Question

(a) On 1 July 2018, Zahid rented out his properties as follows:
(i) An apartment was rented to Abdul Qadir at a monthly rent of Rs. 40,000. Zahid received a non-adjustable security deposit of Rs. 300,000 which was partly used to repay the non-adjustable security deposit amounting to Rs. 175,000 received from the previous tenant in July 2013. He also spent Rs. 20,000 on repairs of the apartment in February 2019.
(ii) A bungalow was rented to a bank. Zahid and his younger brother are joint owners of the bungalow in the ratio of 60:40 respectively. The annual rent agreed with the bank was Rs. 6,000,000 which is inclusive of Rs. 100,000 per month for utilities, cleaning and security. Zahid paid Rs. 35,000 per month for providing these services. Required: Under the provisions of Income Tax Ordinance, 2001 compute total and taxable income of Zahid for the tax year 2019 under appropriate heads of income. (07)
(b) Identify due date of filing of tax return in each of the following cases, under the provisions of the Income Tax Ordinance, 2001:
(i) An individual who’s entire income falls under final tax regime (0.5)
(ii) An individual who derives his income from business which falls under normal tax regime. (0.5)
(iii) An individual filing return in response to a notice received from the Commissioner who believes that he is likely to discontinue his business. (01)
(iv) An individual filing return in response to a notice received from the Commissioner for not filing return of income of the previous tax year. (01)

(kindly solve in the context of pakistan and please do it in typed form)

Answer 1

Calculation of Total and taxable income of Zahid for 2019 under appropriate head of Income

Case 1

1. In July 2013, Rs. 175,000 received and the same was refunded from Rs. 300,000 deposit received from tenant on July 2018.According to Income Tax Ordinance, 2001, if an amount not adjustable with rent is received from succeeding tenant is used to refund the non adjustable deposit of previous tenant and 10 years has not lapsed from the termination of previous tenant, then only the remaining amount will be chargeable under Income from property. Previous tenant left in 2013. 10 years has not elapsed. Rs. 300,000-Rs. 175,000 = Rs.125,000 will be chargeable to Income under house property for the next 10 years in equal proportion ie. 12,500 annually
2. Monthly rent is Rs. 40,000 (annually, Rs. 480,000).
3. Rs. 20,000 paid on repairs in Feb 2019. As per Income Tax Ordianance, 2001, reparis amounting to 1/5th of annual rent chargeable to tax can be deducted. Actual repairs not considered. So, Rs. 480,000/5 = Rs. 96,000 can be deducted.

Amount chargeable to tax under income from property
Annual Rent   480,000
+Non adj deposit 12,500
= 492,500
- reparis 96,000
Income   396,500

Case 2

Annual rent received from bank (Zahid's share alone) = Rs. 60,00,000* 60% = Rs.36,00,000
Rs. 100,000 is included for utilities. As per Income Tax Ordinance, 2001, amount included in rent as utilities are chargeable to tax under the head 'Income from other sources'. Actual amount paid by owner for utilities not given in Act so cannot be deducted.

Amount chargeable to tax under income from property = Rs. 60,00,000 - Rs. 100,000 = Rs. 59,00,000*60% = Rs. 35,40,000
Amount chargeable to tax under income from other sources = Rs. 100,000*60% = Rs. 60,000

Total and Taxable Income = Income from property + Income from other sources = (396,500+35,40,000)+60,000 = Rs.39,96,500

Identify due date of filing Taxe Return as per Income Tax ordinance 2001

1. An individual whose entire income falls under final tax regime: They don't have to file return but must provide a statement showing particulars of the person's income for the tax year by 30th September
2. Individual who derives income from business under normal tax regime: File ITR by 30th September
3.Individual filing return as in response to notice from comissioner, discontinue business: As per Sec 117 of Income Tax Ordinance, 2001, a return of income for the period specified in the notice received from comissioner needs to be submitted within the time specified in the notice
4. Individual filing return as response to notice from comissioner that he did not file previous year's IT return: As per Sec 114, the Return has to be filed within 30 days of such notice being served or longer period if it is specified in notice or allowed by commissioner.