1

Examples and Practice Questions for Capital Gains & Income

from Other Sources
Ex.1
Mr. Qamar disposed of the following assets during Tax Year 2012:
Assets Purchase Sale Date Cost Sale Proceeds
Date
Shares of AB (Pvt.) Co. 01/01/08 31/05/12 40,000 70,000
Shares of DE (Pvt.) Co. 13/03/11 15/06/12 20,000 5,000
Shares of D Public Unlisted Co. 01/01/08 30/04/12 30,000 20,000
Shares of N Public Unlisted Co. 01/03/11 26/02/12 60,000 200,000
Jewellery of his wife 13/07/07 15/08/11 10,000 80,000
Painting 13/04/07 14/04/12 90,000 20,000
Exempt asset A 13/04/07 14/04/12 20,000 30,000
Exempt Asset B 13/04/07 14/04/12 25,000 5,000
Coin 13/04/07 14/04/12 200,000 600,000
Car of son 13/04/07 14/04/12 300,000 600,000
Home furniture 15/05/07 14/05/12 3,000 15,000

He also informed you that he has earned income from business of Rs.900,000 during the year.
Required:
Calculate his taxable liability?
Ex.2
Mr. Ibrahim has disposed of the following assets in TY 2012:
Assets Purchase Sale Date Cost Sale Proceeds
Date
Shares of AB (Pvt.) Co. 01/01/08 01/01/12 300,000 900,000
Shares of DF Listed Co. 01/01/05 31/08/11 200,000 600,000
Shares of GE Unlisted Co. 01/01/07 31/03/12 30,000 10,000
Shares of Q Listed Co. 01/04/11 31/07/11 90,000 200,000
Shares of M Listed Co. 01/05/11 31/12/11 30,000 90,000
Shares of R Listed Co. 13/05/11 15/07/11 60,000 25,000

He also informed you that he has earned income from business of Rs.1,000,000 during the year.
Required:
Calculate his taxable liability?
Ex.3
Mr. Asim is working as a CFO in Ammar (Pvt.) Ltd. He has purchased a right on
February 1, 2007 to purchase 700 shares of company by paying Rs.2,800 as cost
against right Exercising the rights he purchased the shares on May 1,2007 by
paying Rs.43 per share. All shares were sold by him on April 1, 2011. Details' of market price
per share:

By Khalid Mehmood, FCA

 2

Date FMV/share
February1,2007 35
May1,2007 75
April1, 2007 90 _.

Required:
Calculate income for relevant years under relevant heads?
Ex.4
Mr. A gifted some gold to Mr. B on passing module A on 18 May 2004. Mr. B on receiving
the result of module E on 15 May 2012 disposed of whole of the gold.
Fair market value on 18 May 2004 Rs.200,000
Fair market value on 15 May 2012 Rs.900,000
Required:
Calculate tax liability of Mr. B for TY 2012?
Ex.5
In May 2012, Hameeda sold certain personal assets at the following prices:
Rs.
Plot in DHA Karachi 10,000,000
Paintings 2,000,000
Jewellery 5,000,000
Additional information:
Plot in DHA Karachi was inherited by her from her father in May 2006. It was purchased by her
father for Rs.4,000,000 and the Market value at the time of inheritance was Rs.5,000,000.
Paintings were inherited from her mother in July 2011. These paintings were purchased by her
mother for Rs.1,000,000 and market value at the time of inheritance was Rs.2,350,000.
Jewellery costing Rs.3,000,000 was purchased and gifted to her by her husband inn March 2009.
Required:
Discuss taxability of Hameeda in respect of the above gains/losses on sale of assets in the context
of Income tax ordinance, 2001.
Q1
Ms Ruby, aged 55, is a taxpayer resident in Pakistan. During the year ended 30 June 2014, she
disposed of the following assets:
Immovable assets
i. 15 July 2013: Sold her house in Lahore for Rs.55,000,000. She had inherited the house
from her brother in his will on 15 December 2012. The house had cost her brother
Rs.20,000,000 in the year 2006. At the time of the transfer into her name, the market
value was estimated to be Rs. 40,000,000. Before the sale of the house, Ruby incurred
Rs.10,000,000 on the extension of its covered area. Income tax at 0·5% of the sale price
at the time of its transfer to the buyer was collected at source by the transferring
authority.
ii. 30 September 2013: The government of Punjab compulsorily acquired her land under the
Land Acquisition Act, 1894 for the construction of a water dam and paid her

By Khalid Mehmood, FCA

 3

compensation of Rs. 30,000,000. She had purchased the land for Rs.25,000,000 on 1
January 2012. On 7 October 2013, she invested the whole amount of the compensation
received in the acquisition of another piece of land in an area designated by the
government for the people affected by the dam.
iii. 1 January 2014: Ruby sold her ten acres of agricultural land in Sahiwal for Rs.5,000,000.
She had received the land as gift from her father on 30 June 2012, on which date the fair
market value of the land was estimated at Rs.2,000,000. Originally the land had been
given to her father for free to make it fit for cultivation. Ruby incurred the following
expenditure on the land:

Rs.
District Council fee for the transfer of the land into her name 200,000
Fine paid for a violation of the terms of use of the land 150,000
Cost of construction of water courses for the irrigation of the land 300,000
Commission paid to a commission agent for the sale of the land 50,000
Movable assets
1. 30 August 2013: She sold two paintings by renowned artists as below:
a. Gulgee‟s painting for Rs.300,000 which she had originally acquired for
Rs.400,000 on 15 August 2010 to display in her drawing room.
b. Shakir Ali‟s painting for Rs.800,000 which she had acquired for Rs.700,000 on 15
January 2013 for her study room.
c. Rs. 25,000 was paid for an expert valuation in respect of each painting on the date
of sale.
2. 15 September 2013: She sold her golden bangles for Rs.350,000. She had incurred the
following expenditure in respect of the bangles:
– Acquired gold from Saudi Arabia on 1 January 2012 for 10,000 Saudi
Riyals.
– Paid import duties and other indirect taxes of Rs. 8,000.
– Paid Rs. 30,000 to a goldsmith on 10 January 2012 for preparation of the
bangles‟ exquisite design.
– Paid Rs. 10,000 as Zakat under the existing Zakat and Ushr law in
Pakistan on 1 August 2013.
Currency rates on 1 January 2012 were:
Notified by the State Bank of Pakistan 1 Saudi Riyal = 22 Pak Rupees
Open market rate 1 Saudi Riyal = 24 Pak Rupees
3. 30 September 2013: Sold 10,000 shares in Reliable Energy Limited, a company listed on
the Islamabad Stock Exchange, for Rs.350,000. She had acquired these shares on 15
October 2011 at Rs. 15 per share by subscribing to the initial public offer of the shares by
the company. She was allowed a tax credit of Rs. 25,000 in the tax year 2012 against this
investment. No tax was withheld at source on this transaction.
4. 15 December 2013: Sold 11,000 shares in Pinewood (Pvt) Ltd for Rs.330,000. She had
acquired these shares as follows:
– 5,000 shares purchased at Rs. 20 per share on 5 February 2002.
– 5,000 rights issue shares acquired by her on 1 July 2005 at Rs. 20 per
share when the breakup value was Rs. 25 per share.

By Khalid Mehmood, FCA

 4

– 1,000 bonus shares allotted to her on 1 October 2011 when the fair
market value was Rs. 35 per share.
A capital value tax of Rs. 2,500 was paid at the time of the acquisition of the
rights issue shares.
5. 15 February 2014: Sold her tractor (used for agricultural purposes on her land in Sahiwal)
for Rs. 1,200,000. The market value of the tractor at the time of acquisition on 1 February
2013 was Rs. 1,500,000, but Ruby had purchased the tractor from the Government of
Punjab at the subsidized price of only Rs. 1,000,000. She had incurred Rs.90,000 on
normal repairs for the tractor.
6. 1 April 2014: Sold 15,000 shares in Sun Electric (Pvt) Ltd for Rs.600,000 which she had
acquired on 1 July 2010 from her ex-employer under an employee share scheme for
Rs.150,000. She had the option to dispose of the shares on or after 1 July 2012.
The fair values of the shares were as below:
– Rs. 20 per share on 1 July 2010
– Rs. 30 per share on 1 July 2012
– Rs. 45 per share on 1 April 2014
Other information:
 Unless stated otherwise, Ruby paid all amounts through crossed cheques and deducted
and deposited tax as required under the law.
 Advance tax of Rs. 240,000 has been paid by Ruby on the basis of her tax liability for the
tax year 2013.
Required:
Compute the tax payable by Ms. Ruby for the tax year 2014 on the taxable income arising
from the above transactions. Give brief reasons for your treatment of each item.
Note: The reasons/explanations for the items not listed in the computation should be shown
separately.
Q2
Mr Ilyas, aged 50 and resident in Pakistan, disposed of the following assets during the year
ended 30 June 2013:
Immovable assets
a) 5 July 2012: Sold his house in Lahore for Rs.30,000,000. He had bought the house on 5
December 2011 for Rs.20,000,000, incurring the following expenses:
– stamp duty at 2% of the purchase price;
– Capital value tax at 2% of the purchase price;
– Broker‟s fee at 2% of the purchase price; and
– Corporation tax at 1% of the purchase price.
During his ownership of the house, Ilyas incurred the following expenses:
– Rs. 300,000 on the modification of the drawing room to give it a modern look;
and
– Rs. 25,000 as property tax.
Further payments made at the time of the sale of the house were:
– Broker‟s fee at 2% of the sale price;
– Income tax at 0·5% of the sale price at the time of the transfer of the house to the
buyer.

By Khalid Mehmood, FCA

 5

b) 30 September 2012: The government of Punjab compulsorily acquired his land under the
Land Acquisition Act, 1894 and paid him Rs.30,000,000. He had purchased the land for
Rs. 25,000,000 on 1 January 2011. On 7 October 2012, he invested the whole amount of
the consideration received in a ten-year fixed term deposit account with the National
Bank of Pakistan. The profit on the deposit will become due to Ilyas at the time of
maturity of the term.
c) 1 January 2013: Ilyas entered into a contract for the sale of his house in Islamabad with
Mr Sohail for a consideration of Rs.50,000,000. Sohail paid Rs.5,000,000 at the time of
the contract for sale. However, he failed to pay the balance of the amount by 30 April
2013 and Ilyas forfeited the Rs.5,000,000 in accordance with the terms of the contract.
Subsequently, the house was sold for Rs.49,000,000 to Mr. Mumtaz on 30 June 2013.
Ilyas had inherited the house on 25 June 2010, on which date the fair market value of the
house was estimated at Rs. 39,000,000.
Movable assets
1. 15 July 2012: Sold 2,500 shares in Pakistan Petroleum Ltd, a company listed on the
Karachi Stock Exchange, for Rs.500,000. He had purchased these shares on 15
September 2011 for Rs.350,000. No tax was withheld at source on this transaction.
2. 30 August 2012: Gifted a painting, having a market value of Rs. 1,000,000, to his
brother, a citizen of Germany, and who had lived in Germany for the last ten years. In
2012 the brother visited Pakistan for a period of 180 days, flying back to Germany again
on 30 August 2012. Ilyas had bought the painting for Rs.500,000 on 1 January 1990.
3. 15 September 2012: Gifted jewellery, having a fair market value of Rs.1,500,000, to his
sister who is an employee of the Federal Government and has been posted in Saudi
Arabia since 1 June 2010. Ilyas had bought this jewellery on 1 September 2011 for
Rs.500,000.
4. 14 December 2012: Sold 10,000 shares in Interwood (Pvt.) Ltd for Rs.300,000. He had
acquired these sharesas follows:
– 5,000 shares were purchased at Rs. 18 per share on 5 February 2010.
– 5,000 bonus shares were allotted to him on 1 July 2010 when the fair market
value was Rs. 22 per share.
– Incidental charges relating to the purchase and sale of these shares of Rs.10,000
were paid in cash.
5. 15 February 2013: Discarded a machine which he had imported from China for
Rs.1,000,000 on 1 January 2013 to start the business. However, the machine was badly
damaged during the shipment, rendering it unfit for use. The shipping company paid him
Rs.850,000 as damages. The scrap value of the machine on the date it was discarded was
estimated to be Rs.200,000. The documentation charges incurred in connection with the
claim for damages were Rs.25,000.
6. 15 April 2013: Sold 50,000 shares in Delta (Pvt.) Ltd for Rs.450,000. The shares were
originally purchased for Rs.550,000 on 15 May 2009. On 30 June 2012, Ilyas had made a
provision for diminution in the value of the shares of Rs.125,000.
Other information:
I. Unless stated otherwise, Ilyas paid all the amounts through crossed cheques and tax was
deducted and deposited as required under the law.

By Khalid Mehmood, FCA

 6

II. Ilyas has a brought forward capital loss of Rs.700,000 from the tax year 2011 which had
arisen on account of a sale of shares in Pakistan Petroleum Ltd.
III. Advance tax of Rs.25,000 has been deducted on his cash withdrawals from the bank
during the tax year 2013.
IV. Advance tax of Rs. 50,000 has been paid by Ilyas on the basis of his tax liability for the
tax year 2012.
Required:
Compute the tax payable by Mr. Ilyas for the tax year 2013 on the taxable income arising
from the above transactions. Give brief reasons for your treatment of each item.
Q3
Mr. Bilal, aged 45 and resident in Pakistan, disposed of the following assets during the year
ended 30 June 2013:
Immovable assets
1. 5 July 2012: Sold agricultural land for Rs.9,000,000 which he had bought on 15
September 2011 for Rs. 6,500,000, along with paying transfer fees of Rs.160,000.
The following expenses were also made by Bilal in relation to the property:
a. Rs.40,000 for a valuation of the property;
b. Rs.80,000 on account of brokerage to a real estate agent; and
c. Rs.200,000 on improving the fertility of the land by better drainage.
d. Although the above amounts were all paid through a crossed bank draft, no tax
was deducted by Bilal.
e. The registration authority collected tax on the sale proceeds of land from Bilal as
required under the law.
2. 15 July 2012: Exchanged his plot of land in Lahore which had a fair market value of Rs.
7,500,000 for a plot in Okara, owned by Mr. Asad, which had an estimated value of
Rs.6,500,000. Bilal had bought his plot in Lahore on 15 February 2011 for Rs.6,000,000.
It is expected that due to future development in the area, the price of the plot in Okara
will rise to Rs.8,000,000 in 2014.
a. No tax was collected by the transferring authority at the time of this transaction.
3. 10 August 2012: Sold a flat in Karachi for Rs. 5,000,000 which he had bought on 1
January 1995 for Rs.4, 000,000.
Securities and other shares
1. 25 June 2013: Sold 100,000 call options (right to purchase shares) in a public company
listed on the Islamabad Stock Exchange at Rs.2·5 per call option. He had purchased these
call options on 20 June 2013 at Rs.1·90 per call option. Other admissible expenses
incurred on these transactions were Rs.10,000.
2. 30 June 2013: Sold 5,000 shares in Turbo Motors Limited, an unlisted company in which
50% of the shares are held by the Government of Balochistan, at Rs.170 per share. He
had purchased these shares on 1 November 2012 at Rs. 120 per share. The following
expenses were incurred in connection with these shares:
a. Capital value tax paid at 0·01% of the purchase price of the shares; and
b. commission of Rs. 0·10 per share on each side of the trade.
3. 1 January 2013: Sold 150,000 shares in Farid Sugar Mills (Pvt) Ltd (FSM) for Rs.
3,000,000. He had received these shares on 1 January 2011 as a dividend in specie from

By Khalid Mehmood, FCA

 7

United Sugar Mills Ltd. On 1 January 2011, the fair market value of the shares in FSM
was estimated to be Rs.10 per share.
Additional information:
a) Bilal had suffered a loss of Rs.440,500 under the head „capital gains‟ in the tax year 2010
from a sale of shares in a private limited company. The loss has remained unadjusted as
he had no capital gains in the tax years 2011 and 2012.
b) Tax on cash withdrawals from his bank during the year ended 30 June 2013 is Rs.
12,000.
c) With the prior approval of the Commissioner, Bilal has opted that his capital gains may
NOT be determined and taxed under the Eighth Schedule to the Income Tax Ordinance,
2001.
Required:
Compute the tax payable by Mr. Bilal for the tax year 2013 on the taxable income arising
from the above transactions. Give brief reasons for your treatment of each item.
Q4 (Dec-13)
Mr. Iqbal, aged 45 years, is working as a Chief Engineer in a listed company Tameer Limited
(TL). The company is engaged in the manufacture of chipboards for the local market. He derived
following emoluments during the tax year ended 30 June 20X4:
Rupees
Basic salary (per month) 300,000
Cost of living allowance (per month) 50,000
Milk allowance (per month) 10,000

In addition to the above emoluments, Mr. Iqbal was also provided the following:

1. Special bonus equal to one month‟s basic salary paid on 5 June 20X4.
2. A new company maintained car for his personal use. The car was purchased on 1 March
20X4 at a cost of Rs.1,800,000. However, the cost of the car would have been
Rs.3,000,000 had the company obtained it on finance lease. Mr. Iqbal, in accordance with
the terms of his employment, purchased his previous car from TL for Rs. 250,000. This
car was provided to him solely for business purposes. The fair market value of the car at
the time of sale to Mr. Iqbal was Rs.600,000.
3. A reimbursement of Rs.36,000 in respect of driver‟s salary. Mr. Iqbal paid Rs.60,000 to
the driver for four months.
4. A fully furnished accommodation in DHA, Karachi. The fair market value of the rent was
estimated to be Rs. 85,000 per month.
5. An option to acquire 4,000 shares in TL‟s parent company, Tameer Inc. which is listed on
New York Stock Exchange was granted to him in May 20X3. Mr. Iqbal exercised the
option on 5 January 20X4 at a price of USD 1.5 per share. The market value of the shares
at the close of business on 5 January 20X4 was USD 2.5 per share. He sold 3,000 shares
on 30 June 20X4 at a price of USD 3 per share. The dollar rupee parity on both the above
dates was USD 1 = Rs.100.
6. On 15 May 20X4 Mr. Iqbal was provided 800 shares in TL as a reward for his excellent
performance. However, he was restricted from selling or transferring these shares before

By Khalid Mehmood, FCA

 8

16 November 20X4. The market value of these shares at the close of business on 15 May
20X4 was Rs.12.5 per share.
Mr. Iqbal received additional income as follows, for the tax year 20X4:
 Annual rent of Rs.800,000 from letting out a building to KK Enterprise. Following
expenses were incurred by Mr. Iqbal in relation to the building: Repairs Rs.200,000, Fire
insurance premium Rs.30,000, Ground rent Rs.10,000, Watchman‟s salary Rs.8,000 and
Interest of Rs.15,000 on a loan obtained for building renovation by creating first charge
on the building in favor of a scheduled bank.
 Brokerage fee of Rs.200,000 in connection with the transfer of two apartments in
Islamabad. The brokerage fee was received in cash. Mr. Iqbal incurred an expense of
Rs.30,000 against telephone costs and air travel to Islamabad in connection with the
above deal. He also paid Rs.10,000 as a gift to his brother for showing the apartments to
his clients in Islamabad.
 Profit of Rs.150,000 on a savings account maintained with an Islamic bank. The bank
deducted withholding tax of Rs.15,000 and Zakat of Rs.25,000.
 He also received an income tax refund of Rs.225,000 related to tax year 20X2. The
amount included Rs.25,000 being compensation for delayed refund.
Other related information is as under:
a) TL deducted withholding tax of Rs.1,200,000 from Mr. Iqbal‟s salary during tax year
20X4.
b) On 1 July 20X3, Mr. Iqbal acquired a life insurance policy and paid a premium of
Rs.500,000. He also contributed Rs.1,600,000 to an approved pension fund.
c) On 1 August 20X3, he purchased 50,000 shares in a listed company AB Limited at a
price of Rs.20 each. On 1 January 20X4, AB Limited announced 20% right shares to
existing shareholders at a price of Rs.18 per share. On 25 January 20X4, Mr. Iqbal
subscribed the right issue in full.
Required:
Under the Income Tax Ordinance, 2001 and Rules made thereunder, compute the taxable income
and income tax payable by or refundable to Mr. Iqbal for the tax year ended 30 June 20X4.
Q5 (Dec-12)
Mr. Yaqeen, a Pakistani citizen, returned to Pakistan on 30 June 20X1 after residing for six years
in Norway. On 1 July 20X1 he joined a private hospital KKUH and received following
emoluments:
Rupees
Basic salary (per month) 500,000
Medical allowance (per month) 60,000
Leave fare assistance 240,000
On 1 January 20X2 Mr. Yaqeen resigned from the hospital and joined Dil (Private) Limited
(DPL), a company engaged in health care and production of dental products. Mr. Yaqeen
received Rs. 3,000,000 from DPL as consideration for joining the company. DPL agreed to pay
following emoluments to Mr. Yaqeen for the tax year 20X2:
Rupees
Basic salary (per month) 800,000
Medical allowance (per month) 80,000
Utilities allowance (per month) 100,000

By Khalid Mehmood, FCA

 9

On 1 January 20X2 DPL provided him with refrigerator, cooking range and washing machine for
his use at home. The book value of these appliances was Rs.200,000 and these were returnable to
the company after four years. 15% depreciation was charged by DPL on these appliances.
On 31 March 20X2 he was given an option to purchase 2,000 shares of DPL at Rs.50 per share.
The breakup value of the company on that date was Rs.150 per share.
On 1 April 20X2 he received a loan of Rs.5,000,000 from DPL for the purchase of a house. The
profit on loan was payable at the rate of 8% per annum. The prescribed bench mark rate is 10%
per annum.
Other information relevant to Mr. Yaqeen for the tax year 20X2 is as under:
1. On 15 April 20X2 he fell ill and was admitted to KKUH where he had been working
during his employment. The hospital incurred Rs.50,000 on his treatment but charged
nothing to him.
2. On 30 April 20X2 he received salary arrears of Rs.900,000 from his ex-employer in
Norway.
3. Mr. Yaqeen had 30 acres of agricultural land in Dheer which he did not cultivate himself.
During tax year 20X2 he received annual rent of Rs 600,000 from the tenant cultivating
the land.
4. On 1 May 20X2 he spent Rs. 800,000 on the renovation of his residential house. The
entire amount was obtained as a loan from a scheduled bank on which a profit of Rs.
20,000 was paid to the bank during the tax year 20X2.
5. On 15 June 20X2 he received insurance claim of Rs. 600,000 against theft of a painting
which was stolen on 31 May 20X2. The painting was purchased by him on 1 January
20X1 for Rs.350,000. He had paid insurance premium of Rs. 24,000 and also paid
lawyer‟s fee of Rs.50,000 who represented him in the settlement proceedings.
6. On 15 July 20X1 Mr. Yaqeen received 20,000 shares in AB (Private) Limited (ABL), a
company incorporated under the Companies Ordinance, 1984 as a dividend in specie. On
30 June 20X2 he sold 15,000 shares in ABL for Rs.425,000. The fair market value of
these shares, on the date of issue, was estimated at Rs.25 per share.
Required:
Under the provisions of Income Tax Ordinance, 2001 compute the taxable income and net tax
payable for the tax year 20X2.
Q6 (Jun-11)
Mr. Khan has been working for a listed company Turtle Limited (TL) for the last many years.
The details of his emoluments during the tax year ended June 30, 20X4 are as under:
Rupees
Basic salary (per month) 350,000
Conveyance allowance (per month) 50,000
In addition to the above cash emoluments, Mr. Khan was also provided with the following:
a. A rent free furnished accommodation with a fair market rent of Rs. 100,000 per month.
b. An 1800cc company maintained car, both for business and private use. The car was
purchased by TL on July 1, 20X1 at a fair market value of Rs. 2,000,000.
c. On July 1, 20X3 he was provided with an interest free loan of Rs. 2,500,000 which is
repayable in lump sum in December 20X4. The prescribed benchmark rate is 13% per
annum. The prescribed benchmark rate is 13% per annum. On December 1, 20X3 Mr.
Khan utilized 60% of the amount of loan for purchasing a double storey bungalow. The

By Khalid Mehmood, FCA

 10

total cost of the bungalow was Rs. 25,000,000. The bungalow, on its ground floor, also
had a suitable space for opening a departmental store.
In order to increase its operational efficiency, TL announced a redundancy scheme to its
employees. Mr. Khan opting for the scheme resigned from TL with effect from January 1, 20X4.
Upon resignation, 25% of his outstanding loan balance was waived by TL and the remaining
loan amount was adjusted from his final settlement. He received the following payments from
TL:

Rupees
Compensation under the redundancy scheme 4,000,000
Gratuity under unapproved scheme 2,000,000
Following further information is also available:
i. Tax of Rs. 1,837,000 was withheld by TL from the above payments.
ii. Mr. Khan was allowed to purchase the 1800cc car at an accounting book value of
Rs.1,000,000 which he sold in the open market at a price of Rs.1,500,000.
iii. On March 1, 20X4 Mr. Khan rented out the ground floor of his bungalow to Mr. Riaz, for
establishing a departmental store, at a monthly rent of Rs.137,500. Due to the strategic
location of the store, he also received adjustable and non-adjustable deposits of Rs.
600,000 and Rs. 500,000 respectively.
iv. On April 1, 20X4 he rented out the residential portion of the bungalow to a Commercial
Bank for their marketing executive. He received gross amount of Rs. 2,400,000 as two
year‟s advance rent. The Bank deducted tax of Rs. 197,500 from such payment.
v. A donation of Rs. 500,000 was made to an un-approved trust for the construction of
mosque.
vi. In July 20X1, Mr. Khan was issued shares in TL. The fair market value of shares at the
time of issue was Rs.500,000. He disposed-off these shares in June 20X4 at a gain of
Rs.500,000.

Required:
Compute the taxable income, tax liability and tax payable/ refundable, if any, to Mr. Khan for the
tax year 20X4. The average rate of tax of Mr. Khan for the last three years was 18%.
Q7 (J13)
a) What is meant by “Securities” under the provisions of Income Tax Ordinance, 2001?
Briefly describe “Holding period” in relation to securities as provided under the Income
Tax Rules, 2002.
b) Mr. Parekh acquired and disposed of 3,500 shares of a listed company, Big Limited (BL).
The details are as follows:

Dated Acquisition Disposal

No. of shares Rate No. of shares Rate
31-03-2012 1,400 20 - -
15-09-2012 700 22 - -
01-04-2013 900 18 - -
01-05-2013 - - 600 17

By Khalid Mehmood, FCA

 11

07-05-2013 - - 800 19
21-05-2013 - - 700 18
31-05-2013 500 23 400 25
31-05-2013 - - 1,000 27
Required:
Under the provisions of Income Tax Ordinance, 2001 and Rules made thereunder, calculate the
amount of capital gain / loss and tax thereon, if any, on the above transactions. Ignore incidental
expenses on cost of acquisition of securities.

By Khalid Mehmood, FCA