BML 304- TAXATION CAT

MAY-AUGUST 2024
INSTRUCTIONS:

1. Use Times New Roman font type.

2. Font size 12
3. MINIMUM number of pages for CAT should be between 5 & 10 pages and for
WBA should be between 5 & 10 pages.
4. Clearly show the beginning of every new concept by using paragraphs.
5. Have a cover page that shows Name of University, students full name, student
Admission number, Unit title, Unit code, nature of assignment (CAT or WBA),
Lecturers name, Semester and Year
6. Use APA style –Reference & Citation
7. Use clear examples.
8. Use Ideas from the Notes presented & enhance your assignment by undertaking
a comprehensive research using material in the University Library, off campus
library material or any other reference material relevant to this course. Copy
pasting will lead to an automatic zero for the students involved.
9. All Students must hand in a soft copy through Moodle online system
10. No assignment will be accepted after the due date. Deadline for submission is
14th June 2024.
QUESTION ONE

Read the Case Study below carefully and answer the questions that follow.

COMMISSIONER’S PRESCRIBED BENEFIT RATES (EXTRACT FROM PAYE

GUIDE)
A SERVICES
Monthly Rates Annual Rates
(Ksh) (Ksh)
Electricity (communal or from a generator) 1,500 18,000
Water (communal or from a borehole) 500 6,000
Provision of furniture (1% of cost to employer). If
hired, the cost of hire should be brought to charge
Telephone (Landline and Mobile Phones) 30% of bills

B AGRICULTURAL EMPLOYEES REDUCED RATES OF BENEFITS

Monthly Rates Annual Rates
(Ksh) (Ksh)
Water 200 2,400
Electricity 900 10,800

RESIDENTS INDIVIDUAL INCOME TAX RATES AND RELIEF – EFFECTIVE 1ST

JANUARY 2017 (KRA PUBLIC NOTICE BASED ON FINANCE ACT 2016)
TAX BANDS ON ANNUAL INCOME TAX RATES
On the first shs 134,164 10 %
On the next shs 126,403 15 %
On the next shs 126,403 20 %
On the next shs 126,403 25 %
On all income over shs 513,373 30 %
 Personal Relief shs 15,360 Per Annum

Use the above sets of information together with the knowledge of Taxation you have
acquired to answer the following questions:

Mr. ABC is an employee, businessman and investor. His emoluments, benefits and
other incomes and expenses from various sources were as follows during the years of
income shown below:

i) Employment income and expenses per annum

Year 2017 Year 2018 Year 2019
Ksh. Ksh. Ksh.
Basic salary 400,000 460,000 500,000
Electricity bill (paid by employer) 14,000 17,000 20,000
Bus fare expenses (to and from work) 18,000 20,000 23,000
Pension contributions by Self 40,000 46,000 50,000
Pension contributions by Employer 40,000 46,000 50,000
Contributions to Home Ownership
Savings Plan (HOSP) in registered
Insurance company 40,000 50,000 60,000

ii) Business income and expenses (Sole proprietorship)

Year 2017 Year 2018 Year 2019
Ksh. Ksh. Ksh.
Gross profit 180,000 360,000 420,000
Expenses:
Salaries and wages 100,000 120,000 160,000
 Rent and rates 30,000 50,000 70,000
Tax penalties by KRA 10,000 - 20,000
Selling and distribution expenses 60,000 80,000 100,000
Bad debts written off 10,000 30,000 20,000
Provision for doubtful debts (2.5% of
Trade debtors) 20,000 30,000 50,000

iii) Other incomes

Year 2017 Year 2018 Year 2019
Ksh. Ksh. Ksh.
Interest income (net):
From XYZ bank fixed deposit 25,000 35,000 30,000
From Kenya Postbank 8,000 10,000 15,000
Dividend income (net) 12,000 18,000 20,000
Required:
a) Evaluate Mr. ABC's total taxable income for each of the years 2017, 2018 and 2019.
(16 Marks)
b) Compute the tax payable by Mr. ABC on his total taxable income for each of the
years 2017, 2018 and 2019. (6 Marks)
c) Comment on any three (3) items not used in (a) above giving the reason thereof for
each. (3 Marks)