QUIZ - - INCOME FROM PROPERTY

On 1st August 2013, Mr. Aadil agreed to rent out a house to Mr. Saadiq at a monthly rent of Rs.
180,000, which includes Rs.30,000 per month for utilities, cleaning & security (FMR = Rs.
150,000) with effect from 1 September 2013 and received 3 year’s rent in advance. He received
Rs. 640,000 as un-adjustable security deposit, he also received Rs.360,000 adjustable deposit.
The previous tenant Mr. Hamza vacated the same house on August 31, 2013. Mr. Hamza paid
Rs.160,000 monthly rent from July 2010, Mr. Aadil refunded the security deposit (un adjustable)
in September 2013 amounting to Rs. 500,000 received from Mr. Hamza (previous tenant).
Aadil also incurred the following expenses in respect of the above house:
a. Actual utilities expense Rs.240,000.
b. Property tax of Rs. 50,000.
c. Payment of interest amounting to Rs. 200,000
d. Insurance premium of Rs. 110,000.
e. Rs. 18,000 per month to Wasif for collection of rent.
f. Legal charges of Rs.40,000 for drafting the tenancy agreement and also paid Rs.80,000 legal
charges to defend the title of property.
Required:
Under the provisions of the Income Tax Ordinance, 2001 compute the taxable income and tax
liability of the following persons for tax year 2014:
A. Mr. Aadil (as an individual) B. Company
TAX RATES FOR INCOME FROM PROPERTY- INDIVIDUAL (STR)

No. Gross amount of rent Rate of tax

1. Up to Rs.200,000 Nil

2. Rs.200,001—Rs.600,000 Rs -0- plus 5% of the gross amount exceeding Rs.200,000.

3. Rs.600,001—Rs.1,000,000 Rs.20,000 plus 10% of the gross amount exceeding Rs.600,000.

4. Rs.1,000,001—Rs.2,000,000 Rs.60,000 plus 15% of the gross amount exceeding Rs.1million.

TAX RATES FOR INCOME FROM PROPERTY- INDIVIDUAL (NTR)

NON SALARIED CATEGORY

No. TAXABLE INCOME Rate of tax

1. Up to Rs.400,000 Nil

2. Rs.400,001—Rs.600,000 Rs -0- plus 5% of the gross amount exceeding Rs.400,000.

3. Rs.600,001—Rs.1,200,000 Rs.10,000 plus 10% of the gross amount exceeding Rs.600,000.

Tax rate is 29% at normal tax structure, if the owner is a company.