Question

Question 5 (10)

Mr. Prime Shaapopi CA (SA) (NAM) for the year of assessment ending 28 February
2020.
Profit from business 500 000
Profit from branch of business in Zimbabwe 100 000
Director’s fees 8 000
Insurance pay out for loss of profits 80 000
Profit on sale of truck 120 000
 Cost price 300 000
 Tax value 200 000
 Selling price 320 000
Gain from Unit Trust 80 000
Interest from bank 400
Interest from subscription shares 800
Farming subsidy on soil erosion 20 000
Lease premium received 10 000
Lump sum on retirement from pension fund 100 000
Retrenchment benefit from employers 80 000
Goodwill received 120 000

You are required to calculate the income of Mr. Prime Shaapopi CA (SA) (NAM) for
the year of assessment ending 28 February 2020.

Answer 1

Computation of total income of MR Prime shaapopi for assessment year ending february 2020:

(A) Income from Salary

Retrenchemnet compensation received from employers = 80,000

Exemption under sec 10(10B) = (80,000)

Actual amount received or limit of 5,00,000

which ever ls lower   

Income taxable under the head salary = 0

(B) Income from business or Profession

Profit from business = 5,00,000

profit received from branch of business =1,00,000

less: insurance pay out for loss of profits =(80,000)

Income taxable under Business = 5,20,000

(c) Income from capital gain

Lease premium received = 10.000

(Assuming the lease as long term lease)

Goodwill = 1.20.000

(Cost of acquisition incase of goodwill is nill as per sec 55)

so entire amount is treated as taxable)

Profit on sale of truck = 1,20,000

Income taxable under capital gain = 2,50,000

(D) Income from other sources:

Directors fees received = 8,000

Interest Received from bank = 400

Income received on subscription of shares = 800

Gain received form trust = 80,000

Income from Other sources =89,200

Total gross income: (A+B+C+D) =8,59,200

less: Exemptios:

Interest received from bank is exempted under (400)

sec 80TTA upto rs 10,000

Net total income = 8,58,800

Notes:

1) Subsidy received by the farmers is treated as agriculture income and the same is exempted from tax

2) Lumsum fund on retirement received from pension fund is exempted from tax

Conclusion: Total taxable income of Mr prime shapopi = 8,58,800