Taxation

Practice Questions:
Q1) Mr Danish is a Pakistan citizen, he was present in UAE for 180 days and
remaining days in Pakistan. Determine his residential status by rule?
Rule for Resident Individual (Section 82):
A person is resident in Pakistan for a tax year if they meet any one of these
three rules:
1. Physical Presence Rule:
Present in Pakistan for 183 days or more in the tax year.
2. Govt. Employee Rule:
Employee of Federal or Provincial Govt. posted abroad during tax year.
3. Stateless Rule:
A citizen of Pakistan who is not present in any other country for 183+ days
and not a resident of any other country.
Given:
Mr. Danish – Pakistan citizen
- In UAE = 180 days
- Remaining days = 365 – 180 = 185 days in Pakistan
Apply Rule 1 (Physical Presence):
Days in Pakistan = 185 days → Yes, 185 ≥ 183 ✅
So, he is resident under Rule 1.
No need to check other rules once one rule is satisfied.
Answer:

Mr. Danish is Resident in Pakistan for the tax year.

Mr. Danish is Resident in Pakistan for the tax year.

 Q2) Mr. Sharukh officer of Grade-20 in Federal Government posted at
German Embassy. Show its residential status by rule?

Resident, under Rule 2 of Section 82.

Rule 2 says:

An employee or official of the Federal or Provincial Government posted

abroad during the tax year is always resident in Pakistan, irrespective of
days present in Pakistan.

Since Mr. Sharukh is a Federal Government officer posted at the German

Embassy, he meets this rule automatically.

Answer: Resident

Q3) On Jan 01 2023 Mr. David was sent to Pakistan by his UK based
company to work on a special project. He left Pakistan on 30 th May 2023.
Determine his residential status.

Given:

 Mr. David sent to Pakistan on Jan 1, 2023 (arrival date).

 Left Pakistan on May 30, 2023 (departure date).
 Tax year in Pakistan: July 1, 2022 to June 30, 2023 (tax year 2023).

Step 1 – Calculate days present in Pakistan during tax year 2023

(July 1, 2022 – June 30, 2023):

From July 1, 2022 to Dec 31, 2022 → Not stated he was in Pakistan, so likely
0 days.

From Jan 1, 2023 to May 30, 2023:

 Jan 1 to Jan 31 = 31 days

 Feb = 28 days (2023 not leap)

 March = 31 days

 April = 30 days

 May 1 to May 30 = 30 days

Total = 31 + 28 + 31 + 30 + 30 = 150 days.

 Step 2 – Apply physical presence rule (Rule 1 of Section 82):

Resident if 183 days or more in Pakistan in the tax year.

He has 150 days → less than 183 → Rule 1 not satisfied.

Step 3 – Check other rules:

 Rule 2: Govt. employee? No → Not applicable.

 Rule 3: Pakistan citizen? Not stated; probably not (UK company). Even if
citizen, for Rule 3 to apply he must:
(a) Not be present in any other single country for ≥183 days in the tax year,
and
(b) Not be a resident taxpayer of any other country.
Likely not applicable if he’s resident of UK for tax purposes.

Step 4 – Conclusion:

No rule satisfied → Non-resident for tax year 2023.

Final Answer:

Mr. David is Non-resident in Pakistan for tax year 2023.

Q4) Dr. Ahmed arrive in Pakistan from UAE on July 01, 2022 & remain in
Pakistan for few months. He departure for UAE on 15 th Nov 2022, and arrive
again in Pakistan on 10th Feb 2023 and went back to UAE on 5th April 2023.
Show its residential status.

Given timeline for Dr. Ahmed:

 Arrived in Pakistan: July 1, 2022

 Departed for UAE: November 15, 2022
 Arrived again in Pakistan: February 10, 2023
 Departed for UAE: April 5, 2023

Tax year = July 1, 2022 to June 30, 2023 (Tax Year 2023).
 July 2022: 31 days (July 1–31)
 Aug: 31
 Sep: 30
 Oct: 31
 Nov 1–15: 15 days

Days = 31 + 31 + 30 + 31 + 15 = 138 days

Period 2: February 10, 2023 to April 5, 2023

 Feb 10–28: 19 days

 March: 31 days
 April 1–5: 5 days


Step 1: Calculate total days in Pakistan during tax

year 2023
Period 1: July 1, 2022 to November 15, 2022

 July 2022: 31 days (July 1–31)

 Aug: 31

 Sep: 30

 Oct: 31

 Nov 1–15: 15 days

Days = 31 + 31 + 30 + 31 + 15 = 138 days

Period 2: February 10, 2023 to April 5, 2023

 Feb 10–28: 19 days

 March: 31 days

 April 1–5: 5 days

 Days = 19 + 31 + 5 = 55 days

Total days in Pakistan in tax year 2023 = 138 + 55 = 193 days

Step 2: Apply Rule 1 (Physical presence)

Resident if ≥183 days in Pakistan in tax year.

193 days ≥ 183 → Yes, Rule 1 satisfied.

Step 3: Conclusion

No need to check other rules since Rule 1 is met.

Final Answer:
Dr. Ahmed is Resident in Pakistan for tax year 2023. ✅

Q5) Mr. Sameer USA citizen visited Pakistan for 1 month. Is he resident or
non-resident in Pakistan?

Given:

 Mr. Sameer is a USA citizen.

 Visited Pakistan for 1 month in the tax year.
 Not mentioned any other presence in Pakistan.

 Step 1: Apply Rule 1 (Physical presence)

 Resident if present in Pakistan for 183 days or more in the tax year.
  1 month ≈ 30 days → much less than 183 → Rule 1 not satisfied.

 Step 2: Check Rule 2 (Government employee

abroad)
 He is not an employee of Pakistan Federal/Provincial Govt. → Not
applicable.

Step 3: Check Rule 3 (“Stateless rule” for Pakistan

citizens)
He is USA citizen, not Pakistan citizen → Rule 3 not applicable.

Conclusion:
He doesn’t satisfy any rule → Non-resident.

Answer:
Mr. Sameer is Non-resident in Pakistan.

Q6) Mr. Salman a property dealer in USA came to Pakistan on 01 February

2022. During his stay up to 02 August 2022 in Pakistan, he remained in
Peshawar up to 30 June 2022 and thereafter till his departure from Pakistan,
in Quetta

Given:
Mr. Salman — USA citizen, property dealer in USA
Came to Pakistan: February 1, 2022
Left Pakistan: August 2, 2022

Tax year for Pakistan: July 1, 2021 to June 30, 2022 (tax year 2022)

Step 1: Identify the tax year and presence period

He was in Pakistan from Feb 1, 2022 to Aug 2, 2022, but we only

consider days in the tax year 2022 (which ends June 30, 2022).
 So:
From Feb 1, 2022 to June 30, 2022

 Feb: 1–28 (2022 not leap year) → 28 days

 Mar: 31 days

 Apr: 30 days

 May: 31 days

 Jun: 30 days

Total = 28 + 31 + 30 + 31 + 30 = 150 days in Pakistan in tax year 2022.

Step 2: Apply Rule 1 (Physical presence)

183 days required for resident status → 150 days < 183 → Rule 1 not
satisfied.

Step 3: Other rules

 Not a Govt. employee of Pakistan → Rule 2 not applicable.

 Not a citizen of Pakistan → Rule 3 not applicable.

Step 4: Conclusion

No rule met → Non-resident for tax year 2022.

Final Answer:
Mr. Salman is Non-resident in Pakistan for tax year 2022.
 Q7) Mr. Mubeen a citizen of Pakistan, came to Pakistan for the first time on a
special assignment from his company on April 01, 2023 and left the country
on March 30, 2024. Is he is resident in tax year 2023?

Given:

 Mr. Mubeen — citizen of Pakistan

 Arrived in Pakistan: April 1, 2023
 Left Pakistan: March 30, 2024

Tax Year 2023 = July 1, 2022 to June 30, 2023.

Step 1: Determine days in Pakistan during tax year

2023
From July 1, 2022 to June 30, 2023:

 From July 1, 2022 to March 31, 2023 → he was not in Pakistan (arrived April
1, 2023).

 From April 1, 2023 to June 30, 2023:

o April: 30 days

o May: 31 days

o June: 30 days
Total = 91 days in tax year 2023.

Step 2: Apply Rule 1 (physical presence)

91 days < 183 → Rule 1 not satisfied.

Step 3: Check Rule 2 (Govt. employee abroad)

He is on a company assignment, not a Govt. employee → Not applicable.

Step 4: Check Rule 3 (“Stateless” rule)

 Rule 3 says: A citizen of Pakistan is resident if both:

 He is not present in any single foreign country for 183 days or more in the
tax year, and
 He is not a resident taxpayer of any other country.

Let's check:

In tax year 2023 (July 1, 2022 – June 30, 2023):

 From July 1, 2022 to March 31, 2023 (9 months) → likely in another country
(not stated which) for more than 183 days? Possibly yes, if he was in one
country before coming to Pakistan.
 But even if so, if he is not a resident taxpayer of any other
country (possible if he was in a country that doesn't tax him as resident) —
need more info.

Since the question doesn’t specify his tax status abroad, but says "first time
came to Pakistan" — likely he was abroad for the first 9 months of the
tax year, probably in one country for >183 days (July 2022–March 2023 = ~9
months = ~273 days abroad in one country).

So Rule 3(a) fails (he was present in another country for ≥183 days in tax year
2023) → Rule 3 not satisfied.

Step 5: Conclusion
No rule satisfied → Non-resident for tax year 2023.

Final Answer:
Mr. Mubeen is Non-resident in tax year 2023.

Q1) BBL is a non-listed public company incorporated under the Companies

Act, 2017. All the shareholders
of the company are individuals. The control and management of affairs of the
company during the year was outside Pakistan.

As per ITO 2001 – Residential

Status of BBL)
1. Company Type (Section 2(28))
 BBL is a public company, and because it is not listed, it is treated as a:

Non-listed public company under ITO 2001.

Residential Status of Company

(Section 83 of ITO 2001)
According to Section 83, a company is resident in Pakistan only if:

It is incorporated or formed by or under any law of Pakistan,

OR

The control and management of its affairs is situated wholly in

Pakistan at any time during the tax year.

Q8) Mr. Rana, who had never travelled abroad in his life, got a job in
Canada. He went to Canada on December 29, 2022 to assume his
responsibilities as a CFO. In June, 2023 his company sent him to India on a
training workshop. On June 30, 2023 on his way back to Canada he had to
stay in Karachi for a whole day in transit.

We need to determine Mr. Rana’s residential status for tax year 2023 (July 1, 2022
– June 30, 2023).

Given:

 Never traveled abroad before.

 Left for Canada: December 29, 2022 (from Pakistan).
 In June 2023: Went to India on workshop from Canada.
 On June 30, 2023: In Karachi for a whole day in transit back to Canada.

Step 1: Calculate days in Pakistan in tax year 2023

Tax year 2023 = July 1, 2022 to June 30, 2023.
 From July 1, 2022 to December 28, 2022 → He was in Pakistan (never
traveled abroad before).
Days:

 July 2022: 31

 Aug: 31

 Sep: 30

 Oct: 31

 Nov: 30

 Dec 1–28: 28 days

Subtotal = 31+31+30+31+30+28 = 181 days (in Pakistan before leaving).

From December 29, 2022 to June 29, 2023 → Abroad (Canada/India).

From June 30, 2023 → In Karachi for 1 day (transit).

Total days in Pakistan in tax year 2023 = 181 + 1 = 182 days.

Step 2: Apply Rule 1 (Physical presence)

Resident if ≥183 days in Pakistan in tax year.

182 days → just 1 day short → Rule 1 not satisfied.

Step 3: Check Rule 2 (Govt. employee abroad)

He works for a Canadian company → not Pakistani govt. → Rule 2 not

applicable.

Step 4: Check Rule 3 (Citizen not in any foreign

country for ≥183 days and not resident of any other
country)
In tax year 2023:
He was in Canada from Dec 29, 2022 to June 29, 2023 (except India trip) —
Days in Canada: Dec 29–31, 2022 = 3 days + Jan–Jun 2023 (approx 181 days
total? Let’s check quickly):

Actually, more exact:

Dec 29–31, 2022 = 3 days (in Canada)
Jan 1–Jun 29, 2023 = 180 days (excluding India trip days which were part of
June)

But June 2023 he went to India for workshop — suppose he was in India from
e.g., June 20 to June 29, then to Karachi June 30. That means Canada days
from Jan 1 to June 19: 170 days + 3 days in Dec 2022 = 173 days in Canada
in the tax year.

So he was in Canada for about 173 days in tax year 2023 → less than 183
days in any single foreign country.

Now Rule 3(a) says: “not present in any other country for 183 days or more
in the tax year” → true.

Rule 3(b) says: “is not a resident taxpayer of any other country” — but he
works in Canada as CFO, might be Canadian tax resident from Jan 1, 2023 —
not enough info, but if he’s a resident taxpayer of Canada in 2023, Rule 3
fails.

Likely he becomes resident of Canada for tax year 2023 → Rule 3(b) fails.

Step 5: Conclusion

Neither Rule 1, 2, nor 3 satisfied → Non-resident for tax year 2023.

Final Answer:
Mr. Rana is Non-resident in Pakistan for tax year 2023. ✅
Q9) Mr. Baber, a Federal Government employee was posted to the Pakistan
mission in Geneva from July 01, 2022 to May 30, 2023.

Rule 2 of Section 82:

An employee or official of the Federal Government or a Provincial

Government posted abroad during the tax year is always resident in
Pakistan, regardless of days present in Pakistan.

Mr. Baber is a Federal Government employee posted to the Pakistan

mission in Geneva from July 1, 2022 to May 30, 2023 — which falls within tax
year 2023 (July 1, 2022 – June 30, 2023).

So Rule 2 applies automatically.

Answer:
Mr. Baber is Resident in Pakistan for tax year 2023.
Practice Questions:

BBL is a non-listed public company incorporated under the Companies Act,

2017. All the shareholders of the company are individuals. The control and
management of affairs of the company during the year was outside Pakistan

Company Type (Section 2(28))

BBL is a public company, and because it is not listed, it is treated as a:

➡️Non-listed public company under ITO 2001.

Residential Status of Company (Section 83 of ITO 2001)

According to Section 83, a company is resident in Pakistan only if:

1. It is incorporated or formed by or under any law of Pakistan,

OR
2. The control and management of its affairs is situated wholly in Pakistan
at any time during the tax year.

Q Yango an online riding company is a Russian based company operating in

Pakistan. Explain the status of Yango either resident or non-resident

Here is the correct answer according to the Income Tax Ordinance,

2001 (Pakistan).

Residential Status of Yango (a Russian-based

online riding company operating in Pakistan)
To determine whether Yango is resident or non-resident, we apply
Section 83 of the ITO 2001.
Section 83 – Residence of a Company
A company is resident in Pakistan if:

1. It is incorporated or formed in Pakistan,

OR

2. The control and management of its affairs is situated

wholly in Pakistan at any time during the tax year.

Given in the Question

 Yango is a Russian-based company (incorporated outside Pakistan).
 It is operating in Pakistan, but its main control, management,
and headquarters are in Russia.

Conclusion According to ITO 2001

✔ Since Yango is not incorporated in Pakistan,

✔ And control and management are not wholly in Pakistan,

Yango is a Non-Resident Company

under ITO 2001.
Important Clarification
A foreign company can operate in Pakistan, have offices, drivers, and
business activities here —
but it remains non-resident unless:
  Its board of directors makes decisions in Pakistan, AND
 Its central management is in Pakistan.

This is not the case for Yango, so it is non-resident.

If you want, I can also explain the tax implications for a non-resident
company operating in Pakistan (PE, withholding taxes, digital service tax,
etc.).

Compute Total and Taxable Income of XYZ (Pvt.) Limited considering

following data:

Aggregate income from all heads 1,200,000

Agriculture Income 50,000
Zakat paid under Zakat & Ushr Ordinance 1980 200,000

Workers Welfare F Below is the correct computation according to the

Income Tax Ordinance, 2001 (Pakistan).

Given
Amount
Particulars
(Rs.)
Aggregate income from all heads 1,200,000
Agriculture income 50,000
Zakat paid under Zakat & Ushr
200,000
Ordinance, 1980
Workers Welfare Fund (WWF) paid 100,000

TREATMENTS UNDER ITO 2001

1. Agriculture Income

Agriculture income is exempt (Section 41), so it must be excluded from

total income.

2. Zakat Paid

Zakat paid under the Zakat & Ushr Ordinance, 1980 is allowed as a
straight deduction from Total Income as per Section 60.
➡️Therefore: Deductible.

3. Worker’s Welfare Fund (WWF)

WWF is NOT allowed as a deduction from taxable income.

➡️Therefore: NOT deductible.

STEP-WISE COMPUTATION
Step 1: Remove Agriculture Income

Aggregate Income: 1,200,000

Less: Agriculture Income (Exempt) (50,000)

👉 Total Income = 1,150,000

Step 2: Deduct Zakat Paid

Total Income: 1,150,000

Less: Zakat (200,000)

👉 Taxable Income = 950,000

FINAL ANSWER
Amount
Description
(Rs.)
Total Income (after removing 1,150,00
agriculture income) 0
Taxable Income (after zakat
950,000
deduction)

If you want, I can also compute tax liability, minimum tax, or convert this
into exam-friendly working notes.

Q1) Ms. Saima received rent of Rs. 50,000 per month for his flat from her
aunt during tax year 2023. While fair market rent of the property is 60,000
per month. Required: Calculate total income and taxable income from
property.
Here is the correct solution according to Income Tax Ordinance, 2001
(Pakistan).

GIVEN
 Actual Rent Received: Rs. 50,000 per month
 Fair Market Rent: Rs. 60,000 per month
 Relationship: Aunt (Relative)
 Tax Year: 2023

APPLICABLE LAW (Section 15 – Income from

Property)
1. If the property is rented to a relative, income from
property shall be the higher of:

 Actual rent received OR

 Fair market rent (FMV)

➡️Section 15(5) applies.

2. Allowable Deduction

Admissible deduction = 1/5 (20%) of the Gross Rent

(As per Section 15A)

STEP 1: Determine Gross Annual Rent

Since the tenant is a relative, we use higher of actual or fair market
rent:

Actual rent = 50,000

FMV = 60,000 → higher

Annual Gross Rent = 60,000 × 12 = 720,000

STEP 2: Deduct Allowable Allowance

(1/5th)
1/5 of 720,000
= 144,000

STEP 3: Calculate Taxable Income

Taxable Income = Gross Rent – Allowable Deduction
= 720,000 – 144,000
= 576,000

FINAL ANSWER
Amount
Description
(Rs.)

Total Income from Property

720,000
(Gross Rent)

Taxable Income from

576,000
Property

Q Mr. Ahmed give his Leather factory and received 600,000 per month as
rent for renting factory premises (200,000) together with machines
(400,000).

The question specifically asks:

“Calculate total income and taxable income from property.”

So we consider ONLY the rent of the factory premises (building),

NOT the machinery rent — because rent of machinery is NOT property
income (it falls under “Income from Other Sources”).

GIVEN
  Total rent received per month = 600,000
o Rent of premises (building) = 200,000 per month
o Rent of machinery = 400,000 per month → not property
income

PROPERTY INCOME TREATMENT (Section 15 +

15A)
Property income includes rent of building only.

Allowable deduction:

1/5 (20%) of gross rent (u/s 15A)

STEP–1: GROSS PROPERTY INCOME

Monthly rent of premises = 200,000
Annual rent = 200,000 × 12
= 2,400,000

👉 Total Income from Property = 2,400,000

STEP–2: DEDUCT ALLOWABLE 1/5

DEDUCTION
1/5 of 2,400,000 = 480,000

STEP–3: TAXABLE PROPERTY INCOME

 Taxable Income = 2,400,000 − 480,000
= 1,920,000

FINAL ANSWER
Amount
Description
(Rs.)

Total Income from

2,400,000
Property

Taxable Income from

1,920,000
Property

Q Mr. Faizan received 10,000 per month rent for his flat in Kemari and
received 100,000 forefieted deposit for sale of land. Required: Calculate
total income and taxable income from property.

According to the Ordinance:

 Rental income from immovable property falls under "Income from

Property" (Section 15).

 Forfeited deposit related to the sale of land: This is not rental income. It
arises from an agreement to sell immovable property.

o Such forfeited deposits are generally treated as "Capital Gains" if the land
was a capital asset (Section 37), or potentially as "Income from Other
Sources" (Section 39) if it is not considered a capital asset or part of
business.

o Since the question groups it under "income from property" for calculation,
we will compute it separately but include in Total Income.
1. Income from Property (Flat Rent):
Annual Rent (10,000 × 12) = Rs. 120,000

Deductions under Section 15:

The Ordinance allows a deduction of 25% of annual rent as a statutory
allowance for repairs, maintenance, etc. (if no other deductions are provided)
Less: 25% statutory deduction (Sec. 15) = Rs. 30,000

Income from Property (rental) = 120,000 – 30,000 = Rs. 90,000.

Treatment of Forfeited Deposit

 Nature: Forfeited deposit from an abortive sale of land is not income from
property under Section 15.
 Possible heads:
1. Capital Gains (if land was a capital asset in Mr. Faizan’s hands, and
forfeiture is treated as part of consideration for transfer — but since sale
didn’t proceed, courts/ITO often treat it as Income from Other Sources).
2. Income from Other Sources (Section 39) — since it’s not from property,
business, salary, etc.
3. In tax practice in Pakistan, forfeited deposits from intended sale of property
(not stock-in-trade) are usually taxable under "Income from Other
Sources" in the year received.
 Taxable amount: Full Rs. 100,000 (no expense deduction unless directly
related expense is proved).

 Total Income
 Total Income = Income from Property + Income from Other Sources
= 90,000 + 100,000
= Rs. 190,000.

Taxable Income
 Both amounts are fully taxable under their respective heads.
 No further general deductions (like personal allowances) apply at the "total
income" stage — those are applied in tax liability computation, not in taxable
income per head.
 So, Taxable Income (as per heads) is:
 Head of Income Taxable Amount (Rs.)

Income from Property (Rent) 90,000

Income from Other Sources (Forfeited Deposit) 100,000

Total Taxable Income 190,000

Final Answer:
 Income from Property: Rs. 90,000 (after 25% deduction from annual
rent).
 Total Taxable Income: Rs. 190,000 (including Rs. 100,000 from forfeited
deposit under other sources).

Q Ms. Khadija get 20,000 per month rent for 12 months and also get un-
adjustable advance for his flat Rs. 300,000. Required: Calculate total
income and taxable income from property.

Step 1: Identify the two receipts

1. Monthly rent: Rs. 20,000 × 12 months = Rs. 240,000 per year.
2. Un-adjustable advance: Rs. 300,000 (received for the flat).

Step 2: Tax treatment of each receipt

 (A) Monthly Rent

 Tax head: Income from Property (Section 15).

 Gross Annual Rent: Rs. 240,000.

 Statutory deduction: 25% of gross rent (Section 15(5)).

25%×240,000=Rs.60,000

 Taxable rent:
240,000−60,000=Rs.180,000

(B) Un-adjustable Advance

 Nature: An amount received that will not be adjusted against future rent
and is non-refundable.

 Tax treatment:
This is not rent but a capital receipt in nature for granting lease rights.
Under Section 15(2), any advance rent is taxable in the year it is received.
“Advance rent” means rent received in advance for future periods.
But if it is truly non-adjustable and non-refundable, it may be treated
as premium or lease premium (Section 16), taxable under “Income from
Other Sources” or apportioned over lease period.
In common tax practice in Pakistan, if it is not refundable and not adjustable
against rent, it is fully taxable in the year of receipt as income from
property (by deeming it advance rent taxable upfront under Section 15(2)).

 Taxable amount: Full Rs. 300,000 (in the year of receipt) under “Income
from Property” as advance rent.

Step 3: Taxable Income from Property

Taxable from rent = Rs. 180,000
Taxable from un-adjustable advance = Rs. 300,000
Total from property head = Rs. 480,000

Step 4: Total Taxable Income (assuming only property

income)
 Total Taxable Income = Rs. 480,000

Final Summary

Amount
Component Taxable Amount (Rs.)
(Rs.)

Annual Rent 240,000 180,000 (after 25% deduction)

Un-adjustable 300,000 (taxable in full as advance

300,000
Advance rent u/s 15(2))

Total Income from

540,000 480,000
Property

Total Taxable
480,000
Income

Conclusion:

 Total Income from Property: Rs. 540,000 (gross receipts)

 Taxable Income from Property: Rs. 480,000

Total Taxable Income: Rs. 480,000 (if only property income exists)

Q Loan of Rs. 20,000 is received in cash from a student (not registered at

FBR).

Tax Treatment:

 Loans are not income → not taxable.

 However, under Section 231A (advance tax on cash withdrawals), if a non-

filer makes a cash withdrawal above Rs. 50,000 in a day from a bank, tax is
withheld.
 But here, loan is from a person (not a bank), so no immediate tax.

 Issue: If the lender is non-filer, the borrower may have no withholding

obligation, but the lender's identity may be questioned for anti-money
laundering.

Taxable? → No (not income).

Q Loan of Rs 25,000 is received from teacher A (registered at FBR) in cash

form. iii) Loan of Rs 50,000 is received from teacher B (registered at FBR)
through cross cheque.

 Same as above—loan is not income, not taxable.

 Since lender is a filer, no tax complications.

Taxable? → No.

Q Loan of Rs 25,000 is received from teacher A (registered at FBR) in cash

form.

 No income element.

 Banking transaction, but no tax on receiving a loan by cheque.

 No withholding tax on this.

Taxable? → No.

Q Your brother gifted a Bike to you.

 Gift from brother: Under Section 111, gifts from parents, spouse, brother,
sister, son, or daughter are exempt from income tax.

 No tax on recipient.

Taxable? → No (exempt gift).

 Q His friend give the gift of jewelry worth Rs. 100,000.

 Gift from a friend not covered in exempt relatives list.

 Under Section 111(1)

 (b), gifts above Rs. 50,000 from a non-relative can be added to income of the
recipient and taxed unless proven from taxable income of giver or
agriculture income.

 Exception: If the giver is a non-resident, limit is Rs. 100,000, otherwise Rs.

50,000.

 Here, Rs. 100,000 gift from friend > Rs. 50,000 limit → taxable in recipient’s
hands unless proven to be from friend’s agriculture income or taxable
income.

Taxable? → Yes, unless gifter proves it from taxable income.

Summary Table

Taxabl
Transaction Amount (Rs.) Reason
e?

Loan from student

20,000 No Loan not income
(cash)

Loan from teacher A

25,000 No Loan not income
(cash)

Loan from teacher B

50,000 No Loan not income
(cheque)

Gift from brother Not specified Exempt relative

No
(bike) value (brother)
 Taxabl
Transaction Amount (Rs.) Reason
e?

Gift from friend Non-relative gift above

100,000 Yes
(jewelry) Rs. 50,000
Total Taxable Income from these transactions:
Only jewelry gift potentially taxable → Rs. 100,000 to be included in Income from
Other Sources under Section 111 if not exempted.

Q) Mr. Taimoor who is 13 years old has earned income from business of Rs.
10 million. His father`s individual income is 20 million and mother`s
individual income is 25 million. Required: Calculate taxable income of Mr.
Taimoor assuming (a) Business is acquired in inheritance (b) Business is not
acquired in inheritance (means initiate by him).

Answer under Income Tax Ordinance, 2001 of Pakistan

We need to determine the taxable income of Mr. Taimoor (13 years

old) with:

 His business income = Rs. 10,000,000

 Father’s income = Rs. 20,000,000
 Mother’s income = Rs. 25,000,000

Relevant Law – Section 12 (Income of Minor Child):

Income of a minor child is generally clubbed with the income of the
parent whose total income (excluding minor’s income) is higher,
except:

 If income arises from manual work by the minor,

  If income arises from skill or talent of the minor,
 Or if business is acquired by inheritance – then minor’s income
is taxed separately (not clubbed).

(a) Business acquired in inheritance

 Business inherited → Minor’s income is taxed separately (Section

12(4)).
 No clubbing with parent’s income.
 Mr. Taimoor files separate tax return.
 Taxable income of Mr. Taimoor = Rs. 10,000,000 (full business
income).

Answer for (a):

Taxable Income of Mr. Taimoor=Rs. 10,000,000Taxable Income

of Mr. Taimoor=Rs. 10,000,000

(b) Business not acquired in inheritance (initiated by him)

 Since it is not inherited, Section 12 applies for clubbing.

 Step 1: Compare parents’ income excluding minor’s income:

o Father’s income = Rs. 20,000,000

o Mother’s income = Rs. 25,000,000
o Mother’s income is higher.
 Step 2: Minor’s income (Rs. 10,000,000) is added to mother’s
income for tax purposes.
 Step 3: Minor is still required to file a return showing this income,
but tax will be computed by clubbing.
  Taxable income of Mr. Taimoor in his own return = Rs.
10,000,000, but tax liability calculated as part of mother’s income (i.e.,
effectively no separate tax if mother pays higher marginal rate).

Answer for (b):

Taxable Income of Mr. Taimoor (in his own return)=Rs. 10,000,0

00Taxable Income of Mr. Taimoor (in his own return)=Rs. 10,00
0,000

(But this income will be clubbed with mother’s income for tax computation.)

Summary Table:

Cas Taxable Income in

Business Source Tax Treatment
e Minor’s Return

Acquired by Not clubbed – taxed

(a) Rs. 10,000,000
inheritance separately

Rs. 10,000,000 (but

Not inherited Clubbed with higher-
(b) tax on mother’s total)
(self-started) income parent (mother)
Q1) On 14 December 2022 Ahmed sold 10,000 shares in Interwood (Pvt.) Ltd
for Rs. 300,000. He had acquired these shares as follows:
• 5,000 shares were purchased at Rs. 18 per share on 5 February 2019.
• 5,000 bonus shares were allotted to him on 1 July 2020 when the fair
market value was Rs. 22 per share.

Step 1: Identify nature of shares and holding period

Interwood (Pvt.) Ltd is a private limited company.
Shares of private companies are treated as capital assets (unless held as
trading stock).
 Step 2: Acquisition cost of shares sold
Sale on 14 December 2022 of 10,000 shares for Rs. 300,000 (i.e., Rs.
30/share).

(a) First 5,000 shares – Purchased on 5 February 2019

 Purchase price: 5,000 × Rs. 18 = Rs. 90,000.

 Holding period: 5 Feb 2019 to 14 Dec 2022 → more than 1 year.
 These are capital assets held >1 year, so taxable under Capital Gains.

(b) Next 5,000 shares – Bonus shares allotted on 1 July 2020

 For bonus shares, cost under Eighth Schedule, Rule 8:

Cost = FMV on date of allotment (or if not determinable, proportionate cost
from original shares).
 Given FMV on 1 July 2020 = Rs. 22/share.
 Cost of 5,000 bonus shares = 5,000 × Rs. 22 = Rs. 110,000.
 Holding: 1 July 2020 to 14 Dec 2022 → more than 1 year.

Step 3: Separate consideration for each block

Total sale proceeds = Rs. 300,000 for 10,000 shares → average Rs. 30/share.
We allocate proceeds proportionately:

 For first 5,000 shares: 5,000/10,000 × 300,000 = Rs. 150,000.

 For bonus 5,000 shares: Rs. 150,000.

Step 4: Gain calculation

(1) Purchased shares:
Sale consideration = Rs. 150,000
Cost = Rs. 90,000
Gain = 150,000 – 90,000 = Rs. 60,000.

(2) Bonus shares:

Sale consideration = Rs. 150,000
Cost (FMV at allotment) = Rs. 110,000
Gain = 150,000 – 110,000 = Rs. 40,000.
Step 5: Total capital gain and taxability
Total capital gain = 60,000 + 40,000 = Rs. 100,000.

Both holdings >12 months → qualifies for reduced rate under S. 37(4A) if
applicable (depends on year and asset type).
For private company shares, if held >1 year, a lower fixed tax rate may
apply as per Division VII of First Schedule (but in 2022, capital gains on
securities were taxed at 12.5% if filer; for non-filer 15%). We assume Ahmed
is a filer.

However, since exact rates depend on the tax year and taxpayer status, gain
amount is computed first:

Capital gain taxable under S. 37 = Rs. 100,000.

Final Answer:

Type of Cost Sale Consideration Capital Gain

Shares (Rs.) (Rs.) (Rs.)

Purchased 90,000 150,000 60,000

110,00
Bonus 150,000 40,000
0

200,0
Total 300,000 100,000
00

Taxable Capital Gains = Rs. 100,000 (subject to applicable CGT rate for
private company shares held >1 year).

Q2) On March 01, 2023 Mr. Aleem sold 10,000 shares in Pakistan
Telecommunication Limited, a company listed on Karachi Stock Exchange for
Rs. 300,000. He had purchased these shares on July 01, 2022 for Rs.
200,000. Brokerage and other expenses on sale transaction were Rs. 1,500.
Mr. Aleem is a in the active taxpayers list under the Income tax Law.
 1. Details of transaction
 Asset: Shares of PTCL – listed on Karachi Stock Exchange (KSE).
 Quantity: 10,000 shares.
 Sale date: 01 March 2023.
 Sale proceeds: Rs. 300,000.
 Purchase date: 01 July 2022.
 Purchase cost: Rs. 200,000.
 Brokerage/expenses on sale: Rs. 1,500.
 Taxpayer status: Active taxpayer (filer).

2. Determine holding period

 Purchase: 01 July 2022.
 Sale: 01 March 2023.
 Holding period = 8 months → Less than 12 months.

3. Capital gains tax treatment for listed shares (as per

S. 37A)
For listed securities sold within 12 months of acquisition:

 Gains are subject to full taxation under normal tax rates (not final tax
unless specified). However, effective Tax Year 2022 onwards, capital gains
on disposal of listed securities are subject to advance tax under Division
VIIIA of First Schedule at fixed rates depending on holding period and filer
status.

Relevant rule (for TY 2023):

Holding period < 12 months → Gain taxed at 15% if filer (as per then
applicable rate in 2023).
(Note: Exact rate may vary by year; for TY 2023, for filers, short-term gain
rate was 15% on listed shares.)

4. Calculate chargeable capital gain

Sale consideration: Rs. 300,000
Less: Brokerage/expenses on sale: Rs. 1,500
Net sale proceeds: Rs. 298,500

Cost of acquisition: Rs. 200,000

Capital gain = Net sale proceeds − Cost

= Rs. 298,500 − Rs. 200,000
= Rs. 98,500

5. Tax liability
Since holding < 12 months:
Rate = 15% (for filer, as per First Schedule Division VIIIA for TY 2023).

Tax = 15% × Rs. 98,500 = Rs. 14,775

This tax is final tax under S. 37A(5) for listed securities.

6. Taxable income from this transaction

Even though tax is final, the capital gain amount is still part of total income
under the head “Capital Gains,” but tax paid is final and not adjustable.

Taxable capital gain under S. 37A = Rs. 98,500

Final tax liability = Rs. 14,775

Final Answer:

Amount
Description
(Rs.)

Sale proceeds 300,000

 Amount
Description
(Rs.)

Less: Brokerage/expenses (1,500)

Net proceeds 298,500

Less: Cost of acquisition (200,000)

Chargeable capital gain 98,500

Tax rate (filer, <12

15%
months holding)

Final tax liability 14,775

Taxable capital gain for income tax purposes: Rs. 98,500 (subject to
final tax @ 15%).

Q3) On June 15, 2023 Imran sold his personal car for Rs. 1,500,000. The car
has been originally purchased for Rs. 1,200,000 on September 13, 2020.
 Answer under Income Tax Ordinance, 2001

1. Nature of asset
 Personal car – a movable property, used for personal purposes, not part of
business assets.
 This is a capital asset (S. 37).

2. Capital gains tax on personal movable property

Under S. 37(8), gain on disposal of a personal movable property is
exempt from tax if:

 It is not part of business inventory, and

 It is a personal effect (for personal use).

Cars used for personal purposes generally qualify as personal movable

property.
Exception: If the car is luxury and treated differently under law, but
currently no such exclusion for capital gains.

3. Calculation of gain (though exempt)

 Sale date: 15 June 2023
 Sale price: Rs. 1,500,000
 Purchase date: 13 September 2020
 Purchase cost: Rs. 1,200,000

Holding period > 1 year.

Gain = 1,500,000 – 1,200,000 = Rs. 300,000.
4. Tax treatment
Gain on sale of personal car is exempt under S. 37(8) as it is a personal
movable property.

No capital gains tax payable.

No inclusion in taxable income.

Final Answer:

Item Amount (Rs.)

Sale proceeds 1,500,000

Purchase cost (1,200,000)

Capital gain 300,000

Taxability Exempt (personal movable property)

Taxable capital gain = Rs. 0

Tax liability = Rs. 0
 Q4) Mr. Mobeen has also paid a sum of Rs. 60,000 for purchase of dining table set on 15
January 2009 for his personal use. He sold the said set to Mr. Gufran for a sum of Rs. 90,000 on
27 June, 2023.

1. Nature of Asset

 Dining table set – purchased for personal use (household furniture).

 This is personal movable property as defined under S. 37(8) of the
Ordinance.

2. Capital Gains Tax Treatment

Under Section 37(8), any gain on disposal of personal movable

property is exempt from tax if it is for personal or household use and not
part of business inventory.

Examples: Furniture, car, jewelry (unless treated as luxury item under

specific provisions – but dining table set is clearly personal effect).

3. Calculation of Gain

 Purchase price (15 Jan 2009): Rs. 60,000

 Sale price (27 June 2023): Rs. 90,000
 Holding period: > 1 year (long-term).

Gain = 90,000 − 60,000 = Rs. 30,000.

 4. Taxability

 Exempt under S. 37(8) → No capital gains tax.

 Not included in taxable income.

Final Answer:

Description Amount (Rs.)

Sale proceeds 90,000

Purchase cost (60,000)

Capital gain 30,000

Taxable gain 0 (exempt as personal movable property)

Tax payable Nil

Q5) Mrs. Saleha is a resident person. She deposed of the following assets
during the tax year 2024. i) A painting which she inherited from her father
was sold for Rs. 1,250,000. The market value of the painting at the time of
inheritance was Rs. 1,550,000. The painting was purchased by her father for
Rs. 1,000,000. ii) She sold jewelry for Rs. 2,300,000 which was purchased by
her husband in March 2020 for Rs.1,300,000 and gifted to her on the same
date. iii) She disposed of her car for Rs. 1,800,000. The car was being used
for the purposes of her business. The tax written down value of the car at the
beginning of tax year 2024 was Rs. 1,600,000. The rate of depreciation for
tax purposes is 20%. iv) On 20 October 2022 she sold a dining table to
Faheem for Rs. 18,000, which she had purchased on 15 May 2024 for Rs.
15,000 for her personal use.

i) Sale of inherited painting

 Nature: Capital asset (personal use → personal movable property but

painting of value > Rs. 100,000 may be treated differently).
 Inheritance cost: FMV at date of inheritance = Rs. 1,550,000 (S. 76(1)
(a): cost to successor = FMV on date of inheritance).
 Sale proceeds: Rs. 1,250,000.
 Gain/Loss: 1,250,000 − 1,550,000 = Loss of Rs. 300,000.
 Taxability: Loss on personal movable property (not part of business)
is not allowable as capital loss (S. 37(8): personal movable property
gains are exempt, losses not deductible).
 Result: No income, no deductible loss.

ii) Sale of jewelry gifted by husband

  Gift from husband: Exempt under S. 111 (gifts between spouses).
 Cost for Mrs. Saleha: Cost to husband = Rs. 1,300,000 (gift
exemption but for capital gains, cost to previous owner is taken S.
76(1)(b)).
 Sale proceeds: Rs. 2,300,000.
 Gain: 2,300,000 − 1,300,000 = Rs. 1,000,000.
 Taxability: Jewelry is personal movable property but luxury item?
In Pakistan, jewelry is capital asset; gain on personal jewelry is
taxable as capital gain under S. 37 (no specific exemption for jewelry in
S. 37(8) unlike furniture/car).
Holding > 1 year (March 2020 to 2024), so reduced rate may apply if
considered capital asset; taxable in full under normal capital gains
rules.

iii) Disposal of business car

 Use: Business asset → depreciation claimed.

 Tax Written Down Value (TWDV) at beginning of TY 2024: Rs.
1,600,000.
 Depreciation rate: 20%.
 Depreciation for TY 2024: 20% × 1,600,000 = Rs. 320,000 (but
since sold during year, depreciation up to date of sale? Usually, for
asset sold, depreciation not claimed for full year; but here they may
give net effect).
 WDV after depreciation: 1,600,000 − 320,000 = Rs. 1,280,000 (if
full year’s depreciation allowed).
 Sale proceeds: Rs. 1,800,000.
  Gain on disposal (business asset): 1,800,000 − 1,280,000 = Rs.
520,000 → This is business income under S. 22(1)(c) (depreciation
recapture).
Or if depreciation not fully taken, then WDV at time of sale = 1,600,000
× (1 − 20%)^0? The problem seems to give TWDV at start of year and
rate but not when sold; assume sold during year, adjust depreciation
proportionately.
But in exams, they may simply take:
Capital gain for business asset = Sale price − WDV at time of
sale → if WDV is after full year’s depreciation (if sold at year end) =
1,280,000 → gain = 520,000.
Let's keep it as Rs. 520,000 taxable as business income (not capital
gain).

iv) Sale of dining table (purchased 15 May 2024, sold

20 Oct 2022 — date mismatch)

There is a date error: purchased May 2024 but sold Oct 2022 (impossible).
Assuming purchase 15 May 2022 (TY 2022) sold 20 Oct 2022.

 Personal use dining table → personal movable

property → exempt under S. 37(8).
 Gain = 18,000 − 15,000 = Rs. 3,000 → exempt.

Summary of taxable amounts

 Gain/ Head of
Asset Taxable?
(Loss) Income

(300,00 No (exempt, loss not

Painting -
0) deductible)

1,000,00
Jewelry Yes Capital Gains
0

Business Business
520,000 Yes
Car Income

Dining
3,000 No (exempt) -
Table

Total Taxable Income from these transactions:

Capital Gains (Jewelry) = Rs. 1,000,000
Business Income (Car disposal) = Rs. 520,000

Final Answer:

1. Painting: Loss Rs. 300,000 – not deductible.

2. Jewelry: Capital Gain Rs. 1,000,000 – taxable.
3. Business Car: Rs. 520,000 gain – taxable as business income.
4. Dining Table: Exempt.

Total taxable income from these = Rs. 1,520,000

(1,000,000 + 520,000).