Income From Salary Flashcards
Amount treated as salary
Revenue capital nature
Reimbursements other than for official purposes
Allowances rent utilities
Wages pays overtime lieu work condition supplements gratuity
Perquisites
Annuity pension
Amount in addition to salary
Golden handshake termination redundancy and loss of employment payments
Provident fund if not repayment of contribution of employee
Work condition changes
Restrictive covenants
Tax free salary treatment
Salary grossed up by tax payable by employer
When amount shall be treated as received and is deduction allowed
Made by employees employer or third party under arrangement
by past or perspective employer or two employee
or an associate of an employee or third party in agreement with employee
Golden handshake or termination treatment
Rate is A/ B perc
A id tax paid by employee for 3 preceding tax years and
b is employees taxable income from 3 preceding tax year( in loss case 2. Years)
Summary of rates to car house laptop washing machine fridge
Car 5% or 10% of value or 5% or 10% of their market value obtained only if it is transferred then share market value of asset at time of transfer
in case of house 45% of basic salary for the amount that would have been paid
in case of laptop fair market value of the asset for the year less amount paid by employee to employer or depreciation charge by employer in his book less amount paid by employee to employer
Perquisites vehicle
0% in case of official use
If a personal use then 10% of cost to acquire the vehicle or fair market value of the vehicle at commencement of lease
If partly personal and partly official use then 5% of cost of employer for acquiring the vehicle or the fair market value at commencment of lease
Perquisites services and utilities
In case of housekeeper driver governor or domestic assistant provided by employer salary paid by employer to percent providing services less amount paid by employee will be added to salary
Fair market value of utilities as gas electricity water telephone
Interest free loan
Interest is added to salary at benchmark rate and if loan is provided at less than benchmark rate then the difference shall be calculated and that will be added in salary
Benchmark rate
2003 BenchMark is 5% per annum and for coming years it increases 1% but till 10% so rate for current and coming years is 10%
When Loan interest not added to salary
If the loan is up to 1000000 or the interest is arising because employee waived interest to employer in case of provident funds
Obligation paid by employer case and the aquisition of assets from loan by employer case
If obligation is paid by employer on waived off by employer that will be added to salary
when employee uses loan acquire a property producing income under any head of income it will be assumed that employee has paid interest equal to benchmark rate
Services or property by employer
Fair market value of profit or services less the aMount paid by employee to employer shall be added to salary
Value of accomodation and minimum time scale
Higher or
45 perc of time scale of basic( initial) salary
Amount that would’ve been paid if accomodation was not provided
Minimum time scale is starting salary
If rent allowance is 30 perc it will be used instead of 45 perc
Self hiring of property s15 5
If employee or his wife own house given rent to employer and employer provides same house to employee as rent fee accommodation it will have two fold effect rent actually receive the employee from employer will be income from property and it will be upper quiz in form of combination 45% of basic salary will be added under the head salary
Arrear high tax treatment
If employees income is charged at higher rate as compared to rate that was applicable if salary was paid in year he did services he may give notice to commissioner and elect rate applicable in the year in which he earned salary
Employee share scheme
It means and agreement under which a company may issue shares in the
An employee of the company or an employee of an associated company
The trustee of a trust and the trusty may transfer shares to an employee of the company or an employee of an associated company
Value of right 14(1) Disposal of right (2)
The value of a right or option to acquire shares under and employment share scheme is not chargeable to tax
Where In tax year an employee disposes of a right or option to acquire shares under an employee share scheme the amount chargeable under the head salary include amount of Gain calculated as
a - b
where a is the consideration received for disposal of right or option and b is the employees cost in respect of right or option
Excercise of right
Where shares issued to employee under employee share scheme including as result of exercise of option following amount is chargeable
the fair market value of shares at date of issue less consideration given by employee for shares for right or options
Shares issuer by company on restriction of transfer
Where shares are issued to an employee under and employee share scheme and their is restriction on transfer nothing will be added in income and till employee has a free right to transfer the shares on getting the free right to transfer the salary cell include the fair market value of the shares at the time of disposal less consideration
Foreign source salary treatment 102
any foreign sourec salary received by a resident individual Shall be exempt if individual has paid for an income tax on salary
it will be assumed that resident individual has paid for an income tax if tax is withheld from salary by the employer and paid to revenue authority of the foreign country
where a citizen of Pakistan leaves Pakistan during a tax year and remains abroad then salary income earned outside Pakistan during that year shall be exempt from tax
Exemptions salary pension
Any pension receive by a citizen of Pakistan from former employer shall be exempt if person continues to work for employer or associate of employer then it will be chargeable
if person receives more than one pension then only higher pension will be examined
if a person’s age is more than 60 years then all pension shall be extempt irrespective of above mention conditions
pension received by employee of arm forces of Federal or provincial government is exempt
Exemption on commutation gratuity unapproved gratutity
Commutation of pension received from government or pension scheme approved by board shall be exempt
Gratuity or commutation of pension received on retirement or death by his hairs of government employees shall be fully exempt
approved by a commissioner shall be fully exempt
approved by board shall be exact up to 3 lakh if applicable to all employees
Unapproved gratituy or pension amount exempt will be lower of following 50% of amount receivable or 75000 rupees
Benevolent fund exemption and perquisites exemption
Benevolent Grant paid from a benevolent fun to employees or members of their families is exempt
Perquisites receive by an employee are exempt if
Free or subsidize food provided by hotels and restaurants to employee during duty or
Free or subsidized education provide by educational institution to children of employees
Free or subsidized medical treatment provided by hospital to employees
Other benefit for which employer do not wear any marginal cost as notified by board
