FIN623 Solved MCQs and Subjective Questions by Instructor

FIN623 Taxation Management MCQs and Subjective Questions Solved and Verified by Course Instructor of VU ,

Shared by Fuad Hasan from LMS Moderated Discussion Board

FIN623 Taxation Management - Question:  Subject: Deduction at source

Dear sir, If salary of person is not fall in tax rate, than what will be the accounting entry in business, 1. Either this salary is treated as business expense and deducted during taxable income computation, 2. Or this salary is not taken as expense and not deducted from taxable income. If the deduction at source is done at a particular rate as the salary of the person fall under the tax rate , than 3. Is this deduct able amount submitted to govt. as tax ? 4. Is the balance salary treated as expense ? regards.

Instructor's Reply:

If salary is below the taxable limit then no tax is charged. The tax deduction at source is done on those salaries which are taxable. The whole amount of tax is gathered and submittes to tax department. The amount of tax on each taxable salary is calculated according the specific slab rate in which the salary falls.

FIN623 Taxation Management - Question: Subject: Depriciation

Dear sir, As u replied my question of depreciation, Then either the asset is disposed off or sold out. If it is sold then the salvage value is booked and the asset is removed from the Balance sheet. In above answer if the case is that the asset is neither sold out or disposed off, and continuing in process what will be the treatment. And if a some changes its status from individual to Limited company than what will be the treatment of assets and depreciation it the life of assets is more than 10 years. As fixed assets value is not shown in individual balance sheet, now what will he do? Regards.

Instructor's Reply:

All the assets have their estimated useful life and depreciation is charged uptill the end of the estimated useful life of the asset. It is necessary for the companies to charge the depreciation. When the asset is of no more use then it is disposed off or sold out. There is no other method to deal assets. It is the normal process which is done in the companies.

FIN623 Taxation Management - Question: No.concept is clear about "Accrual basis mandatory" adopt only the company or any firm. please shortly brief in this regards. Thanks.

Instructor's Reply:

This is the accounting system. It means that it is necessary for the companies to adopt this system. The sole proprietor can use the cash basis system of accounting.

FIN623 Taxation Management - Question: Dear sir, In lecture 36 example 1, The salaries amount is added back as no deduction at source is done. But the question is that if we take the total amount Rs.350,000/- than tax calculation are done at a given rate, but either this salary is for a single employee or more than 1 employees. If this salary is for 3 employees 100,000+100000+150000 per Annam than why we deduct tax at source because their salary is tax exempt according to schedule. And why these amounts are added back. Similarly if this salary is for a single employee than there will be tax deduction at source. So plz clear my point. Regards.

Instructor's Reply:

This tax calculation is at the end of the company not at the end of employees. On salaries tax was not deducted by the company that is why that amount would become the income of the company and would be added back, these amounts were added back and tax will be calculated on total amount after adding back all the missing items given in the example.

FIN623 Taxation Management - Question: Mr. Tareen let out a house at the monthly rent of Rs. 150,000 and received a deposit of Rs. 65,000 not adjustable against the rent. What would be his tax payable?  ► Rs. 3,250 ► Rs. 325 ► Rs. 92,400 ► Rs. 215,000  Yearly salary.....150000*12 = 1800000 +=non-adjustable advance    =   6500 total                                     =   1806500 Tax payable = 57500 + (806500=806500*10/100) tax payable= 138150  but there is not such option in above question.

Instructor's Reply:

Your answer is right. From where you have taken the question?

FIN623 Taxation Management - Question: Respectable Sir,                 Sir please tell me that Mr. A Resdent person and live in 182 or more days in Pakistan his income Applicable for taxable income?

Instructor's Reply:

If a person lives in Pakistan 183 or more days then he is resident individual and liable to pay tax.

FIN623 Taxation Management - Question:    Dear Sir,           Explain me what is Flat Tax, Marginal Tax and Applicable Tax.

Instructor's Reply:

A system in which all levels of income are taxed at the same rate.  Tax rate paid on an additional unit of income. In a progressive tax regimen, the marginal tax rate increases as the income rises, and the highest income bracket attracts the highest marginal tax rate.

FIN623 Taxation Management - Question: what does mean by the "filing of the tax return"?

Instructor's Reply:

It means to submit the income tax form that includes the details of  your income.

FIN623 Taxation Management - Question: formula of tax credit calculation i) (A/B) * C ii) (A/B)-C iii) (A/B) + c iv) All of the given options.

Instructor's Reply:

Dear Student, This is the formula of tax credit calculation which is A/B*C.

FIN623 Taxation Management - Question: Mr. A is an employee of Government of the Punjab, his data for the year 2009 is given below. Salary Rs. 60,000 per month Gratuity Rs. 1,000,000 Tax deducted at source Rs. 54,000 What will be the Mr. A's taxable income for tax year 2009?

Instructor's Reply:

Gratuity is exempt and tax deducted at source is subtracted after calculating the taxable income. So the taxable income will be 60,000*12=72,000

FIN623 Taxation Management - Question:   Mr. Adeel owns a property which he has rented out for Rs.10, 000 per month. The local authority has determined the rental value of the property as Rs.144, 000. He has no other income. Required: What will be the fair market value of the property? How much tax will be payable by Mr.khan for the tax year 2009?

Instructor's Reply:

Total rent will be 10,000*12= 120,000 and the value determined by the local authority 144,000. The amount whichever will be higher will be the fair market value so 144,000 is the fair market value.

FIN623 Taxation Management - Question: Dear sir,     Please sir explain why below items are not included in the solution of assignment no 02.Please sir give me answer with detail. Compensation for early rumination Bench mark rate on loan Bench mark Thank You,

Instructor's Reply:

Compensation for early termination belongs to tax year 2011 as he was terminated on December 2010. Bench mark rate is used for the clculation of loans given to employees.

FIN623 Taxation Management - Question: Dear Sir, AOA, Please uploaded the rates of Page No.126 to Page No.130 of handouts according to tax year 2010.

Instructor's Reply:

Dear Student, Only those rates which have changed have been updated and uploaded on the LMS. Those rates which have not changed have not been uploaded on the LMS. You can use the rates of Tax year 2009 in 2010 as they have not changed. So there are same for both tax years.

FIN623 Taxation Management - Question: Dear Sir, I am confused about taxable income of a salaried individual and employee of a company. My question is, if all the employees salary of a company are comes under tax rate, than 1.Either they are charged individual (filing their returns individually) 2.Or the tax is deducted by the company from their salary ( the return is submitted by the company under expenses) If they are submitting their individual tax and company also deduct the tax, than the salaried persons are double taxed? Plz clear my point as m confused. As if company is not deducting the tax from salary at source than it will not claim this salary as expense. Or the only those employees are taxed whom salaries are not come under the tax rate individually but from the company side the collectively salaried is payable to tax. But if think so than the concept of Deduction at source is failed. Waiting for your reply.

Instructor's Reply:

The company deducts the tax of those persons who come under the minimum tax bracket. Those who do not earn taxable income are not taxed. If the company deducts the income tax of the salaried person then he would not show this in his income tax return form, however he would show other sources of income. Salaried persons are not doubled taxed.

FIN623 Taxation Management - Question: Dear sir, As described the gems, stones, jewelry and antique which are not held by the assesses for his family members are capital assets, and any profit obtained by a person from their disposal is Capital Gain. On the other hand a person who associate with this business the income obtained is Income from Business. How can we differentiate it from each other. Regards.

Instructor's Reply:

If someone is involved in the trading of precious metals then this would be his business and any profit from this will be business income. If the asset is in the personal use of the family members then this is not the capital asset and any gain from this will not be capital gain and vice versa.

FIN623 Taxation Management - Question: dear Sir, plz tell me what rates i shell be applied those who mentioned in the lectures.those who write in the book or the tax rates of 2010? kindly guide me. thanks

Instructor's Reply:

Rates of tax year 2010 should be used. I shall post an announcement soon for the guidance of the students.

FIN623 Taxation Management - Question: This word that is AOP is alway create the confusion, when we calculate the practical question. Please shortly brief in this regards with an example. Thanks.

Instructor's Reply:

It stands for Association of Persons. When two or more persons combine for a business activity to earn profit then this is known as Association of Profits.