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CMA JUNE - 2020 EXAMINATION MANAGEMENT LEVEL SUBJECT: R2. TAXATION
MODEL SOLUTION
Solution of the Q. No. 2(a) Assesse: Mr. Karim
Computation of Capital Gain and tax liability Income year: 2019-20; Assessment Year: 2020-21
Income under capital gain under section -31 Tk. Tk. Tk.
Sale proceeds of capital assets (tk. 2000 x 2000 shares) 4,000,000 or FMF value at the time of transfer whichever is higher 4,000,000 4,000,000
Less; Allowable deduction
a. Expenditure incurred to transfer shares (1% on Tk.
4000000)
40,000
b. Cost of acquisition (Note 1) 1,598,625 1,638,625
Capital Gain 2,361,375
Less: Exempted [sec 32 (7)] 2,361,375
Capital gain tax liability -
Note: 1
In July 2012, Shares purchase (5000 shares x Tk. 1575) 7,875,000
Add: Brokerage fee (1.5% on 7875000) 118,125
Total 7,993,125
Total Shares sold 2,000
Less: Bonus shares received 1,000
Shares sold from original purchase 1,000
So, Proportionate cost of 1000 shares (tk. 7993125/5000 x
1000) 1,598,625
(b)
Assesse: Mr. Zaman
Computation of Taxable income
Income year: 2019-20; Assessment Year: 2020-21 Sl.
No. Income from other sources Section -33 Tk. Tk.
1 Dividend from ICB unit fund (Tk 31500/90 x 100) 35,000
Less: Exempted up to Tk 25000 25,000 10,000
2 Interest on post office savings bank (Tk 36000/90 x 100) 40,000 3 Fees for technical service from Government (Tk 18000/90 x 100) 20,000 4 Prize of winning prize bond lottery (Tk 20000/80 x 100) 25,000
5 Income from talk show 2,000
6 Interest on fixed deposit from leasing company (Tk 9000/90 x 100) 10,000 7 Income from copyright and royalty from a person 4,000 8 Unexplained investment (Tk 1175000-Tk 1000000) 175,000
Total 286,000
Note: Royalty received from a person so no TDS is allowed.
(c)
(i) Gift to the younger brother : Exempted full, as per section 4(1)(h)
(ii) Gift to a friend : Taxable, FMV less cash received, i.e., Tk.
750,000 (iii) Donation to a local charitable institution : Fully taxable
(iv) Donation to registered charitable institution : Exempted – lower of 20% of total income (i.e., Tk. 600,000) and Tk. 100,000 [section 4(1)(c)(iv)]
(v) Gift to sister-in-law : Exempted full, as per section 4(1)(a)
(vi) Gift to brother in law : Exempted [maximum Tk. 20,000 {section 4(1)(d)}]
(d)
(i) Mr. Karim : Nil (ii) Mr. Howlader : Nil
(iii) Mr. Shakawat : Tk. 500 for a single journey (iv) Mr. Belal : Tk. 1,500 for a single journey (v) Ms. Nowshin : Tk. 500 for a single journey (vi) Mr. Ali : Nil
(e)
(i) not applying for registration or enlistment within the
prescribed time-limit : Tk. 10,000
(ii) not displaying the registration or turnover tax
certificate in a visible place : Tk. 10,000
(iii) not making inclusion of the output tax in the return : Double of output tax not included (iv) taking more input tax credit than entitlement in the
return
: Double of input taxirregularly taken (v) willingly evading/attempting to evade assessment and
payment of taxes : Twice the amount of taxes evaded
(vi) non-submission of Input Output coefficient within the
prescribed time : Tk. 10,000
Solution of the Q. No. 3
Computation of taxable Income and Tax Liability:
Pay & Allowance Note
Amount of Income
(Tk.)
Amount of exempted
Income (Tk.)
Net taxable income
(Tk.)
Income from salary:
Basic salary (40,000 X 12) 480,000 - 480,000 Medical allowance Note: 1 49,000 49,000 - Employer's contribution to
Recognized Provident Fund 48,000 - 48,000
leave encashment 12,000 12,000
Workers’ Participation Fund (WPF) 60,000 50,000 10,000 Conveyance facilities and allowance Note: 2 84,000 - 84,000 Festival Bonus 80,000 - 80,000 House rent allowance (exemption is
50% of basic salary or Tk.300,000 annually whichever is lower)
300,000
240,000 60,000
Total 774,000
Income from Interest on Security:
Interest on 3-monthly profit based
Sanchaypatra- Tk. 45,000/(1-10%) Note: 3
50,000 - 50,000 Interest on Wage Earner’s Bond 60,000 60,000 -
Page 3 of 6 Interest from taxable Government
Security Note: 4
7,300 - 7,300
Total 57,300
Income from House Property:
Annual Rental Value: Tk. 570,000/(1-5%) 600,000
Less: Tenant's expenses paid by owner (water and gas bill)
24,000
Actual Rental Value 576,000
Municipal Value (5,500 sft X Tk. 120) 660,000
Annual Value (Higher one) 660,000
Unspent repair expenses (Tk.198,000-171,000) 27,000
687,000
Less: Admissible expenses:
Repair & Maintenance (Tk.675,000X30%)
198,000
City corporation tax 8,000
Fire Insurance premium 7,000
Interest on Mortgage 12,000 225,000
Total 462,000
Income from Agriculture:
Income from sale of robi crop 300,000
Income from borga 50,000
Income from lease of agricultural
land 20,000
370,000
Less: Admissible expenses:
Production cost (Tk.300,000 X 60%) 180,000
Local tax 4,000
Crop insurance premium 6,000
Allowable depreciation 3,000 193,000
Total 177,000
Income from Business: Tax
exempted full Note: 6 -
Income from other Sources:
Interest on Fixed deposit- Tk.27,00/(1-10%) 30,000
Cash Dividend: Tk.72,000/(1-10%) 80,000
Less: Exemption 50,000 30,000
Dividend received from ICB Mutual Fund: Tk.45,000/(1-10%)
50,000
Less: Exemption 25,000 25,000
Total 85,000
Total Taxable Income 1,555,300
Eligible amount for rebate
Particulars of rebatable investment
Payment of Life Insurance Premium 60,000 Contribution to monthly deposit
pension scheme (not exceeding allowable
limit) 60,000
Donate to Asiatic Society, Bangladesh 50,000 Purchases Government Treasury Bond 200,000
A. Total allowable investment 370,000
B. 25% of the total income Tk.15,05,300 [TK.15,55,300- 50,000 interest on
Sanchaypatra, which is mentioned of section
82C.] 376,325
C. 1.5 crore 15,000,000
Eligible amount for rebate (the lesser of A, B or C) 370,000
Computation of Tax rebate on eligible investment
Eligible amount Rate Amount
370,000 10% 37,000
Though total income exceed taka fifteen lakh, rate would be 10%
Computation of tax on regular taxable Income
On first 300,000 0% -
On the next 100,000 5% 5,000
On the next 300,000 10% 30,000
On the next 400,000 15% 60,000
On the next 405,300 20% 81,060
Tax liability 1,505,300 176,060
Tax on interest on Sanchaypatra 5,000
Total Tax liability 181,060
Computation of Net Tax Liability
Tax liabilities on total income 181,060
Less: Investment Tax rebate: 37,000
Less: Additional Tax rebate due to first
submission of tax return through online 2,000 Less: TDS (Note: 7) 51,375 90,375
Net Tax Liability 90,685
Note: 1 Medical allowance (Tk.2,000 X 12) 24,000
Received Tk. 25,000 for his eye surgery 25,000 49,000 Less: Exemption:
Medical allowance: Exempted- Tk.
120,000 or 10% of basic salary whichever is lower
24,000
Allowance for eye surgery- Full 25,000 49,000
Taxable Income -
Note: 2
Page 5 of 6 Conveyance facilities and allowance:
Conveyance facilities: Higher of Tk.60,000 or 5%
basic salary
60,000 Conveyance allowance (Tk.2,000X 12): 24,000 Total (Included salary income as per Rule 33E) 84,000 Note: 2
Interest on 3-monthly profit based Sanchaypatrais income of Section 82C
Note: 4
Interest from taxable Government Security (Tk.
50,000X15%) 7,500
Less: Bank Commission 200
7,300
Note: 5 Salary of night guard and legal expenses is not admissible Note: 6 As per para 33 of 6th schedule, Part A, any
income derived from Software Development is tax exempted
Note: 7 Particulars Amount Rate TDS
Amount Interest on 3-monthly profit based
Sanchaypatra
50,000 10%
5,000
Interest from taxable Government Security 7,500 5% 375
On Annual Rental Value 600,000 5% 30,000
Interest on Fixed deposit 30,000 10% 3,000
Cash Dividend 80,000 10% 8,000
Dividend received from ICB Mutual Fund 50,000 10% 5,000
Total 51,375
Solution of the Q. No. 4 (a)
(i) Inadmissible expense:
1. Inadmissible expense portion in salary is Tk. 500,000 as computed below:
(i) In perquisite:
Perquisite paid to CEO, CFO &Chief Research Advisor Tk. 4,000,000 (800,000+600,000+2,600,000)
Less: Allowable limit u/s 30(e) (550,000+550,000+2,500,000) Tk. 3,600,000 Tk. 400,000 (ii) In incentive bonus u/s 30(j)Tk. 600,000 – (5,000,000 × 10%) Tk. 100,000
2. The allowable rate of free sample is 0.50% for annual turnover between 5 crore to Tk. 10 crore in Food industry. The turnover of the company was Tk. 100,000,000 and free sample allowed is (100,000,000 × 0.50%) or Tk. 500,000. So inadmissible expense is 550,000 – 500,000 or Tk. 50,000.
3. The allowable limit of technical fee is 8% of net profit under section 30(h). The net profit of the company was Tk. 5,000,000 and amount allowed is (5,000,000 × 8%) or Tk. 400,000. So inadmissible expense is 600,000 – 400,000 or Tk. 200,000.
4. Donation to public universities are considered as CSR [Ref. SRO 229/IT/2011; 223/IT/2012 &
186/IT/2014]. This is inadmissible as rebate is considered on it.
5. The allowable limit of overseas traveling expense is 0.50% of disclosed turnover under section 30(k). The disclosed turnover of the company was Tk. 100,000,000 and amount
allowed is (100,000,000 × 0.50%) or Tk. 500,000. So inadmissible expense is 1,000,000 – 500,000 or Tk. 500,000.
6. Provision for bad debt inadmissible is Tk. 500,000 and admissible is Tk. 100,000 7. The allowable limit of Entertainment expense is under Rule 65:
Income, profits and gains of the business and profession
(before charging such allowance) i.e. Tk. 5,000,000 + 300,000 = 5,300,000
Allowable
Rate Amount
On the first Tk. 1,000,000 4% Tk. 40,000
On the balance amount of Tk. 4,300,000 2% Tk. 86,000
Tk. 126,000 So inadmissible expense is 300,000 – 126,000 or Tk. 174,000.
8. The allowable limit of promotional expense is 0.50% of disclosed turnover under section 30(p). The disclosed turnover of the company was Tk. 100,000,000 and amount allowed is (100,000,000 × 0.50%) or Tk. 500,000. So inadmissible expense is 700,000 – 500,000 or Tk.
200,000.
(ii) Rebate on CSR Exp.:
Eligible amount on which rebate will be allowed (lower one of (i), (ii) and (iii) below) (i) Actual CSR Expense:Donation to Dhaka University Tk. 800,000 (ii) 20% of Total income (11,024,000 × 20%) 2,204,800
(iii) 12 crore
Eligible amount of CSR expense on which rebate will be allowed is Tk. 800,000.So, Rebate
@10% is = (800,000 × 10%) = Tk. 80,000 (b)
Tk. Tk.
Raw materials, January 1 Add, Purchase of raw material Raw materials available for use Less, Raw materials, December 31 Raw materials used in the production Direct labor
Manufacturing overhead
Total manufacturing cost Add, Work in process, January 1
Less, Work in process, December 31
Cost of goods manufactured Add, Finished goods inventory, January 1
Goods available for sale
Less, Finished goods inventory, December 31
Cost of goods sold Add, Profit [1,700,000 × 15%]
Selling price
90,000 750,000 840,000 60,000
780,000 150,000 640,000 1,570,000 180,000 1,750,000 100,000 1,650,000 260,000 1,910,000 210,000 1,700,000 255,000 1,955,000
Value Added Tax:
VAT on output [1,955,000 × 15%] = 293,250
Less, VAT on input i.e. Raw material used [780,000 × 15%] = 117,000
VAT payable = 176,250
VAT can also be calculated in the following alternative way:
Value addition = Output value (Selling price) – Input value (Raw material used)
= 1,955,000 – 780,000 = 1,175,000
VAT payable = 15% on 1,175,000 = 176,250
= THE END =
