Kavi derives annual employment from MCB and the following information is provided to you for the year ended 30 June 2019.

(i) Kavi receives annual emoluments of Rs 2,760,000 exclusive of the end of year bonus.

(ii) He enjoys the benefit of a company car of 2500cc used by him and the entire car running expenses are met fully by the employer.

(iii) Kavi also owns a building which he rents out. His rental income amounts to Rs 800,000. Maintenance expenditure of the building amounts to Rs 350,000.

(iv) During the year ended 30 June 2019, he received dividends from MCB Ltd of an amount of Rs 48,000.

(v) Kavi joined a club in January 2019. This club has the reputation of having as members very influent persons who would be potential customers to the firm where Kavi works. He avers that he joined this club purposely in order to attract potential customers. Indeed the firm noted an influx of customers after January 2019. Total Subscription expenses incurred by Kavi to the club are Rs 88,000.

(vi) Very often, Kavi has to attend meetings at the offices of the clients. In so doing, he has to be well dressed. He usually attended these meetings in suits. He claimed that the expenditure incurred to acquire these suits is Rs 12,000.

(vii) Kavi’s son, Akshay, aged 19 years, is following full time undergraduate education since June 2018 at Charles Telfair Institute. The tuition fees, excluding administration and student union fees, are Rs 63,800 for the year ended 30 June 2019. His wife is not working and not deriving any income.

(viii) Kavi also contracted a housing loan for their first residence at Grand Bay. Interest paid for the year ended June 2019 was Rs 299,800

REQUIRED:

In the most efficient way, compute Kavi’s income tax liability for the year ended June 2019. [15 marks]

Answer rating: 100% (QA)

Income tax liability for Kavi for the year ended 30 June 2019 Total income Rs 2760000 Rs 80... View the full answer