CHAPTER 5-SALARY INCOME

15 MR. A
Mr. A is an employee of a multinational company incorporated in Pakistan. His remuneration during the
year was as follows -

Rupees
(1) Basic salary 1,117,245
(2) Reward 22,062
(3) Bonus 300,000
(4) House rent allowance 643,514
(5) Utility allowance 111,724
The Company has provided him for
a car personal and business use. The cost of the car
wa
Rs.1,100,000.
During the year, Mr. A has been paid an interest free loan for construction of to
Rs.1,150,000. a house amounu
In addition to the above, Mr. A
was granted Stock Option of 2500 shares by the Head the
Company at US$ 36 per shares. Out of
theabove stock option, 1250 shares vested to
Ono the

year were immediately exercised

by him. The price of the share at nin per
share. The exchange rate between the
US$ and Pak Rupee on the date on time of exercise
was
was US$ 1
ntiol
Rs.1003. which Mr. A exerciseu
Required:
During the year, the company has
to compute his taxable income andwithheld
tax
tax from his salary amounting to Rs.
695,000. T
thereon for the Tax Year
2020.
Emile Mnolf lnt
 MR. MUSHIAQ

Mr. Mushtaq has provided you with the following data for the
thereon for the tax year 2020. computation of his total income and tax

Rupees
Basic salary
225,000
Bon
50,000
Conveyance allowance
50,000
House rent allowance
101,250
Leave fare assistance
60,000
Cash paid to a non-profit organization by way of donation
20,000
Motor vehicle valuing Rs. 400,000 provided by employer
and used partly for personal and partly for business purpose.
Running cost borne by employee
30,000
At the start of the tax year Mr. Mushtaq was issued 5,000 shares under an employee share option scheme
whereby he was offered shares at 25% discount to the market value. The market value of shares is Rs.11
per share. House loan taken by Mr. Mushtaq amounted to Rs.200,000 and interest paid on such loan
during the year amounted to Rs.6,000.
Required:
You are required to compute his taxable income and tax thereon for the tax year 2020. Show all
computations and assumptions, as necessary.

17 MR. BASHIR AHMED

Mr. Bashir Ahmed is an employee who had joined his current employment during the tax year 2020. His
details of salary, allowance and perquisites received from company "A" his previous employer and
company "B" his present employer are as follows:

Particulars Company A CompanyB

Basic salary 714,158 572,572
Bonus 150,000 71,800
House rent allowance 258,663 222,746
Utility allowance 71,415 57,257
Conveyance provided by Company B partly used for business and
private use. Cost of the car purchased by the company Rs.1,100,000
Leave encashment 77,783
Medical reimbursement as per the terms of employment 35,000 25,000
Ex-gratia payment received under golden handshake scheme 2,048,300
The detail of assessed income and assessed tax in respect of past three years is as follows:
Rs. Rs.
2017 1,309,570 269,902
2018 1,545,850 371,255
2019 2,264,940 557,633

During the year Company "A" had deducted tax under section 149 amounting to Rs.270,000 Mr.
and
"B" had deducted tax under section 149 amounting to Rs.800,000 from payments made to
Company
Bashir.
Required:
liability of Mr. Bashir based on the data provided above for the tax
Compute the taxable income and tax
year 2020.

hatornd Acdountonte of Dalictan

18 MR. HAYAT
Mr. Hayat, chief engineer in Mega Limited, had received 6,000 shares of the company in July 2017, under
an employee share scheme. Mr. Hayat had the option to transfer the shares in tax year 2019 or thereafter
The market value of shares at the time of issue was Rs. 12 per share. In 2018 the share attained a market
value of Rs. 20; however, Mr. Hayat sold the shares in May 2020 when the share price was Rs. 35 per

share.

Required:
With reference to above, briefly explain the relevant provisions of the income tax Ordinance, 2001
(i)
relating to employee share scheme.
Compute the amount to be included in the taxable income of Mr. Hayat for each tax year.
(i)

19 MR. AINUDDIN KHAN

Mr. Ainuddin Khan, retired civil servant has joined a listed company during the year and provides you
the following information relevant to the tax year 2020 related to the income year ended June 30, 2020:

(a) Payroll Rupees

() Monthly payroll 220,000
(i) Bonus (to the extent of 20% of annual payroll)

(ii) House rent allowance receivable in cash with monthly payroll 50,000
(iv) The company maintained 1000 CC. car valuing Rs 1,200,000
for personal and official use, on which total expenditure
incurred by the company 80,000
(b) Other payments made by company on vouchers

) Residential electricity 200,000

(i) Petrol for residential generator 5,000
(ii) Gas bills of residence 6,000
(iv) Telephone bills of residence including withholding
tax of Rs. 100 13,885
(v) Club bills 4,000
(vi) Internet usage reimbursement 9,000
(c) Mr. Ainuddin Khan also received the following sums:

(1) Pension from government 80,000

(i) Dividends from investment in WAPDA Bonds (net of tax and zakat) 70,000
Required:
Compute total income of Mr. Khan for tax year 2020.

20 MR. MATEEN
Mr. Mateen was employed with Melody Limited
(ML) as an event organizer. On June 30, 2019 he resignea
from his employment without completion of notice
period. On July 01, 2019 he joined another company
Rock Star Limited (RSL) as a senior event organizer. Following information is available relating to nis
assessment for the tax year 2020:
(a) On July 01, 2019 RSL paid Rs. 280,000 to ML
by Mr. Mateen.
as
compensation in lieu of un-served notice period

(6) On July 15, 2019 Mr. Mateen received a

gratuity of Rs. 350,000 from an unrecognized gratuiy
fund maintained by ML. He also received Rs.
150,000 as leave encashment.
(c) In accordance with the terms of his employment with RSL, Mr. Mateen was provided with the
following emoluments / benefits during the tax year 2020:
 Question bank: Objective test and long-form questions

() Basic salary of Rs. 245,000 per month and utility allowance of Rs. 21,000 per month.

(i) A reimbursement of personal medical expenses, upto 15% of the annual basic salary and
Rs. 250,00 on account of hospitalization charges for his daughter were made after
procuring hospital bills showing the national tax number of the hospital. These bills were
also attested and certified by RSL

(ii) For the first two months of his employment, a pick and drop facility was provided to Mr.
Mateen at a monthly rent of Rs. 25,000. On September 01, 2019, RSL provided a company
maintained 1300 CC. car which was partly used for private purposes. The cost of the car
was Rs. 1,500,000.

(iv) Monthly salary of Rs. 6,000 was paid to Mr. Mateen's house keeper. Mr. Mateen however,
reimbursed 20% of the house keeper's salary to RSL.

(v) A special allowance of Rs. 50,000 was paid to meet expenses necessarily to be incurred in
the performance of his official duties. Actual expenditure was Rs. 40,000.
(Vi) On January 01, 2020, he was provided an interestfree loan of Rs. 1,500,000. The prescribed
benchmark rate is 10% per annum.

(vii) A commission of Rs. 500,000 was paid for introducing new clients to the company
Withholding tax was deducted by RSL at the rate of 12% from such payments.
(vii) The tax deducted at source from his salary by RSL for the tax year 2020 amounted to Rs.
550,000.
(d) Apart from his employment with RSL, Mr. Mateen also organized events for private clients. He
received a total of Rs. 1,000,000 from such clients. No tax was deducted from such receipts.
However, he incurred an overall loss of Rs. 350,000 on organizing these events.

On May 31, 2020 he received Rs. 180,000 from Mr. Ali as consideration for vacating his bungalow.
(e)
Pak. Rs. 535,000. He
() He also received a share of profit froma business in Malaysia equivalent to
paid Rs. 130,000 in taxes in Malaysia on such income.
Privatization Commission of
Mr. Mateen acquired 10,000 shares of a listed company from the
Pakistan at a price of Rs.10 per share on May 31, 2019. He was allowed a tax credit of Rs. 15,000
in tax year 2019 against this investment. On May 20, 2020 he sold all the shares for Rs. 1,000,000.
He paid Zakat of Rs. 250,000 to an approved organization, through crossed cheque.
(h)
Required:
Mr. Mateen for the tax
Compute the taxable income, tax liability and tax payable/ refundable, any, by
if
year 2020.

21 MR. ASLAM
Commerce (GUC) on 01 December 2019, as its
Mr. Aslam has been appointed by Grace University of
to teach 'Taxation'. Mr. Aslam is experience teacher for 35 years and currently he is 62
full time teacher
his monthly salary from the employer is given below:
years old. The break-up of
(Rupees)
100,000
Basic salary
10,000
Utilities allowance
30,000
House rent allowance
amounts from the GUC
Further, he has also received following
25,000
Re-imbursement of children's education fee
24,000
Bonus
was also
on Mr. Aslam's salary. He
on account of tax chargeable
GUC agreed to bear Rs. 5,000 monthly The vehicle was to be used partly for official
cost of Rs. 1,500,000.
provided with a motor vehicle having amounted to Rs. 110,000.
use. Medical re-imbursements
in terms of employment
 Required
On the basis of foregoing, compute Mr. Aslam's taxable income and tax liability for tax year, 2020.

22 MR. AKRAM
Mr.Akram is an employee of Royal Brands Ltd. (a listed Co). In tax year 2020, his basic salary aggregated
to Rs. 1.500.000. The company offered him shares option for acquiring 5,000 shares under employee
sharescheme. Cost of option amounted to Rs. 1,000. He exercised the option Rs. 50/ share on 1st
September, 2019. Fair market value (FMV) at the time of exercise of shares was Rs. 70/ share. After
holding the shares for a period of 202 days, he disposed them off at:
a) Rs 90/ share
b) Rs 40/ share

Required
In each of the above scenarios, compute Mr. Akram's taxable income and tax
liability for tax year 2020.
23 MR.AKBER
Mr. Akber was employed 1st August 2019 at ABC Limited in the monthly Basic Pay Scale of 150,000 -
10,000 175,000. His monthly emoluments during the year ended 30th June 2020 were
follows
as

(Rupees)
Basic Salary
160,000
Travelling allowance
12,000
Medical allowance
18,000
Mr. Akber was offered to either avail a house rent allowance of
He opted for the accommodation. Mr. Aslam has been Rs.15,000 or rent free accommodation.
provided free utilities with a maximum limit of Rs.
10,000 per month. However, he generally consumed utilities worth Rs.
15,000
a month.

Mr. Akber has also been provided with a motor vehicle for
official as well as private use. The vehicle
acquired by ABC Ltd on lease. The fair market value of vehicle was Rs. 1,500,000 was
at the inception of
lease. However, under the lease agreement, ABC Ltd. was
over the lease term. required pay a total sum of Rs.2,000,000
to

During the month of December 2019, the

employer waived a Rs. 100,000 loan due from Mr. Akber.
Further, the employer also re-imbursed children education
deducted by employer at Rs. 7,000 per month out of Mr. expenses amounting to Rs.46,000. 1ax
Akber's salary.
Mr. Akber left the job as well as Pakistan on 30th April 2020 and joined a new
salary of AED 12,000 effective from 1st June, 2020. Conversion rate AED 1 job at UAE on a monthiy
PKRs. 27/-
Required
Compute Mr. Akber's taxable income and tax
liability for tax year 2020.