M / 4.2M) × 1M), minus tax paid.
100
What section governs advance tax?
Section 147 of the Income Tax Ordinance, 2001.
101
What is the course expected completion date?
One month before the exam date.
102
What is the lowest passing percentage recorded?
6% in Summer 2019.
103
What is the highest passing percentage recorded?
46% in Winter 2019.
104
Why did performance drop in Winter 2020?
Answers lacked completeness and conceptual knowledge.
105
What was challenging in Summer 2021?
Question 7 on Federal Excise Act.
106
What are the five heads of income listed on page 11?
Salary, Property, Capital Gain, Business, Other Sources.
107
What reduces taxable income per page 12?
Exempt income and deductible allowances.
108
What is the tax liability formula on page 12?
Tax on separate block + other taxable income - reductions - credits + MTR + FTR - WHT/advance tax.
109
What is a key tip for using bare acts?
Know section and schedule locations for quick reference.
110
What is the syllabus weightage for sales tax laws?
30-45%.
111
What is included in professional values in the syllabus?
Fair tax legislation, ethics, tax evasion, and avoidance.
112
What is the purpose of the Income Tax Ordinance, 2001?
Primary legislation for income tax in Pakistan.
113
What is a binding clarification for taxpayers?
Notifications/SROs, unlike circulars.
114
What is the role of the Eighth Schedule?
Specific rules for capital gains on listed securities.
115
What is the tax regime for builders under Section 147?
Advance tax on a project-by-project basis (Part IIB, First Schedule).
116
What is income from property per Section 15?
Rent from property ownership, excluding vacant properties.
117
What is a perquisite example?
Company car provided to an employee.
118
How is salary taxed if paid in arrears?
Taxed in the year received, per Section 12.
119
Scenario: Bonus Rs. 300K received in 2024 for 2023. When taxed?
Taxed in 2024, year of receipt.
120
What is the exemption limit for retrenchment payments?
Exempt up to Rs. 500K (Clause 13, Second Schedule).
121
What is income from property deduction limit?
Repairs allowance up to 1/5th of rent (Section 15).
122
Scenario: Rent Rs. 1M, repairs Rs. 250K. What’s deductible?
Rs. 200K (1/5th of 1M), excess disallowed.
123
What assets are depreciable under Section 22?
Assets used in business or income-producing activity.
124
What is the depreciation rate for buildings?
5% per Third Schedule.
125
Scenario: Building cost Rs. 10M, used 2 years. What’s depreciation?
Rs. 1M (10M × 5% × 2 years).
126
What is the holding period for securities tax exemption?
Over 6 years, 0% tax if acquired pre-July 2016.
127
Scenario: Security held 5 years, gain Rs. 500K. What’s tax?
Taxable per Eighth Schedule rates for 5-year hold.
128
What is dividend income taxed under?
Section 5 as FTR, unless NTR opted.
129
Scenario: Dividend Rs. 200K, FTR rate 15%. What’s tax?
Rs. 30K (200K × 15%), final tax.
130
What is a common exemption under Section 53?
Agricultural income (Clause 1, Second Schedule).
131
What is the tax credit limit for donations?
30% of taxable income (Section 61).
132
Scenario: Income Rs. 10M, donation Rs. 4M. What’s credit?
Rs. 3M (30% of 10M), maximum allowed.
133
What is the cash basis of accounting?
Income and expenses recorded when cash changes hands.
134
Scenario: Accrual revenue Rs. 2M, received Rs. 1M. What’s taxable on cash basis?
Rs. 1M, only cash received.
135
What is an allowable business deduction?
Rent paid for business premises (Section 20).
136
Scenario: Business income Rs. 5M, rent Rs. 1M. What’s taxable?
Rs. 4M (5M - 1M), after deduction.
137
What is a loss set-off rule?
Business loss set off against any income except salary (Section 56).
138
Scenario: Business loss Rs. 1M, salary Rs. 2M. What’s offset?
Rs. 0, salary not available for set-off.
139
What is the minimum tax rate for companies?
1% of turnover (Section 113).
140
Scenario: Turnover Rs. 50M, normal tax Rs. 400K. What’s minimum tax?
Rs. 500K (1% of 50M), higher amount.
141
What is foreign equity per Section 106?
Paid-up capital and reserves attributable to foreign controller.
142
Scenario: FCRC equity Rs. 400M, debt Rs. 1,500M, interest Rs. 150M. What’s disallowed?
Max debt = 1,200M (3*400M), excess = 300M, disallowed = Rs. 30M (300/1,500*150M).
143
What is the threshold for Section 106A exemption?
Foreign profit on debt less than Rs. 10M.
144
Scenario: Advance tax Rs. 3M paid, tax liability Rs. 2.5M. What’s refund?
Rs. 500K, excess refundable.
145
What is the individual exemption threshold for advance tax?
Latest taxable income below Rs. 1M (Section 147).
146
What is the deadline for June quarter advance tax for individuals?
On or before 15th June.
147
Scenario: Tax Rs. 2M, turnover Rs. 10M last year, Rs. 3M this quarter. What’s advance tax?
Rs. 600K ((2M / 10M) × 3M), minus tax paid.
148
What is the purpose of examiner comments?
Highlight common mistakes and focus areas for improvement.
149
What was a key issue in Summer 2019?
First open-book exam, students underestimated preparation.
150
What is the tax rate slab for salary Rs. 1.5M?
Per Part I, First Schedule, e.g., 7.5% on excess over Rs. 1.2M.
151
Scenario: Salary Rs. 1.5M, exempt Rs. 300K. What’s tax?
Tax on Rs. 1.2M per First Schedule slabs.
152
What is the rental income tax regime option?
NTR or FTR, depending on taxpayer election.
153
Scenario: Rent Rs. 800K, deductions Rs. 100K. What’s taxable under NTR?
Rs. 700K (800K - 100K), taxed per slabs.
154
What is the initial allowance rate for machinery?
25% in first year (Section 23).
155
Scenario: Machinery Rs. 2M, used 1 year. What’s allowance?
Rs. 500K (25% of 2M), plus annual depreciation.
156
What is the tax rate for capital gains held 1 year?
15% per First Schedule.
157
Scenario: Gain Rs. 1M, held 1 year. What’s tax?
Rs. 150K (1M × 15%), separate block.
158
What is the securities gain rate for 3-year hold?
10% if acquired post-July 2016 (Eighth Schedule).
159
Scenario: Security gain Rs. 400K, 3 years. What’s tax?
Rs. 40K (400K × 10%), per Eighth Schedule.
160
What is interest income under Section 39?
Interest from bank deposits or loans.
161
Scenario: Interest Rs. 500K, expense Rs. 50K. What’s taxable?
Rs. 450K (500K - 50K), under NTR.
162
What is a common tax concession?
Reduced rate for small companies (Clause 19, Second Schedule).
163
Scenario: Income Rs. 3M, concession reduces rate 5%. What’s saving?
Rs. 150K (3M × 5%), tax reduced.
164
What is the accrual basis requirement?
Record income when earned, expenses when incurred.
165
Scenario: Accrual expense Rs. 200K, unpaid. What’s deductible?
Rs. 200K, accrued amount deductible.
166
What is a business deduction limit?
Must be wholly and exclusively for business (Section 20).
167
Scenario: Mixed expense Rs. 300K, 50% business. What’s deductible?
Rs. 150K (50% of 300K), business portion.
168
What is the loss carryforward limit?
6 years for business losses (Section 56).
169
Scenario: Loss Rs. 5M in 2022. When expires?
2028, if not offset earlier.
170
What is the ACT rate under Section 113C?
17% of accounting income, if higher than normal tax.
171
Scenario: Accounting income Rs. 10M, normal tax Rs. 1.5M. What’s ACT?
Rs. 1.7M (10M × 17%), if higher.
172
What is foreign profit on debt per Section 106A?
Interest paid to non-residents, including imputed interest.
173
Scenario: FCRC profit Rs. 20M, income Rs. 50M. What’s disallowed?
Rs. 10.5M (20M - (50M + 20M) × 15%).
174
What is the advance tax credit rule?
Credited against tax due, excess refundable (Section 147).
175
Scenario: Tax Rs. 4M, advance Rs. 4.5M. What’s refund?
Rs. 500K, excess credited or refunded.
176
What is the passing percentage in Summer 2023?
27%, improved from prior sessions.
177
What was a challenge in Winter 2020 Q.2?
70% of examinees scored below 30%.
178
What does Part III of the First Schedule cover?
Rates for dividends and other FTR incomes.
179
What is a deductible allowance example?
Zakat paid, per Section 60.
180
Scenario: Salary Rs. 2M, zakat Rs. 50K. What’s taxable?
Rs. 1.95M (2M - 50K), after deduction.
181
What is the property income FTR rate?
10% of gross rent, if opted (Section 15A).
182
Scenario: Rent Rs. 1M, FTR opted. What’s tax?
Rs. 100K (1M × 10%), final tax.
183
What is the depreciation rate for machinery?
15% per Third Schedule.
184
Scenario: Machine Rs. 5M, 3 years. What’s depreciation?
Rs. 2.25M (5M × 15% × 3), cumulative.
185
What is the capital gain exemption for immovable property?
Exempt if held over 4 years (Clause 110A, Second Schedule).
186
Scenario: Property gain Rs. 2M, held 5 years. What’s tax?
Rs. 0, exempt per Clause 110A.
187
What is the securities gain rate for 1-year hold?
15% per Eighth Schedule.
188
Scenario: Security gain Rs. 600K, 1 year. What’s tax?
Rs. 90K (600K × 15%), taxable.
189
What is the tax rate for dividends under FTR?
15% per Section 5.
190
Scenario: Dividend Rs. 1M, FTR. What’s tax?
Rs. 150K (1M × 15%), final tax.
191
What is the tax credit for foreign tax?
Limited to Pakistan tax on foreign income (Section 103).
192
Scenario: Foreign tax Rs. 200K, Pakistan tax Rs. 150K. What’s credit?
Rs. 150K, capped at Pakistan tax.
193
What is the cash basis limitation?
No accruals, only cash transactions recorded.
194
Scenario: Cash sale Rs. 1M, due Rs. 500K. What’s taxable?
Rs. 1M, only cash received.
195
What is a business expense disallowance?
Capital expenditure, per Section 21.
196
Scenario: Equipment Rs. 1M, operating Rs. 500K. What’s deductible?
Rs. 500K, operating only.
197
What is the loss set-off priority?
Against business income first, then others (Section 56).
198
Scenario: Loss Rs. 1M, business income Rs. 800K. What’s offset?
Rs. 800K, fully offset.
199
What is the minimum tax exemption?
Exempt for certain non-profits (Clause 11A, Second Schedule).
200
Scenario: Turnover Rs. 20M, non-profit. What’s minimum tax?
Rs. 0, exempt per Clause 11A.
201
What is the debt-to-equity ratio limit?
3:1 under Section 106.
202
Scenario: Equity Rs. 1M, debt Rs. 4M, interest Rs. 400K. What’s disallowed?
Excess debt = 1M, disallowed = Rs. 100K (1/4*400K).
203
What is the advance tax deadline for March quarter (AOP)?
On or before 25th March.
204
Scenario: Tax Rs. 3M, turnover Rs. 15M last year, Rs. 4M this quarter. What’s advance tax?
Rs. 800K ((3M / 15M) × 4M), minus tax paid.
205
What improved in Summer 2021?
Passing ratio rose to 21% from 10%.
206
What is the syllabus weightage for ethics?
5-10%, covering tax evasion and avoidance.
207
What is the purpose of the Tenth Schedule?
Penal provisions for non-ATL taxpayers.
208
What is a salary component under Section 12?
Gratuity, unless exempt.
209
Scenario: Salary Rs. 1M, gratuity Rs. 200K exempt. What’s taxable?
Rs. 1M, gratuity exempt.
210
What is the property income deduction for insurance?
Actual cost, no limit (Section 15).
211
Scenario: Rent Rs. 2M, insurance Rs. 100K. What’s taxable?
Rs. 1.9M (2M - 100K), fully deductible.
212
What is the initial allowance eligibility?
New assets brought into use (Section 23).
213
Scenario: Used asset Rs. 1M. What’s initial allowance?
Rs. 0, only new assets qualify.
214
What is the capital gain tax rate for 2-year hold?
12.5% per First Schedule.
215
Scenario: Gain Rs. 800K, 2 years. What’s tax?
Rs. 100K (800K × 12.5%), taxable.
216
What is the securities gain rate for 4-year hold?
7.5% per Eighth Schedule.
217
Scenario: Gain Rs. 1M, 4 years. What’s tax?
Rs. 75K (1M × 7.5%), taxable.
218
What is the tax treatment of royalty income?
Under other sources, NTR unless FTR (Section 39).
219
Scenario: Royalty Rs. 500K, expense Rs. 50K. What’s taxable?
Rs. 450K (500K - 50K), under NTR.
220
What is a tax concession example?
Reduced rate for exporters (Clause 18, Second Schedule).
221
Scenario: Income Rs. 5M, concession 10%. What’s saving?
Rs. 500K (5M × 10%), tax reduced.
222
What is the accounting method change rule?
Requires Commissioner’s approval (Section 32).
223
Scenario: Switch to cash basis, income Rs. 2M. What’s process?
File request with Commissioner.
224
What is a business deduction for bad debts?
Allowed if previously offered to tax (Section 29).
225
Scenario: Bad debt Rs. 300K, taxed earlier. What’s deductible?
Rs. 300K, fully allowed.
226
What is the loss carryforward restriction?
No carryforward for speculative business (Section 58).
227
Scenario: Speculative loss Rs. 1M. What’s carryforward?
Rs. 0, not allowed.
228
What is the ACT exemption?
Not applicable to certain exempt incomes (Section 113C).
229
Scenario: Exempt income Rs. 2M, ACT Rs. 300K. What’s payable?
Rs. 0, exempt income excluded.
230
What is included in foreign profit on debt?
Imputed interest on convertible bonds (Section 106A).
231
Scenario: Profit Rs. 15M, income Rs. 80M. What’s disallowed?
Rs. 1.5M (15M - (80M + 15M) × 15%).
232
What is the advance tax estimation deadline?
Before last installment for optional estimation (Section 147).
233
Scenario: Tax Rs. 2M, estimate Rs. 1.5M, 3rd quarter. What’s next?
Pay Rs. 1.5M in remaining installments.
234
What was a Winter 2022 examiner tip?
Consider all taxation options in scenarios.
235
What is the Eleventh Schedule purpose?
Tax rules for builders and developers.
236
What is the tax rate for salary Rs. 600K?
0% up to Rs. 600K, per First Schedule.
237
Scenario: Salary Rs. 800K, exempt Rs. 100K. What’s tax?
Tax on Rs. 700K, per slab rates.
238
What is the property income tax rate under NTR?
Progressive slabs per First Schedule.
239
Scenario: Rent Rs. 1.2M, deductions Rs. 200K. What’s tax?
Tax on Rs. 1M, per slabs.
240
What is the depreciation rate for vehicles?
15% per Third Schedule.
241
Scenario: Vehicle Rs. 3M, 2 years. What’s depreciation?
Rs. 900K (3M × 15% × 2), cumulative.
242
What is the capital gain exemption limit?
Personal effects exempt (Clause 112, Second Schedule).
243
Scenario: Jewelry gain Rs. 500K, personal. What’s tax?
Rs. 0, exempt per Clause 112.
244
What is the securities gain rate for 2-year hold?
12.5% per Eighth Schedule.
245
Scenario: Gain Rs. 700K, 2 years. What’s tax?
Rs. 87.5K (700K × 12.5%), taxable.
246
What is the tax rate for interest under NTR?
Progressive slabs per First Schedule.
247
Scenario: Interest Rs. 1M, expense Rs. 100K. What’s tax?
Tax on Rs. 900K, per slabs.
248
What is the tax credit for investment?
Credit under Section 65B for new machinery.
249
Scenario: Investment Rs. 10M, tax Rs. 2M. What’s credit?
10% of tax, Rs. 200K, per Section 65B.
250
What is the default accounting basis for companies?
Accrual basis (Section 32).
251
Scenario: Company revenue Rs. 5M, received Rs. 4M. What’s taxable?
Rs. 5M, accrued amount.
252
What is a business deduction for salaries?
Employee salaries, fully deductible (Section 20).
253
Scenario: Salaries Rs. 2M, revenue Rs. 10M. What’s taxable?
Rs. 8M (10M - 2M), after deduction.
254
What is the loss set-off limit for capital gains?
Only against capital gains (Section 59).
255
Scenario: Capital loss Rs. 1M, business income Rs. 2M. What’s offset?
Rs. 0, no set-off against business.
256
What is the minimum tax rate for individuals?
0.5% of turnover (Section 113).
257
Scenario: Turnover Rs. 10M, tax Rs. 40K. What’s minimum?
Rs. 50K (0.5% of 10M), higher amount.
258
What is the Section 106A effective date?
July 1, 2020, including prior debts.
259
Scenario: Debt pre-2020, profit Rs. 12M, income Rs. 60M. What’s disallowed?
Rs. 1.5M (12M - (60M + 12M) × 15%).
260
What is the advance tax deadline for December quarter (company)?
On or before 25th December.
261
Scenario: Tax Rs. 5M, turnover Rs. 20M last year, Rs. 6M this quarter. What’s advance tax?
Rs. 1.5M ((5M / 20M) × 6M), minus tax paid.
262
What was a Summer 2022 examiner critique?
Wasted time on excluded calculations.
263
What is the Twelfth Schedule focus?
Imports taxation under Section 148.
264
What is a salary exemption for medical?
Medical allowance up to 10% of salary (Clause 139, Second Schedule).
265
Scenario: Salary Rs. 1M, medical Rs. 120K. What’s exempt?
Rs. 100K (10% of 1M), excess taxable.
266
What is the property income deduction for tax paid?
Property tax paid, fully deductible (Section 15).
267
Scenario: Rent Rs. 1.5M, tax Rs. 50K. What’s taxable?
Rs. 1.45M (1.5M - 50K), after deduction.
268
What is the depreciation cap for assets?
Cost or fair value, whichever is lower (Section 22).
269
Scenario: Asset Rs. 2M cost, FMV Rs. 1.8M. What’s base?
Rs. 1.8M, lower FMV used.
270
What is the capital gain tax rate for 3-year hold?
10% per First Schedule.
271
Scenario: Gain Rs. 1.2M, 3 years. What’s tax?
Rs. 120K (1.2M × 10%), taxable.
272
What is the securities gain rate for 5-year hold?
5% per Eighth Schedule.
273
Scenario: Gain Rs. 900K, 5 years. What’s tax?
Rs. 45K (900K × 5%), taxable.
274
What is the tax rate for royalty under FTR?
15% per Section 6.
275
Scenario: Royalty Rs. 800K, FTR. What’s tax?
Rs. 120K (800K × 15%), final tax.
276
What is the tax credit limit for foreign income?
Actual foreign tax or Pakistan tax, whichever is lower (Section 103).
277
Scenario: Foreign income Rs. 2M, tax Rs. 400K, Pakistan tax Rs. 300K. What’s credit?
Rs. 300K, capped at Pakistan tax.
278
What is the business deduction for rent?
Lease rent for business premises (Section 20).
279
Scenario: Rent Rs. 500K, income Rs. 3M. What’s taxable?
Rs. 2.5M (3M - 500K), after deduction.
280
What is the loss carryforward for trading?
6 years, non-speculative only (Section 57).
281
Scenario: Trading loss Rs. 2M, 2023. When expires?
2029, if not offset.
282
What is the minimum tax rate for AOPs?
0.75% of turnover (Section 113).
283
Scenario: Turnover Rs. 30M, tax Rs. 200K. What’s minimum?
Rs. 225K (0.75% of 30M), higher amount.
284
What is the Section 106 debt definition?
Includes debt with untaxed profit to foreign controller.
285
Scenario: Debt Rs. 3M, equity Rs. 800K, interest Rs. 300K. What’s disallowed?
Max debt = 2.4M (3*800K), excess = 600K, disallowed = Rs. 60K (600/3,000*300K).
286
What is the advance tax threshold for companies?
No exemption, always liable (Section 147).
287
Scenario: No prior tax, turnover Rs. 5M, estimate Rs. 1M. What’s advance tax?
Rs. 1M, based on estimate.
288
What was a Winter 2021 observation?
Unattempted easy questions due to poor syllabus coverage.
289
What is the Thirteenth Schedule purpose?
Tax rules for non-profits and trusts.
290
What is a salary exemption for housing?
Rent-free accommodation, value capped (Clause 53, Second Schedule).
291
Scenario: Salary Rs. 2M, accommodation Rs. 400K. What’s taxable?
Rs. 2M, accommodation value added if not exempt.
292
What is the property income deduction for interest?
Interest on property loan, deductible (Section 15).
293
Scenario: Rent Rs. 2M, interest Rs. 300K. What’s taxable?
Rs. 1.7M (2M - 300K), after deduction.
294
What is the depreciation rate for computers?
30% per Third Schedule.
295
Scenario: Computer Rs. 1M, 2 years. What’s depreciation?
Rs. 600K (1M × 30% × 2), cumulative.
296
What is the capital gain tax rate for 4-year hold?
7.5% per First Schedule.
297
Scenario: Gain Rs. 1.5M, 4 years. What’s tax?
Rs. 112.5K (1.5M × 7.5%), taxable.
298
What is the securities gain rate for 6-year hold?
0% if pre-July 2016, else 5% (Eighth Schedule).
299
Scenario: Gain Rs. 1M, 6 years, pre-2016. What’s tax?
Rs. 0, exempt per Eighth Schedule.
300
What is the tax rate for dividends under NTR?
Progressive slabs per First Schedule.
301
Scenario: Dividend Rs. 1M, NTR. What’s tax?
Tax on Rs. 1M, per slabs.
302
What is the tax credit for electricity investment?
Credit under Section 65E, 10% of tax.
303
Scenario: Investment Rs. 20M, tax Rs. 3M. What’s credit?
Rs. 300K (10% of 3M), per Section 65E.
304
What is the business deduction for utilities?
Electricity and water for business use (Section 20).
305
Scenario: Utilities Rs. 200K, income Rs. 4M. What’s taxable?
Rs. 3.8M (4M - 200K), after deduction.
306
What is the loss carryforward for agriculture?
Unlimited, per Section 57.
307
Scenario: Agri loss Rs. 3M, 2023. When expires?
No expiry, carried indefinitely.
308
What is the minimum tax rate for traders?
0.5% per Ninth Schedule.
309
Scenario: Turnover Rs. 15M, tax Rs. 60K. What’s minimum?
Rs. 75K (0.5% of 15M), higher amount.
310
What is the Section 106A carryforward rule?
Disallowed profit carried forward 3 years.
311
Scenario: Disallowed Rs. 5M, 2023. When expires?
2026, if not claimed.
312
What is the advance tax deadline for March quarter (individual)?
On or before 15th March.
313
Scenario: Tax Rs. 1M, turnover Rs. 5M last year, Rs. 2M this quarter. What’s advance tax?
Rs. 400K ((1M / 5M) × 2M), minus tax paid.
314
What was a Summer 2019 tip?
Open-book exams require technical preparation.
315
What is the Fourteenth Schedule focus?
Tax rules for SMEs.
316
What is a salary exemption for education?
Education allowance for children (Clause 54, Second Schedule).
317
Scenario: Salary Rs. 1.5M, education Rs. 150K. What’s exempt?
Rs. 150K, if within limits.
318
What is the property income deduction for maintenance?
Actual maintenance costs (Section 15).
319
Scenario: Rent Rs. 1M, maintenance Rs. 80K. What’s taxable?
Rs. 920K (1M - 80K), after deduction.
320
What is the depreciation rate for furniture?
15% per Third Schedule.
321
Scenario: Furniture Rs. 500K, 3 years. What’s depreciation?
Rs. 225K (500K × 15% × 3), cumulative.
322
What is the capital gain tax rate for 5-year hold?
5% per First Schedule.
323
Scenario: Gain Rs. 2M, 5 years. What’s tax?
Rs. 100K (2M × 5%), taxable.
324
What is the securities gain rate for 3-year hold (post-2016)?
10% per Eighth Schedule.
325
Scenario: Gain Rs. 800K, 3 years, post-2016. What’s tax?
Rs. 80K (800K × 10%), taxable.
326
What is the tax rate for interest under FTR?
10% per Section 7.
327
Scenario: Interest Rs. 600K, FTR. What’s tax?
Rs. 60K (600K × 10%), final tax.
328
What is the tax credit for employment generation?
Credit under Section 64B, based on new jobs.
329
Scenario: New jobs 50, tax Rs. 5M. What’s credit?
Per Section 64B formula, e.g., Rs. 500K.
330
What is the business deduction for advertising?
Marketing costs, fully deductible (Section 20).
331
Scenario: Ads Rs. 300K, income Rs. 6M. What’s taxable?
Rs. 5.7M (6M - 300K), after deduction.
332
What is the loss set-off for other sources?
Against any income except salary (Section 56).
333
Scenario: Other loss Rs. 1M, salary Rs. 2M. What’s offset?
Rs. 0, salary excluded.
334
What is the minimum tax rate for services?
2% per Section 113.
335
Scenario: Turnover Rs. 25M, tax Rs. 400K. What’s minimum?
Rs. 500K (2% of 25M), higher amount.
336
What is the Section 106A profit definition?
Includes finance lease costs.
337
Scenario: Lease cost Rs. 10M, income Rs. 50M. What’s disallowed?
Rs. 2.5M (10M - (50M + 10M) × 15%).
338
What is the advance tax deadline for June quarter (company)?
On or before 15th June.
339
Scenario: Tax Rs. 4M, turnover Rs. 20M last year, Rs. 5M this quarter. What’s advance tax?
Rs. 1M ((4M / 20M) × 5M), minus tax paid.
340
What was a Winter 2019 success factor?
Familiarity with open-book question patterns.
341
Scenario: FCRC, equity Rs. 400M, debt Rs. 2,400M, interest Rs. 240M (Q1, Summer 2003). What’s disallowed?
Foreign equity = 700M (400M + 100M profits + 100M premium + 100M surplus), max debt = 2,100M (3*700M), excess = 300M, disallowed = Rs. 30M (300/2,400*240M).
342
Scenario: ABC Ltd, debt to associates Rs. 53M, equity Rs. 12M (Q2, Winter 2004). What’s disallowed interest?
Foreign equity = 12M (75% of 16M total equity), max debt = 36M (3*12M), excess = 17M, interest Rs. 5.3M (10% of 53M), disallowed = Rs. 1.7M (17/53*5.3M).
343
Scenario: Joy Ltd, 2019 debt Rs. 1,550M, equity Rs. 1,000M (Q3, Summer 2009). What’s disallowed?
Max debt = 3,000M (3*1,000M), no excess, interest Rs. 155M (10% of 1,550M), disallowed = Rs. 0.
344
Scenario: Rainbow Ltd, debt Rs. 765M, equity Rs. 230M (Q4, Winter 2010). What’s disallowed?
Max debt = 690M (3*230M), excess = 75M, interest Rs. 73.2M, disallowed = Rs. 7.15M (75/765*73.2M).
345
Scenario: Desi Ltd, debt Rs. 483M, equity Rs. 630M (Q5, Winter 2015). What’s disallowed?
Max debt = 1,890M (3*630M), no excess, interest Rs. 42.3M, disallowed = Rs. 0.
346
Scenario: Compost Ltd, debt Rs. 1,285M, equity Rs. 303M (Q6, Summer 2021). What’s disallowed under 106?
Max debt = 909M (3*303M), excess = 376M, interest Rs. 89.85M, disallowed = Rs. 26.3M (376/1,285*89.85M).
347
Scenario: Sweet Ltd, advance tax Rs. 20.5M, liability Rs. 32.5M (Q1, Winter 2014). What’s additional tax?
Shortfall = 9.5M (32.5M - 23M WHT/advance), default surcharge applies if <90% of 32.5M.
348
Scenario: Massive Ltd, advance tax Rs. 3.2M, income Rs. 20M (Q2, Winter 2018). What’s tax payable?
Tax Rs. 5.8M (29% of 20M), credit Rs. 3.2M, payable Rs. 2.6M, plus surcharge for late filing.
349
Scenario: Khalid Ltd, loss Rs. 250M, minimum tax Rs. 1.2M (Q3). Is advance tax required?
Yes, based on Rs. 1.2M minimum tax, despite budgeted loss.
350
Scenario: ABC Ltd, tax Rs. 1.5M, turnover Rs. 5M, Q1 Rs. 1M (Q4). What’s advance tax?
Rs. 295K ((1.5M / 5M) × 1M - 5K tax paid), Q1 advance tax.
351
Scenario: XYZ Ltd, tax Rs. 170M, turnover Rs. 3,000M, Q1 Rs. 800M (Q5). What’s advance tax?
Rs. 20.33M ((170M / 3,000M) × 800M - 25M), Q1 advance tax.
352
Scenario: ABC Ltd, tax Rs. 180K, turnover Rs. 4.2M, Q1 Rs. 1M (Q6). What’s advance tax with estimate?
Q1 Rs. 42.86K ((180K / 4.2M) × 1M), adjusted to Rs. 300K estimate later.
353
What is the examiner’s focus in comment-based questions?
Comprehensive analysis of all scenario aspects.
354
What is the purpose of tree diagrams in CFAP 5?
Link concepts and sections for better understanding.
355
What is the tax treatment of recoupment per Winter 2023?
Depends on the tax regime of original taxation.
356
What is a key navigation tip for bare acts?
Locate exemptions in Part I, Second Schedule quickly.
357
What is the syllabus coverage expectation?
Entire syllabus, no selective study.
358
What is the tax rate for salary Rs. 2M?
Per First Schedule, e.g., 15% on excess over Rs. 1.2M.
359
Scenario: Salary Rs. 2M, perquisite Rs. 300K exempt. What’s tax?
Tax on Rs. 2M, per slabs.
360
What is the property income FTR threshold?
Opt-in for 10% gross rent tax (Section 15A).
361
Scenario: Rent Rs. 2M, FTR opted. What’s tax?
Rs. 200K (2M × 10%), final tax.
362
What is the depreciation rate for plant?
10% per Third Schedule.
363
Scenario: Plant Rs. 10M, 4 years. What’s depreciation?
Rs. 4M (10M × 10% × 4), cumulative.
364
What is the capital gain tax rate for 6-year hold?
0% if personal residence (Clause 110, Second Schedule).
365
Scenario: Residence gain Rs. 3M, 6 years. What’s tax?
Rs. 0, exempt per Clause 110.
366
What is the securities gain rate for 1-year hold (post-2016)?
15% per Eighth Schedule.
367
Scenario: Gain Rs. 500K, 1 year, post-2016. What’s tax?
Rs. 75K (500K × 15%), taxable.
368
What is the tax rate for royalty under NTR?
Progressive slabs per First Schedule.
369
Scenario: Royalty Rs. 1.5M, NTR. What’s tax?
Tax on Rs. 1.5M, per slabs.
370
What is the tax credit for R&D?
Credit under Section 65F for research expenditure.
371
Scenario: R&D Rs. 5M, tax Rs. 1M. What’s credit?
Per Section 65F, e.g., Rs. 100K.
372
What is the business deduction for training?
Employee training costs (Section 20).
373
Scenario: Training Rs. 100K, income Rs. 3M. What’s taxable?
Rs. 2.9M (3M - 100K), after deduction.
374
What is the loss carryforward for manufacturing?
6 years, set off against any income (Section 57).
375
Scenario: Mfg loss Rs. 4M, 2023. When expires?
2029, if not offset.
376
What is the minimum tax rate for exporters?
1% per Section 113.
377
Scenario: Turnover Rs. 40M, tax Rs. 300K. What’s minimum?
Rs. 400K (1% of 40M), higher amount.
378
What is the Section 106A disallowance cap?
Higher of Section 106 or 106A disallowance.
379
Scenario: 106 Rs. 5M, 106A Rs. 6M. What’s disallowed?
Rs. 6M, higher amount applies.
380
What is the advance tax estimation requirement?
Evidence of turnover and expenses (Section 147).
381
Scenario: Estimate Rs. 2M, tax Rs. 3M, evidence lacking. What’s payable?
Rs. 3M, estimate rejected.
382
What was a Summer 2023 observation?
Limited discussion of provisions in answers.
383
What is the First Schedule Part I purpose?
Tax rates for individuals and AOPs.
384
What is a salary exemption for transport?
Conveyance allowance, capped (Clause 55, Second Schedule).
385
Scenario: Salary Rs. 1M, conveyance Rs. 80K. What’s exempt?
Rs. 80K, if within limits.
386
What is the property income deduction for legal fees?
Legal costs for rent collection (Section 15).
387
Scenario: Rent Rs. 1M, legal Rs. 50K. What’s taxable?
Rs. 950K (1M - 50K), after deduction.
388
What is the depreciation rate for tools?
15% per Third Schedule.
389
Scenario: Tools Rs. 200K, 2 years. What’s depreciation?
Rs. 60K (200K × 15% × 2), cumulative.
390
What is the capital gain tax rate for 7-year hold?
0% if exempt, else 5% (First Schedule).
391
Scenario: Gain Rs. 1M, 7 years, non-exempt. What’s tax?
Rs. 50K (1M × 5%), taxable.
392
What is the securities gain rate for 2-year hold (pre-2016)?
12.5% per Eighth Schedule.
393
Scenario: Gain Rs. 600K, 2 years, pre-2016. What’s tax?
Rs. 75K (600K × 12.5%), taxable.
394
What is the tax rate for interest under NTR (company)?
29% flat rate (First Schedule).
395
Scenario: Interest Rs. 2M, company NTR. What’s tax?
Rs. 580K (2M × 29%), taxable.
396
What is the tax credit for exports?
Credit under Section 65C, 10% of tax.
397
Scenario: Export Rs. 10M, tax Rs. 2M. What’s credit?
Rs. 200K (10% of 2M), per Section 65C.
398
What is the business deduction for insurance?
Business asset insurance (Section 20).
399
Scenario: Insurance Rs. 150K, income Rs. 5M. What’s taxable?
Rs. 4.85M (5M - 150K), after deduction.
400
What is the loss set-off for property income?
Against any income except salary (Section 56).
401
Scenario: Property loss Rs. 500K, business Rs. 1M. What’s offset?
Rs. 500K, fully offset.
402
What is the minimum tax rate for retailers?
0.5% per Ninth Schedule.
403
Scenario: Turnover Rs. 20M, tax Rs. 80K. What’s minimum?
Rs. 100K (0.5% of 20M), higher amount.
404
What is the Section 106A profit inclusion?
Guarantee fees for financing (Section 106A).
405
Scenario: Fees Rs. 8M, income Rs. 40M. What’s disallowed?
Rs. 2M (8M - (40M + 8M) × 15%).
406
What is the advance tax default surcharge rate?
KIBOR + 3% per annum (Section 205).
407
Scenario: Shortfall Rs. 1M, 6 months, KIBOR 5%. What’s surcharge?
Rs. 40K (1M × (5% + 3%) × 6/12), approximate.
408
What was a Winter 2020 critique?
Poor conceptual knowledge in answers.
409
What is the Second Schedule Part II purpose?
Rate reductions for specific incomes.
410
What is a salary exemption for loans?
Interest-free loan up to Rs. 1M (Clause 56, Second Schedule).
411
Scenario: Salary Rs. 2M, loan Rs. 800K interest-free. What’s taxable?
Rs. 2M, loan exempt.
412
What is the property income deduction for depreciation?
Not allowed, only repairs (Section 15).
413
Scenario: Rent Rs. 1M, depreciation Rs. 100K. What’s taxable?
Rs. 1M, depreciation disallowed.
414
What is the depreciation rate for buildings (commercial)?
5% per Third Schedule.
415
Scenario: Building Rs. 20M, 3 years. What’s depreciation?
Rs. 3M (20M × 5% × 3), cumulative.
416
What is the capital gain tax rate for 8-year hold?
0% if exempt, else 5% (First Schedule).
417
Scenario: Gain Rs. 1.5M, 8 years, non-exempt. What’s tax?
Rs. 75K (1.5M × 5%), taxable.
418
What is the securities gain rate for 4-year hold (pre-2016)?
7.5% per Eighth Schedule.
419
Scenario: Gain Rs. 1M, 4 years, pre-2016. What’s tax?
Rs. 75K (1M × 7.5%), taxable.
420
What is the tax rate for royalty under FTR (company)?
15% per Section 6.
421
Scenario: Royalty Rs. 2M, FTR, company. What’s tax?
Rs. 300K (2M × 15%), final tax.
422
What is the tax credit for SME investment?
Credit under Section 65D, 10% of tax.
423
Scenario: SME Rs. 15M, tax Rs. 3M. What’s credit?
Rs. 300K (10% of 3M), per Section 65D.
424
What is the business deduction for repairs?
Asset repairs, fully deductible (Section 20).
425
Scenario: Repairs Rs. 200K, income Rs. 4M. What’s taxable?
Rs. 3.8M (4M - 200K), after deduction.
426
What is the loss carryforward for services?
6 years, set off against any income (Section 57).
427
Scenario: Service loss Rs. 2M, 2023. When expires?
2029, if not offset.
428
What is the minimum tax rate for manufacturers?
1% per Section 113.
429
Scenario: Turnover Rs. 50M, tax Rs. 450K. What’s minimum?
Rs. 500K (1% of 50M), higher amount.
430
What is the Section 106A profit exclusion?
Less than Rs. 10M total profit exempt.
431
Scenario: Profit Rs. 9M, income Rs. 50M. What’s disallowed?
Rs. 0, below Rs. 10M threshold.
432
What is the advance tax refund process?
Excess credited or refunded post-assessment (Section 147).
433
Scenario: Advance Rs. 6M, tax Rs. 5M. What’s refund?
Rs. 1M, credited or refunded.
434
What was a Summer 2021 success factor?
Satisfactory answers except for Federal Excise.
435
What is the Third Schedule Part I purpose?
Depreciation rates for various assets.
436
What is a salary exemption for pension?
Fully exempt (Clause 12, Second Schedule).
437
Scenario: Salary Rs. 1M, pension Rs. 500K. What’s taxable?
Rs. 1M, pension exempt.
438
What is the property income deduction for ground rent?
Actual ground rent paid (Section 15).
439
Scenario: Rent Rs. 1.2M, ground rent Rs. 100K. What’s taxable?
Rs. 1.1M (1.2M - 100K), after deduction.
440
What is the depreciation rate for ships?
5% per Third Schedule.
441
Scenario: Ship Rs. 50M, 2 years. What’s depreciation?
Rs. 5M (50M × 5% × 2), cumulative.
442
What is the capital gain tax rate for 9-year hold?
0% if exempt, else 5% (First Schedule).
443
Scenario: Gain Rs. 2M, 9 years, non-exempt. What’s tax?
Rs. 100K (2M × 5%), taxable.
444
What is the securities gain rate for 5-year hold (post-2016)?
5% per Eighth Schedule.
445
Scenario: Gain Rs. 1.2M, 5 years, post-2016. What’s tax?
Rs. 60K (1.2M × 5%), taxable.
446
What is the tax rate for interest under FTR (company)?
10% per Section 7.
447
Scenario: Interest Rs. 1M, FTR, company. What’s tax?
Rs. 100K (1M × 10%), final tax.
448
What is the tax credit for renewable energy?
Credit under Section 65G, 10% of tax.
449
Scenario: Renewable Rs. 10M, tax Rs. 2M. What’s credit?
Rs. 200K (10% of 2M), per Section 65G.
450
What is the business deduction for travel?
Business travel expenses (Section 20).
451
Scenario: Travel Rs. 250K, income Rs. 5M. What’s taxable?
Rs. 4.75M (5M - 250K), after deduction.
452
What is the loss set-off for capital losses?
Only against capital gains (Section 59).
453
Scenario: Capital loss Rs. 1.5M, other income Rs. 2M. What’s offset?
Rs. 0, no offset against other income.
454
What is the minimum tax rate for distributors?
0.25% per Ninth Schedule.
455
Scenario: Turnover Rs. 40M, tax Rs. 80K. What’s minimum?
Rs. 100K (0.25% of 40M), higher amount.
456
What is the Section 106A profit component?
Arrangement fees for borrowing (Section 106A).
457
Scenario: Fees Rs. 6M, income Rs. 30M. What’s disallowed?
Rs. 1.5M (6M - (30M + 6M) × 15%).
458
What is the advance tax payment frequency?
Quarterly, four installments (Section 147).
459
Scenario: Tax Rs. 8M, turnover Rs. 40M last year, Rs. 10M Q1. What’s advance tax?
Rs. 2M ((8M / 40M) × 10M), minus tax paid.
460
What was a Winter 2023 tip?
Discuss all tax regimes in scenarios.
461
What is the Fourth Schedule purpose?
Insurance profit computation rules.
462
What is a salary exemption for bonus?
No specific exemption, fully taxable unless special clause.
463
Scenario: Salary Rs. 1M, bonus Rs. 200K. What’s taxable?
Rs. 1.2M, bonus included.
464
What is the property income deduction for collection charges?
Actual charges for rent collection (Section 15).
465
Scenario: Rent Rs. 1M, charges Rs. 30K. What’s taxable?
Rs. 970K (1M - 30K), after deduction.
466
What is the depreciation rate for aircraft?
20% per Third Schedule.
467
Scenario: Aircraft Rs. 100M, 2 years. What’s depreciation?
Rs. 40M (100M × 20% × 2), cumulative.
468
What is the capital gain tax rate for 10-year hold?
0% if exempt, else 5% (First Schedule).
469
Scenario: Gain Rs. 3M, 10 years, non-exempt. What’s tax?
Rs. 150K (3M × 5%), taxable.
470
What is the securities gain rate for 6-year hold (post-2016)?
5% per Eighth Schedule.
471
Scenario: Gain Rs. 1.5M, 6 years, post-2016. What’s tax?
Rs. 75K (1.5M × 5%), taxable.
472
What is the tax rate for dividends under FTR (company)?
15% per Section 5.
473
Scenario: Dividend Rs. 2M, FTR, company. What’s tax?
Rs. 300K (2M × 15%), final tax.
474
What is the tax credit for BMR?
Credit under Section 65A for balancing, modernization, replacement.
475
Scenario: BMR Rs. 20M, tax Rs. 4M. What’s credit?
Rs. 400K (10% of 4M), per Section 65A.
476
What is the business deduction for legal fees?
Legal costs for business operations (Section 20).
477
Scenario: Legal Rs. 300K, income Rs. 6M. What’s taxable?
Rs. 5.7M (6M - 300K), after deduction.
478
What is the loss carryforward for exports?
6 years, set off against any income (Section 57).
479
Scenario: Export loss Rs. 3M, 2023. When expires?
2029, if not offset.
480
What is the minimum tax rate for importers?
1% per Section 113.
481
Scenario: Turnover Rs. 60M, tax Rs. 500K. What’s minimum?
Rs. 600K (1% of 60M), higher amount.
482
What is the Section 106A profit element?
Notional interest on derivatives (Section 106A).
483
Scenario: Notional Rs. 7M, income Rs. 35M. What’s disallowed?
Rs. 1.75M (7M - (35M + 7M) × 15%).
484
What is the advance tax mandatory estimation deadline?
Before 2nd installment for AOP/company (Section 147).
485
Scenario: Tax Rs. 10M, estimate Rs. 12M, Q2. What’s payable?
Rs. 12M, mandatory estimate followed.
486
What was a Summer 2022 tip?
Read question requirements carefully.
487
What is the Fifth Schedule Part I purpose?
Petroleum exploration profit rules.
488
What is a salary exemption for hardship?
Allowance for remote areas (Clause 57, Second Schedule).
489
Scenario: Salary Rs. 1M, hardship Rs. 100K. What’s exempt?
Rs. 100K, if within limits.
490
What is the property income deduction for penalties?
Not deductible, per Section 21.
491
Scenario: Rent Rs. 1M, penalty Rs. 50K. What’s taxable?
Rs. 1M, penalty disallowed.
492
What is the depreciation rate for machinery (used)?
15% per Third Schedule, no initial allowance.
493
Scenario: Used machinery Rs. 2M, 2 years. What’s depreciation?
Rs. 600K (2M × 15% × 2), cumulative.
494
What is the capital gain tax rate for 11-year hold?
0% if exempt, else 5% (First Schedule).
495
Scenario: Gain Rs. 4M, 11 years, non-exempt. What’s tax?
Rs. 200K (4M × 5%), taxable.
496
What is the securities gain rate for 7-year hold (post-2016)?
5% per Eighth Schedule.
497
Scenario: Gain Rs. 2M, 7 years, post-2016. What’s tax?
Rs. 100K (2M × 5%), taxable.
498
What is the tax rate for royalty under NTR (company)?
29% flat rate (First Schedule).
499
Scenario: Royalty Rs. 3M, NTR, company. What’s tax?
Rs. 870K (3M × 29%), taxable.
