INCOME FROM PROPERTY: ILLUSTRATION 5
Mr. Khan owns a property which he has rented out for Rs. 10,000 per month. The local authority has determined the rental value of the property as Rs. 1,44,000. He has no other income.
Required
1.. What will be the fair market value of the property? 2 How much tax will be payable by Mr. Khan for the tax year 2011?
Solution
1. Rent received from property @ Rs. 10,000 p.m. = Rs. 1,20,000. Rental value determined by local authority= Rs. 1,44,000, whichever is higher, so fair market value is Rs. 1,44,000. 2.
Mr. Khan is an individual, who has no other income under any head and his income chargeable to tax under “income from property” is less than Rs. 1,50,000, hence, the income is non-taxable.
Foreign Tax Credit
Where a resident taxpayer derives foreign source income chargeable to tax under the Income Tax Ordinance, 2001, in respect of which taxpayer has paid foreign income tax. In such a case, the taxpayer shall be allowed a tax credit in respect of such amount of income tax paid in the foreign country. The amount of tax credit is calculated on the Dfa Ho basis of average rate of Pakistan income tax. The amount of tax credit is calculated as follows:
1. Foreign income tax paid, or
Pakistan income tax on total income
2. including foreign source income Total income includingforeign income -x Foreign income
3. Whichever of 1 or 2 is less, ie the amount of tax credit deducted from gross tax?
