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Sunday, 10 March 2013

Define the following terms in the income tax ordinance Capital asset and Charitable purpose







CAPITAL ASSET :-
Any property held by any tax payer  is called capital asset, it may be connected with the business or not. However following items may not be included in the capital asset.

Exclude items :
  1. Any stock in trade : The car available in show room for the purpose of sale stock in trade and not included in capital asset.

  1. Shares for sale : If shares are in the hand of shares dealer for the sale purpose these are also stock in trade and not included in capital asset.

  1. Consumable store : If any manufacturing concern keeps some spare parts in his store for the use of his own machinery is called consumable store. So it is excluded from the capital asset.

  1. Raw material held : If any Jute mill holds a raw material for its business purposes, it will be not included in capital asset.

  1. Depreciate asset : If a tax payer is allowed a depreciation deduction on any asset which is used for the business purpose is not included in capital asset.
 Example :-
  • car, motor cycle, van used for the business purpose can not be included in capital asset.
  • Trademark purchased and used in the business is also not included in capital asset.
  1. Movable property : Car, jewelery, furniture, T.V. Etc. held for personal use are not included in capital asset.

  1. Immovable property : It is also not included in capital asset.



CHARITABLE PURPOSE :-
Relief for education, relief for medical, relief for the poor and the advancement of any other object of general public utility includes in the charitable purposes.

Explanation :
Suppose Mr. Amir a taxpayer gives 100,000 rupees scholarship to the poor students during the tax year. This amount will be called charitable donation and this amount relief will be provided to Mr. Amir (taxpayer).

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