MCQ 1
A tax is imposed at the same rate on consumption by all persons, but it takes a greater proportion of the income of low-income persons than high-income persons. It is best classified as:
A. Progressive tax
B. Proportional tax
C. Regressive tax
D. Ability-to-pay tax
MCQ 2
A Bill proposes to vary a tax whose net proceeds are partly assigned to Provinces. It also changes the principles governing distribution of those proceeds.
Before introduction in the National Assembly, it requires:
A. Approval of National Finance Commission
B. Previous sanction of the President
C. Approval of the Senate only
D. Consent of all Provincial Assemblies
MCQ 3
A tax manager discovers unsupported expenses in a client’s tax return. The firm’s partner instructs him to ignore them, stating that it is not an audit engagement. Which combination is most appropriate?
A. Partner breaches confidentiality; manager faces self-interest threat
B. Partner breaches integrity and professional behaviour; manager may face intimidation threat
C. Partner breaches objectivity only; manager faces advocacy threat
D. No ethical issue arises because it is a tax engagement
MCQ 4
During Tax Year 2026:
- X Ltd is incorporated abroad and its control and management are partly in Pakistan and partly abroad throughout the year.
- XY Associates is a foreign-formed AOP whose control and management are also partly in Pakistan.
Their residential status is:
A. Both resident
B. X Ltd resident; XY Associates non-resident
C. X Ltd non-resident; XY Associates resident
D. Both non-resident
MCQ 5
An employee acquired 8,000 employer shares at Rs. 20 each under a scheme carrying transfer restrictions. The restrictions expired during Tax Year 2026 when FMV was Rs. 75 per share.
Amount chargeable under Salary in Tax Year 2026 is:
A. Rs. 160,000
B. Rs. 440,000
C. Rs. 600,000
D. Nil until the shares are sold
MCQ 6
Mr. A lets a building for Rs. 100,000 per month, while its fair market rent is Rs. 120,000 per month. During the year he incurs:
- Insurance: Rs. 60,000
- Property tax: Rs. 40,000
- Administration/collection expenses: Rs. 80,000
What is his taxable income from property?
A. Rs. 934,400
B. Rs. 994,400
C. Rs. 1,012,000
D. Rs. 1,052,000
MCQ 7
A business intangible originally cost Rs. 6 million. Tax amortisation of Rs. 2 million had been allowed up to the end of Tax Year 2025. It was sold during Tax Year 2026 for Rs. 5.2 million.
What is the tax treatment in Tax Year 2026?
A. Amortisation continues and gain is Rs. 1.2 million
B. No amortisation; business gain is Rs. 1.2 million
C. No amortisation; capital gain is Rs. 1.2 million
D. Business gain is Rs. 5.2 million
MCQ 8
Mr. B purchased immovable property for Rs. 18 million, of which Rs. 7 million was paid in cash and the balance through banking channel. He later sold it for Rs. 16 million.
Ignoring other adjustments, the capital gain is:
A. Capital loss Rs. 2 million
B. Capital gain Rs. 3 million
C. Capital gain Rs. 5 million
D. Nil
MCQ 9
A person receives Rs. 3 million as composite rent for a building together with plant and machinery. Expenses wholly relating to earning such income are:
- Building repairs: Rs. 120,000
- Plant repairs: Rs. 80,000
- Insurance: Rs. 50,000
- Depreciation: Rs. 550,000
Taxable income is:
A. Rs. 2,200,000 under Income from Other Sources
B. Rs. 2,400,000 under Income from Property
C. Rs. 2,250,000 under Income from Other Sources
D. Rs. 3,000,000 under Income from Property
MCQ 10
A taxpayer has current-year business income of Rs. 30 million before adjustment of brought-forward unabsorbed depreciation. Unabsorbed depreciation brought forward is Rs. 24 million.
What is the correct adjustment?
A. Set off Rs. 24m; taxable income Rs. 6m
B. Set off Rs. 15m; taxable income Rs. 15m and carry forward Rs. 9m
C. Set off Rs. 12m; taxable income Rs. 18m and carry forward Rs. 12m
D. No set-off because taxable income exceeds Rs. 10m
MCQ 11
An AOP has turnover of Rs. 320 million and has paid tax on its income. It does not file financial statements audited by a CA/CMA firm. A member receives his share of profit from the AOP.
Which treatment is correct?
A. Share is always exempt because AOP has paid tax
B. Share is exempt but ignored even for rate purposes
C. Exemption is unavailable because the prescribed audited financial statements were not filed
D. Share is treated as salary income
MCQ 12
A resident taxpayer has:
- Taxable income: Rs. 6,000,000
- Pakistan tax before foreign tax credit: Rs. 1,200,000
- Net foreign-source business income: Rs. 2,000,000
- Foreign income tax paid thereon: Rs. 500,000
Maximum foreign tax credit is:
A. Rs. 240,000
B. Rs. 400,000
C. Rs. 500,000
D. Rs. 1,200,000
MCQ 13
Consider the following statements:
I. An individual having business income of Rs. 350,000 may still be required to file a return even though income is below the normal exemption threshold.
II. A mere change of opinion constitutes definite information sufficient to amend an assessment.
III. An aggrieved person, other than an SOE, may surrender the Commissioner (Appeals) forum and proceed directly to the Appellate Tribunal.
Which are correct?
A. I only
B. I and II only
C. I and III only
D. II and III only
MCQ 14
Which of the following are required to register under the Sales Tax Act, assuming no other special provision applies?
I. Manufacturer making taxable supplies who is not a cottage industry
II. Distributor having annual turnover of Rs. 3 million
III. Importer having annual turnover of Rs. 2 million
IV. Exporter making zero-rated supplies who does not intend to claim refund
A. I only
B. I and II only
C. I, II and III only
D. I, II, III and IV
MCQ 15
A registered person has:
- Taxable supplies: Rs. 8,000,000
- Valid sales returns: Rs. 800,000
- Taxable purchases: Rs. 5,000,000
- Valid purchase returns: Rs. 500,000
- Sales tax on admissible utilities: Rs. 90,000
Sales tax rate is 18%. What is the net sales tax payable and the normal record-retention period?
A. Rs. 396,000; six years
B. Rs. 396,000; five years
C. Rs. 486,000; six years
D. Rs. 576,000; six years
Answer Key + Short Explanations
1. C — Regressive tax. A uniform tax may still be regressive where it consumes a larger percentage of a low-income person’s income.
2. B — Previous sanction of the President. Article 162 applies where a Bill affects taxes or distribution of revenues in which Provinces are interested.
3. B. Ignoring known unsupported claims affects integrity and professional behaviour, while the subordinate may face an intimidation threat.
4. C. A foreign company requires control and management to be wholly in Pakistan at any time, whereas an AOP becomes resident where control and management is wholly or partly in Pakistan.
5. B — Rs. 440,000.
8,000 × (Rs.75 − Rs.20) = Rs.440,000, taxable when the restriction expires.
6. B — Rs. 994,400.
Chargeable rent = Rs.120,000 × 12 = Rs.1,440,000.
Repairs = 20% = Rs.288,000.
Administration = lower of Rs.80,000 or 4% = Rs.57,600.
Taxable = 1,440,000 − 288,000 − 60,000 − 40,000 − 57,600 = Rs.994,400.
7. B — Rs. 1.2 million business gain. No amortisation is allowed in the year of disposal. WDV = Rs.4m; consideration Rs.5.2m; gain = Rs.1.2m under Income from Business.
8. C — Rs. 5 million. The cash-paid portion is not recognised as cost under the applicable rule. Recognised cost = Rs.11m; gain = Rs.16m − Rs.11m = Rs.5m.
9. A — Rs. 2.2 million. Composite lease of building with plant is taxed under Income from Other Sources, where relevant actual expenses including depreciation may be deducted.
10. B. Where the relevant income exceeds Rs.10m, brought-forward unabsorbed depreciation is set off up to 50%: Rs.15m allowed and Rs.9m carried forward.
11. C. For an AOP with turnover of Rs.300 million or more, the member’s share does not enjoy the normal exemption unless the prescribed audited financial statements are filed.
12. B — Rs. 400,000. Average Pakistan tax rate = 1.2m ÷ 6m = 20%. Pakistan tax attributable to foreign income = 2m × 20% = Rs.400,000. Credit is the lower of Rs.400,000 and Rs.500,000.
13. C — I and III only. Business income exceeding Rs.300,000 within the specified range can trigger filing; change of opinion alone is not definite information; and the first appellate forum may be surrendered in the prescribed circumstances.
14. C — I, II and III. A non-cottage manufacturer, distributor and importer fall within compulsory registration categories; the exporter condition specifically includes one intending to obtain refund against zero-rated supplies.
15. A — Rs. 396,000; six years.
Output tax = (8m − 0.8m) × 18% = Rs.1,296,000.
Input tax = (5m − 0.5m) × 18% + 90,000 = Rs.900,000.
Payable = Rs.396,000. Sales-tax records are generally retained for six years, subject to pending proceedings.