ST ER MARCH 2024
HEAD OF INCOME: SALARY BY SIR TARIQ TUNIO - CSS (COMMISSIONER FBR) + CA TEACHER (CAF-2 Tax & PRC-5 ITB) 0332-2130867
MA T # 2
ATTEMPT
HE E GENERAL POINTS CORE AMOUNTS
S REIMBURSEMENT OF EXPENDITURE
Pay, wages or other remuneration provided to employee, leave pay, Expenditure incurred for employee’s own benefit Fully Taxable
Charge of Any salary received by an employee in a tax Fully
payment in lieu of leave, overtime payment, bonus, commission, fees, work Expenditure incurred in performance of duties of employment Not Taxable
Tax on Salary year, other thanexempt, is chargeable to tax in Taxable
conditions supplement (e.g unpleasant or dangerous working conditions)
that year under the head “Salary”
SPECIAL AMOUNTS
Revenue/ Capital Salary means any amount received by an ALLOWANCES Golden handshake § Taxable in the year of receipt at current tax rates, or
Nature employee from anyemployment, whether of a Amount of allowance provided by employer to employee including (or amounts given § Taxable at the average rate of three preceding tax years
revenue or capital nature cost of living, dearness allowance, subsistence, rent, utilities, on termination § Option to be filed with CIR by the due date for filing of
education, entertainment or travel allowance. Note: any Fully of employment) return ofthe tax year in which salary in arrears is received.
Basis of Charge Received basis allowance solely expended in the performance of the employee’s § Mere right or option is not taxable
Taxable
Receipt of (a) actually received by the person; duties of employment is not included in employee’s Salary. § Benefit from mere right/option is taxable if it is disposed, as
Income (b) applied on behalf of the person, at the follows: Consideration received –Cost= Gain
Explanation: The allowance solely expended in the performance of
instruction of the personor under any law; or § Value of shares (Without Restriction): FMV of shares
employee’s duty does not include (i) allowance which is paid in
(c) made available to the person. determinedat date of issue reduced by consideration given
monthly salary on fixed basis or %age of salary; or (ii) allowance Taxable
When is Salary An amount or perquisite is treated as paid if it is Employee Share for the shares and right/option by employee
which is not wholly, exclusively, necessarily or actually spent on
Treated as Paid? paid or provided: Scheme § Value of shares (With Restriction): FMV of shares determined
S
behalf of the employer. [Example: Special Allowance]
§ by employer, an associate of the employer, or by atearlier of:
Medical Allowance: Medical allowance received by employee, if
3rd party underan arrangement with employer Exempt upto § time when employee has free right to transfer the shares
free medical treatment or hospitalization or reimbursement of § time of disposal of shares
or associate of the employer. 10% of Basic
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medical or hospitalization charges are NOT provided for in the reduced by consideration given for the shares and right/option
§ to employee, or an associate of employee or terms of employment. Salary
3rd party under anagreement with employee or byemployee
an associate of the employee. Amount of any profit given to employee instead of salary
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Profits
or inaddition to salary is taxable.
§ by past or prospective employer
PERQUISITES Agreement to enter Amounts received as consideration for agreement to enter
Deductions § No deductions are allowed for any expenditure
Accommodat- § Amount that would have been paid if accommodation was not into employment intoemployment are taxable
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Definitions § Employee means any individual engaged in
ion provided (i.e. alternative amount) Agreement to Amounts received as consideration for conditions of
employment
§ Minimum value to be taken at 45% of MTS/Basic Salary. Conditions employmentor changes thereof is taxable.
§ Employer means any person who engages and
Conveyance § Partial personal use: Amounts received as consideration for agreement to
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remunerates an employee Restrictive
5% of Cost of vehicle (owned case) or FMV of vehicle at thetime restrictive covenant for past, present or prospective
§ Employment includes (a) a directorship or any covenant
of commencement of lease (lease case). employment.
other office involved in the management of a
§ Full personal use: § Taxable in the year of receipt at current tax rates;
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company; (b) a position entitling the holder to a
10% of Cost of vehicle (owned) or FMV of vehicle at the time of § Taxable at the tax rates of the relevant tax year if opted;
fixed or ascertainable remuneration; or (c) the Salary in arrears
commencement of lease agreement (lease case). § Option to be filed with CIR by the due date for filing of
holding or acting in any public office
Domestic Where services of house keeper, driver, gardener or other return ofthe tax year in which salary in arrears is received.
servant domestic assistant are provided: Total salary paid to such servant in Tax on tax § Amount of tax paid by employer is to be grossed up.
the year for services rendered to employee as reduced by
EXEMPTIONS payment made by employee to employer for such services.
Free medical MEDICAL BENEFITS: Benefit representing free Utilities FMV of the utilities provided reduced by payment made by RETIREMENT BENEFITS
Treatment, medical treatment, hospitalization or both, or employee for the utilities. Provident (1) Statutory Provident Fund (for Govt Employee) → Employee’s &
Hospitalization reimbursement of medical charges/hospital Waiver Waiver/Payment: Amount paid/waived by employer Fund Employer’s annual contribution and Annual accretion of Interest are
or Both charges or both are provided by employer is Transfer of FMV of property determined at the time of transfer, as reduced byany not taxable → Payment of accumulated balance Exempt
Reimbursement exempt subject to following conditions: property payment made by employee for the property (2) Recognized Provident Fund →Employee’s annual contribution is
of Medical § Benefit is provided in employee’s terms of Services FMV of services provided by employer determined at the time not taxable → Employer’s annual contribution: Amount exceeding
Charges, employment services are provided as reduced by payment made by employee lower of 1/10th of basic salary & dearness allowance or Rs. 150,000
Hospital § NTN of the hospital or clinic is given & for the services is taxed on annual basis. →Annual accretion of interest: Amount
Charges, or § employer certifies and attests the medical/ Concessional § Amount equal to bench mark rate (in case no interest is charged by exceeding higher of 1/3 of basic salary & dearness allowance or
Both hospital bills / employer) interest amount calculated @ 16% of accumulated amount is taxed
Exemption for following perquisites received by an employee are Interest- free § Difference between interest charged by employer and the interest annually →Payment of accumulated balance is exempt
Food, exempt: Loan computed at bench mark rate e.g. 10% (in case interest is charged (3) Unrecognized Provident Fund →Employee’s & employer’s annual
Education, § free or subsidized food provided by hotels and by employer) contribution and annual accretion of interest are not taxable
Medical restaurants toits employees during duty hours; § No amount is to be added to salary in following situations: →Payment of accumulated balance is fully taxable (except repayment
Treatments, etc. § free or subsidized education provided by an § If employer has charged interest ≥ bench mark rate. of employee’s own contribution)
educationalinstitution to the children of its § If employee has waived interest on his account maintained Pension § Pension received by citizen of Pk from former employer is
employees; by the employer. exempt
§ free or subsidized medical treatment provided § If loan amount does not exceed Rs. 1,000,000/- § Pension is not exempt if employee continues to work for same
by a hospital ora clinic to its employees; and Residual Residual perquisites (i.e. other perquisites not mentioned above) employer or associate of employer
§ any other perquisite or benefit for which the FMV of the perquisites determined at the time they are provided by § More than one pensions: Only higher pension is exempt
employer does nothave to bear any marginal employer reduced by any payment made by employee to employer Leave → Taxable
cost, as notified by the Board. for the perquisite Encashment →Exempt for employees of Federal Govt., Provincial Govt., or Armed
Foreign-Source § FS salary received by resident individual is Forces when it is received preparatory to retirement.
Salary exempt if he paid foreign income tax on salary.
§ Foreign Inc.tax is treated as paid if tax has been Gratuity or Govt. employees: Exempt if received by employee of Govt. (Federal/Provincial/Local), Statutory body, or Govt. corporations in accordance with rules & condition
withheld fromsalary by employer and paid to the Commutation of of employee’s service Approved Gratuity Fund: Fully exempt Approved Gratuity Scheme: Exempt upto Rs. 300,000/- Others: Lower of 50% of the
revenue authority of foreigncountry in which the pension on amount or Rs. 75,000/- is exempt (This exemption is not available if gratuity is (a) received outside Pakistan, (b) received by a NR individual, (c) received by an
employment was exercised. retirement employee who has already received a gratuity previously from same or any other employer, & (d) received by a director who is not a regular employee of Co.)
