Mr. Ammar, a resident individual, owns a building in DHA Islamabad. On 1 October 2020, he rented out the building to Mr. Ali at an annual rent of Rs. 1,200,000. This amount included Rs. 15,000 per month for arranging two security guards for the building. He also received a non-adjustable advance of Rs. 100,000 from the tenant. Following expenses were incurred by Mr. Ammar on the building during the tax year 2021.

Rupees

Repairs and renovation 35,000

Property tax 20,000

Insurance premium 10,000

Mr. Ammar also paid a salary of Rs. 7,500 per month to each of the two security guards at the building.

Required:

Under the provision of Income Tax Ordinance, 2001 calculate the taxable income of Mr. Ammar for the tax year 2021 and tax payable thereon.

Note:

5. Show all the relevant exemptions, exclusions and disallowances.
6. Tax rates are given on the last page. 

Task. 2

1. In the light of the provisions of Income Tax Ordinance, 2001, describe the conditions which need to be satisfied before a person can claim deduction for a bad debt. 

2. Alpha Limited (AL) wrote off a debt amounting to Rs. 500,000 in June 2018. A suit was, however, filed by the company for the recovery of the debt. Tax authorities allowed Rs. 350,000 as a deduction in tax year 2018. In tax year 2021, court adjudicated the case in favour of AL. In view of the provisions of Income Tax Ordinance, 2001 compute the amount which would be added to income or expense, as the case may be, if the company.

(1) Recovers 200,000 (2) Recovers 120,000 

Tax rate applicable for salaried individuals

Up to 600,000	0%
600,001-1,200,000	5% of the amount above 600,000
1,200,001-1,800,000	30,000+10%of the amount above 1,200,000
1,800,001-2,500,000	90,000 + 15% of the amount above 1,800,000
2,500,001-3,500,000	195,000 + 17.5% of the amount above 2,500,000
3,500,001-5,000,000	370,000 + 20% of the amount above 3,5,000,000
5,000,001-8,000,000	670,000 +22.5% of the amount above 5,000,000
8,000,001-12,000,000	1,345,000+25% of the amount above 8,000,000
12,000,001-30,000,000	2,345,000+27.5% of the amount above 12,000,000
30,000,001-50,000,000	7,295,000+30% of the amount above 30,000,000
50,000,001-75,000,000	13,295,000+32.5% of the amount above 50,000,000
Above 75,000,000	21,420,000+35% of the amount above 75,000,000

Rate of tax for individual (non-salaried) and AOP’s

0-400,000	0%
400,001-600,000	5% of the amount above 400,000
600,001-1,200,000	10,000 + 10% of the amount above 600,000
1,200,001-2,400,000	70,000 + 15% of the amount above 1,200,000
2,400,001-3,000,000	250,000 + 20% of the amount above 2,400,000
3,000,001-4,000,000	370,000 + 25% of the amount above 3,000,000
4,000,001-6,000,000	620,000 + 30% of the amount above 4,000,000
Above 6,000,000	1,220,000+35% of the amount above 6,000,000