FIN623 Assignment Solution 2022

                                

                       FIN623 Assignment Solution 2022

Answer the following questions: (2 + 1 + 1 + 6 marks) 1. 

Which one of the following scenarios is an example of tax avoidance and why? a. Mr. Adeel during the year earned taxable income of Rs. 900,000 and got Rs. 165,000exempted in accordance to the taxation laws. b. Mr. Asim during the year earned Rs. 1,500,000 as taxable income. He didnot declarethe income received worth Rs. 500,000 during the year fromthe sale proceedsinhistax return.

 2. M/S Shams Ltd. closes its accounting year on Sep. 30 each year. Determine its taxyearforthe income year starting on October 1, 2021 and ending on September 30, 2022. 

3. Aqib and Rajab both are working in a local company; each earning a monthlybasicsalaryof Rs. 100,000. For the FY2022, their employer deducted income tax @4%of theirincome. During the FY2023, their salaries got an annual increment of 7%and9%respectively. This time, the company will deduct tax at 4%. Identify the taxstructurefollowed by the company. (Calculations are not required) 

4. Using the following data, determine taxable income of Mr. Aamir, if he is (a) resident; &(b) non-resident for the tax year 2023 (Show complete calculations) 

 Monthly basic salary Rs. 400,000 

 Income received from land let out for storing wheat crop Rs. 400,000

  Remittance received in England Rs. 600,000 

 Monthly medical allowance Rs. 50,000

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Tax year:

Start of the 2022 tax year. The tax year in the US in most cases is the same as the calendar year. The difference is: Calendar year - 12 consecutive months beginning January 1 and ending December 31.

Income tax returns are the forms in which assessees file information about their Income and tax thereon before the Income Tax Department. If anyone files a belated return, he / she would not allowed to carry forward certain losses. The result of all this is that you’re required to file a tax return every year. Through this process, it’s determined whether you owe additional taxes beyond what you’ve already paid to the federal government, or if you’re owed a refund of the taxes you’ve already paid.

If you’ve got a job with a regular paycheck, you’re almost certainly already paying taxes. While your employer withholds the taxes you owe on your earnings / income and sends them to the federal government, there's a lot more to do with the process to make sure you're paying taxes appropriately.

For starters, your payroll withholding usually isn’t exactly right: The decisions you make when you set up your payroll withholding at the beginning of your employment can result in you under or excessively paying your taxes.

Further, you may be able to reduce the taxes you owe and thus, get a refund on taxes you already paid by taking certain deductions or credits provided for in the tax law. On the flip-side, you might have additional income not included in your paycheck that you’re legally required to report, and which may result in you owing more in taxes.

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UNDERSTANDING THE INCOME TAX BASICS

Prior to the Registration and Filing of your Income Tax Return, it is suggestable that you should establish the basic understanding on these processes. Knowledge of basic concepts would not only ensure that the tasks are performed easily but also in the befitting manner.

TAXABLE INCOME

Taxable Income means Total Income reduced by donations qualifying straight for deductions and certain deductible allowances.

TOTAL INCOME

Total Income is the aggregate of Income chargeable to Tax under each head of Income.

HEAD OF INCOME

Under the Income Tax Ordinance, 2001, all Income are broadly divided into following five heads of Income:

• Salary

• Income from Property

• Income from Business or Profession

• Capital Gains; and

• Income from Other Sources

RESIDENT

• An individual is Resident for a Tax Year if the individual:

• Is present in Pakistan for a period of, or periods amounting in aggregate to, one hundred and [eighty-three] days or more in the tax year;

• Is present in Pakistan for a period of, or periods amounting in aggregate to, one hundred and twenty days or more in the tax year and, in the four years preceding the tax year, has been in Pakistan for a period of, or periods amounting in aggregate to, three hundred and sixty-five days or more; or

• Is an employee or official of the Federal Government or a Provincial Government posted abroad in the Tax Year.

• An Association of Persons is Resident for a Tax Year if the control and management of its affairs is situated wholly or partly in Pakistan at any time in that year;

• A Company is Resident for a Tax Year if:

• It is incorporated or formed by or under any law in force in Pakistan;

• The control and management of its affairs is situated wholly in Pakistan at any time in the year; or

• It is a Provincial Government or a local Government in Pakistan.

NON-RESIDENT

An Association of Persons, a Company and an Individual are Non-Resident for a Tax Year if they are not Resident for that year.

SOURCE OF INCOME IN PAKISTAN

Is defined in Sec. 101 of the Income Tax Ordinance, 2001, which caters for Incomes under different heads and situations. Some of the common Source of Incomes in Pakistan are as under:

• Salary received or receivable from any employment exercised in Pakistan wherever paid;

• Salary paid by, or on behalf of, the Federal Government, a Provincial Government, or a local Government in Pakistan, wherever the employment is exercised;

• Dividend paid by Resident Company;

• Profit on debt paid by a Resident Person;

• Property or rental Income from the lease of immovable property in Pakistan; and

• Pension or annuity paid or payable by a Resident or permanent establishment of a Non-Resident.

FOREIGN SOURCE OF INCOME

Is any Income, which is not a Source of Income from Pakistan.