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State and explain any four deductions

Question
State and explain any four deductions that may be available against gains or profits from employment. ( 2 marks)

(b) You have been approached by Mr. Kujua to help him determine his taxable income for the year ended 31 December 2001. He provided you with the following information:

1. Employment income:

He is employed by Nyorosha Ltd. where he earns a salary of Sh.75,000 per month. Other benefits from employment include the following:

Company car of 1850cc which was bought in the year 2000 for Sh.850,000

Housed in Furaha Estate. The house has a market rental value of Sh.35,000 per month

Annual performance bonus of one month?s salary if he is rated more than 80% in the company?s annual performance review. In the year 2001, he was rated 85%.

A watchman and a house girl who are paid by the company Sh.5,000 each per month.

2. Business income:

He runs an internet caf? in Furaha shoping Centre. It generated sh.725,000 in the year 2001. However, in the year 2000, it had made a loss of sh.300,000.

3. Wife?s income:

His wife is employed by Sukari Ranch Ltd. where she draws a salary of sh.45,000 per month. In addition, she is given five litres of milk per day to take home. The market price of the milk is sh.30 per litre. PAYE of sh.98,400 was deducted and paid to the Income Tax Department for the year 2001.

4. In the course of the year, Mr. Kujua sold his personal saloon car for Sh.620,000. This represented a gain of sh.200,000 which he used to travel to Dubai for a holiday.

5. Through the advice of his Personal Financial advisor, he had obtained the following investment income in the year:

Dividends

Sh.

Castle Breweries Ltd.

South Africa Creameries Ltd. (A South African Company)

Interest

HFCK Ltd. ? Housing development bonds

Treasury bills

Akiba Bank fixed deposit

Loan to a friend

240,000

360,000

120,000

420,000

96,000

200,000

Required:

(i) Total income chargeable to tax for Mr. Kujua for the year 2001. (10 marks)

(ii) Tax payable and its due date. (5 marks)

(iii) Comment on any information not used. (3 marks)

(Total: 20 marks)

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