[ather]

My bad sir, Sorry took a lot of time of yours. I misunderstood the question. Really appreciate for the support sir.

[ather]

🙂

THanks Sir for making our lives easier <3

Stay Blessed

[ather]

Got it, sir. The wording was confusing but you made it really simple.

[ather]

Thanks 🙂

[ather]

Okay sir, By EAB i mean “Equivalent Annual Benefit”. I don’t have any confusion related to this topic but i was wondering why both of them have same formula for calculation.

[ather]

Now understood fully. Thanks sir. And it will be my last question for this post. Just to make sure, i’m not doing any mistake. In the last examples i assumed “tax will be paid in arrear”. But in the following examples. I’m assuming “Tax is payable immediatley”.

E.g. (i) In case of Asset purchase. (start of year)
investment = T0 (year 0)
TAD = T1 (year 1)
Tax paid = T1 (year 1)

E.g. (ii) In case of Asset purchase. (end of year)
investment = T0 (year 0)
TAD = T0 (year 1)
Tax paid = T0 (year 1)

E.g. (iii) In case income received. (in start of year)
Investment = T0 (year 0)
Income= T0 (year 1 – as it is assumed revenue will be generated 1 year after investment)
Tax paid = T0 (year 1)

E.g. (iv) In case income received. (in end of year)
Investment = T0 (year 0)
Income= T1 (year 1)
Tax paid = T1 (year 1)

E.g. (v) In case of Tax Relief (Start of Year)
Lease payment = T0 (year 0)
Tax relief = T0 (year 1)

E.g. (vi) In case of Tax Relief (End of Year)
Lease payment = T1 (year 1)
Tax relief = T1 (year 1)

I’ll be full clear after it’s answer sir.
Thanks again for your support.

[ather]

Yes sir, i watched a video on lease vs buy.
And the answer is beautifully explained by you. Thanks sir.

[ather]

Sir, please correct me if i’m wrong.

(Assuming tax is payable in arrear)

Example (i) In case of Asset purchase. (start of year)
investment = T0
TAD = T1
Tax paid = T2

(Assuming tax is payable in arrear)
Example (ii) In case of Asset purchase. (end of year)
investment = T0
TAD = T0
Tax paid = T1

(Assuming tax is payable in arrear)
Example (iii) In case of income – (Start of Year)
Investment = T0
Income= T0
Tax paid = T1 ?

(Assuming tax is payable in arrear)
Example (iv) In case of income – (End of Year)
Investment = T0
Income= T1
Tax paid = T2 ?

(Assuming tax is payable in arrear)
Example (v) In case of tax relief – Lease payment – (Start of Year)
Lease payment = T0
Tax relief = T1 ?

(Assuming tax is payable in arrear)
Example (iv) In case of tax relief – Lease payment – (End of Year)
Lease payment = T1
Tax relief = T2 ?

I’m more concerned about last 4 examples please…

[ather]

Everything is cleared Sir. But just adding one more thing in your answer to clear my concept please.

“”
We always assume that revenue occurs on the last day of the accounting period (unless specifically told different). Therefore the first income occurs at time 1 and the tax flow occurs one year later at time 2
“”

But Sir, let’s assume, revenue occurs on the last day of the accounting period (T1) & tax flow will occur one year later at (T2) but as the question is specifically saying that “tax is payable in arrear” then why we are not delaying it for 1 more year ?

Thanks in advance sir. Your previous answer was too logical. Appreciate

[ather]

I really appreciate for your response Sir.
Thanks a lot <3 <3

[ather]

As in the Q1: trading income from the project is $8,000 pa which will start from Y1. If the tax is payable in arrear then why it is not recorded in Y3 ? Because our 1st income is on Y1 (not in Y0).

I’m very confused.

[Author]

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