SALARY INCOME QUESTIONS CH 1

Question # 1

Mr. Mobeen is a chartered accountant and working as finance manager of XYZ (PVT) Limited. During the
financial year 2025, his emolument package includes followings:
● Pay Rs. 100,000 p.m.
● Bonus Rs. 100,000.
● Leave encashment Rs. 50,000.
● Mr. Mobeen is provided with a car of 1,300cc. The said car was purchased in the last year for a
consideration of Rs.1,000,000. Running and maintenance cost of the said vehicle is borne by
employer. The said vehicle is being used partly for the private and partly for business use.
● Mr. Mobeen is provided with a furnished accommodation of 1000 square yards in Lahore and
company bears rent of Rs. 60,000 p.m. of the said accommodation.
● The company also bears the cost of utility bills of Mr. Mobeen home. The sum of total bills of
electricity, gas and water aggregates to Rs. 200,000.
● The salary paid in respect of the cook and guard appointed on the residence of Mr. Mobeen
aggregates to Rs. 10,000 p.m.
● According to the terms of employment, the company bears all the medical expenses of Mr.
Mobeen. Total expenses incurred on this account aggregates to Rs. 75,000.
● The company also provided air tickets and other expenses worth Rs. 85,000 for Mr. Mobeen
and his family trip to UAE for summer leaves.
● During the year, Mr. Mobeen was deputed to Islamabad for the month of December, 2024 in
order to resolve certain administrative issues. He was paid a fixed relocation allowance of Rs.
35,000 in addition to his normal salary.
● The company granted Mr. Mobeen an interest free loan for a sum of Rs.1,500,000 on 1
January, 2025.
● In July 2020, Mr. Mobeen was granted an option to acquire 1000 shares of Alpa (Pvt.) Limited
(Parent Company of his employer). The option was exercisable on completion of three years’
employment with the Company. He paid an amount equivalent of Rs. 100,000 to acquire the
option whereas the fair market value of such option at that time was Rs. 150,000. On July 4,
2024 he paid a sum equivalent of Rs. 200,000 to acquire the said shares which were issued to
him on July 21, 2024 when the market value of the shares was equivalent of Rs. 350 per share.
Mr. Mobeen disposed off the shares on June 21, 2025. The sales proceeds received amounted
to Rs. 375,000.
● Mr. Mobeen tendered his resignation to the company on June 29, 2025 and he was paid a sum
of Rs. 120,000 on account of gratuity from the unapproved gratuity fund on the said date.
● Mr. Mobeen accepted the offer of M/S ABC (Pvt.) Limited to join that organization and he
received a sum of Rs. 75,000 as inducement allowance on account of leaving the past employer.
Required:
Compute the taxable income and tax liability of Mr. Mobeen for the tax year 2025
 SALARY INCOME QUESTIONS CH 2

Question # 2

Mr. Arshad is an employee of a public listed company. He submitted the following data for computation of
his taxable income for the tax year 2025:
Basic pay per annum 480,000
Bonus 240,000
Dearness allowance 50,000
Rent free unfurnished accommodation 75,000
Watchman wages paid by employer 36,000
Gardner wages paid by employer 24,000
Sweeper wages paid by employer 6,000
Employer’s contribution towards recognized provident fund 24,000
Interest on Provident fund balance @ 18% 18,000
Company maintained car for official and private use 1300CC. The said car was acquired three years
earlier. The cost of acquisition of vehicle was Rs. 850,000
Reimbursement of medical expenditure 50,000
Utilities bills paid by the company
Telephone 12,000
Electricity bills paid by employer 15,000
Gas Bills paid by employer 6,000
Water bills paid by employer 9,000
Leave fare assistance (for the first time) 50,000
Commission income for securing a contract paid by the employer 30,000
Due to some health issue, he resigned from the job and following further sums were paid to him:
Provident Fund recognized 150,000
Gratuity Fund unrecognized 70,000
Mr. Arshad bought another car from a relative for a consideration of Rs.285,000 whereas the book value
of the said car was Rs. 435,200. He immediately sold the car at Rs. 600,000.

Required:
Compute the taxable income of Mr.Arshad for the tax year 2025
Question # 3 Spring 2021 Q. 1(a)

On 31 December 2021, Dr. Jamal resigned from his employment with General Hospital Limited. In January
2022, he received following amounts in final settlement:

Rs. 600,000 as leave encashment.

Rs. 8,510,000 from recognized provident fund.
Rs. 1,300,000 and Rs. 1,700,000 as salary arrears relating to tax year 2019 and 2020 respectively.
SALARY INCOME QUESTIONS CH 3

Dr. Jamal had received a monthly salary of Rs. 500,000 from July 2021 to December 2021. His taxable
income and tax liability during the preceding four tax years were as under:

Tax year 2018 2019 2020 2021

Total taxable income (Rs.)2,800,000 3,200,000 3,800,000 4,800,000
Total tax paid (Rs.) 359,500 404,500 300,000 630,000

Required:
As a tax consultant, advise Dr. Jamal about the amount of income tax payable by him for the tax year
2022, under the Income Tax Ordinance, 2001. (07)

Question # 4 Spring 2024 Q.2

Najeeb is a resident individual who had been working at PGA Limited (PGAL) for the past 8 years. On 31
July 2023, he retired from PGAL and received his final settlement on 15 August 2023. Following are the
details of his final settlement amount:

PGAL’s provident fund is recognized and its gratuity fund is approved by the Commissioner Inland
Revenue.

Additional information:

(i)Najeeb had obtained an interest-free loan amounting to Rs. 2,000,000 from PGAL. 80% of the
amount had been recovered by PGAL, and the remaining amount was waived by PGAL at the time
of his retirement.

(ii) As per PGAL’s policy, Najeeb purchased the company-owned laptop, which he had been using,
at a written down value of Rs. 50,000, even though its fair market value upon purchase stood at
Rs. 110,000.

(iii) On 5 August 2023, Najeeb received a watch worth Rs. 80,000 from PGAL as a gift at his
farewell party.

Required:

Under the provisions of the Income Tax Ordinance, 2001 and the Rules made thereunder:

(a) compute the taxable income of Najeeb for the tax year 2024. (05)

(b) how would you treat the amount received from the provident and gratuity funds if they are
unrecognized and unapproved, respectively? (02)
 SALARY INCOME QUESTIONS CH 4

Question # 5 Autumn 2024 Q.1 On

1 July 2023, Saleem Khan joined Solar Energy Limited (SEL) as a Quality Control Manager with a gross
monthly salary of Rs. 500,000, which includes a medical allowance of Rs. 45,000 i.e. 15% of the basic
salary. The salary for each month is credited to his bank account at the beginning of the following month.
In addition to the abovementioned salary, Saleem Khan also received the following benefits:
(i) A company maintained car which was 60% used for personal and 40% for company purposes. The
car was provided on 1 January 2024, when the fair market value of the car was Rs. 5,500,000. SEL
had purchased the car in July 2023 for Rs. 5,000,000. To account for his personal use of the car, a
total deduction of Rs. 100,000 was made from Saleem Khan’s salary up to 30 June 2024.
(ii) A right to acquire 5,000 shares in SEL under the employee share scheme, granted on 1 May 2024.
The right can be exercised upon payment of Rs. 80 per share within a year. On the grant date, the
fair market value of each right to acquire a SEL’s share was Rs. 230. On 30 June 2024, instead of
exercising the rights, Saleem Khan disposed them of at Rs. 120 per share.
Other information:
(i)Prior to joining at SEL, Saleem Khan served as a Production Manager at Hydro Energy Limited
(HEL). He retired from HEL on 25 June 2023, and became entitled to a monthly pension of Rs.
40,000, starting on 1 July 2023. This pension is deposited into his bank account at the end of
each month.
(ii) He paid Zakat under the Zakat and Ushr Ordinance, 1980, amounting to Rs. 182,500.
Required:
Under the provisions of the Income Tax Ordinance, 2001 and the Rules made thereunder, compute under
the correct head of income, the taxable income of Saleem Khan for the tax year 2024. Also, provide
reasons for ignoring any of the above benefits. (07)

Question # 6 Cal
culate tax payable of each employee for tax year 2025 as per the following data:
Tax
Annual Annual Tax Tax
collected on
Employee name gross business Zakat deducted u/ collected on
purchase of
salary income s 149 mobile bill
property
Salman Shah 8,250,000 1,000,000 462,500 833,594 166,719 208,398
Umer Farooq 2,520,000 756,000 189,000 178,691 35,738 44,673
Azhar Arshad 1,800,000 1,440,000 135,000 82,636 16,527 20,659
Aas Fatima 792,000 134,640 59,400 5,708 1,142 1,427
Usaid Khan 1,800,000 882,000 135,000 82,636 16,527 20,659

Note:
Basic salary is 65% of the gross salary
Medical allowance is exempt 10% of the basic salary
SALARY INCOME QUESTIONS CH 5

Question # 7 Spring 2025 Q. 2 (c)

For the purpose of this question, assume that the date today is 31 August 2025.
Asjad joined Premiere Textiles Limited (PTL) on 1 July 2024. He received the following salary from PTL
during the year ended 30 June 2025:

Rupees
Basic salary per month 1,500,000
Medical allowance per month 150,000
Additional information:
(i) As per the terms of employment, Asjad received medical reimbursement of Rs. 800,000 from PTL.
(ii) PTL also provided accommodation to Asjad by renting a property owned by him through a rental
agreement. PTL paid a monthly rental of Rs. 200,000 to Asjad, while the fair market value of rent for a
similar property was Rs. 250,000 per month.
(iii) During the year, Asjad sold 100,000 shares of his ex-employer, Marvel Paints Limited (MPL), a listed
company, at Rs. 100 per share (net of expenses). These shares were issued to him under an Employee
Share Scheme in the tax year 2021 at Rs. 25 per share. The market value of the shares on the issuance
date was Rs. 40 per share.
(iv) During the year, Asjad received Rs. 500,000 from an unapproved gratuity scheme of MPL.
Required:
Under the provisions of the Income Tax Ordinance, 2001 and the Rules made thereunder, compute the
total and taxable income of Asjad under the appropriate head of income for the tax year 2025. (Show all
relevant exemptions, exclusions, and disallowances) (07)
Question # 8 ICAP QB Q.40

Mr. Mateen was employed with Melody Limited (ML) as an event organizer. On June 30, 2024 he resigned
from his employment without completion of notice period. On July 01, 2024 he joined another company
Rock Star Limited (RSL) as a senior event organizer. Following information is available relating to his
assessment for the tax year 2025:
(a) On July 01, 2024 RSL paid Rs. 280,000 to ML as compensation in lieu of un-served notice period by
Mr. Mateen.
(b) On July 15, 2024 Mr. Mateen received a gratuity of Rs. 350,000 from an unrecognized gratuity fund
maintained by ML. He also received Rs. 150,000 as leave encashment.
(c) In accordance with the terms of his employment with RSL, Mr. Mateen was provided with the following
emoluments / benefits during the tax year 2025:
(i) Basic salary of Rs. 245,000 per month and utility allowance of Rs. 21,000 per month.
(ii) A reimbursement of personal medical expenses, upto 15% of the annual basic salary and Rs.
250,000 on account of hospitalization charges for his daughter were made after procuring hospital bills
showing the national tax number of the hospital. These bills were also attested and certified by RSL.
(iii) For the first two months of his employment, a pick and drop facility was provided to Mr. Mateen at a
monthly rent of Rs. 25,000. On September 01, 2024, RSL provided a company maintained 1300 CC.,
Honda City which was partly used for private purposes. The cost of the car was Rs. 2,500,000.
(iv) Monthly salary of Rs. 6,000 was paid to Mr. Mateen’s house keeper by RSL. Mr. Mateen however,
SALARY INCOME QUESTIONS CH 6

reimbursed 20% of the house keeper’s salary to RSL.

(v) A special allowance of Rs. 50,000 was paid to meet expenses necessarily to be incurred in the
performance of his official duties. Actual expenditure was Rs. 40,000.
(vi) On January 01, 2025, he was provided an interest free loan of Rs. 1,500,000. The prescribed
benchmark rate is 10% per annum.
(vii) A commission of Rs. 500,000 was paid for introducing new clients to the company.
Withholding tax was deducted by RSL at the rate of 12% from such payments.
(viii) The tax deducted at source from his salary by RSL for the tax year 2025 amounted to Rs.550,000.

(d) Apart from his employment with RSL, Mr. Mateen also organized events for private clients. He
received a total of Rs. 1,000,000 from such clients. No tax was deducted from such receipts.
However, he incurred an overall loss of Rs. 350,000 on organizing these events.
(e) On May 31, 2025 he received Rs. 180,000 from Mr. Ali as consideration for vacating his bungalow.
(f) He also received a share of profit from a business in Malaysia equivalent to Rs. 535,000. He paid
Rs. 130,000 in taxes in Malaysia on such income.
(g) Mr. Mateen acquired 10,000 shares of a listed company from the Privatization Commission of
Pakistan at a price of Rs.10 per share on May 01, 2024. On May 20, 2025 he sold all the shares
for Rs. 1,000,000.
(h) He paid Zakat of Rs. 250,000 to an approved organization, through crossed cheque.
Required:
Compute the taxable income, tax liability and tax payable / refundable, if any, by Mr. Mateen for the tax
year 2025.