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5. Saud bought a car for Rs.700000 and got it insured at 4.2% annual premium for 3 years.
Calculate how much premium he paid in 3 years if depreciation rate is 12%.
6. A man has a car of worth Rs. 1400000. He got it insured for a period of 2 years at the
rate of 4.5%. The depreciation rate is 10% per year. He has to pay the premium yearly.
Find the total amount of premium he has to pay for a period of 2 years.
7. Faheem got his car insured at a rate of 3% for 3 years. The worth of his car is Rs.850000.
Find the total amount paid as premium if rate of depreciation is 10% per year.

4.5 INCOME TAX

4.5.1 Explain Income Tax, Exempt Income and Taxable Income

• Income Tax:
Income tax is imposed on the annual income of a person whose income exceeds a

certain limit which is determined by the government. The rules for income tax are amended
by the government from time to time.
• Exempt Income:

Tax exempt-income is money on which a person does not have to pay tax. In other
words the income which is not subject to income tax.
• Taxable Income:

Taxable income is the difference of annual income and exempted income.
Taxable Income = Annual Income - Exempted Income

Taxable Income Slabs

Sr. # Annual Income Rate of Tax

1. Rs. 0 to Rs. 400,000 0%

2. Rs. 400001 to Rs. 750000 5% of the amount exceeding
Rs. 400000

3. Rs. 750001 to Rs. 1400000 Rs.17500 + 10% of the amount
exceeding Rs. 750000

4. Rs. 1400001 to Rs. 1500000 Rs.82,500 + 12.5% of the amount
exceeding Rs. 1400000

5. Rs. 1500001 to Rs. 1,800,000 Rs.95,000 +15% of the amount
exceeding Rs.1500000

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