Escolar Documentos
Profissional Documentos
Cultura Documentos
SALARY
Example 1
Mr. A is the employee of M/s ABC Ltd. Mr. A provided following particulars.
Compute his tax able income and tax liability for the Tax Year 2010
SOLUTION
Mr. A
M/s ABC Ltd.
Salaried Individual
Tax Year: 2010
Notes:
1. Medical allowance is exempt upto 10% of Basic Salary. (Clause 139, Part I, 2nd Schedule)
1
Example 2
Mr. B is the employee of M/s BCD Ltd. Mr. B prov ided following particulars.
Compute his tax able income and tax liability for the Tax Year 2010
SOLUTION
Mr. B
M/s BCD Ltd.
Salaried Individual
Tax Year: 2010
Notes:
1. Annual v alue of accomodation is higher than 45% of Basic salary, so actual is taken. (Rule 4)
2. Medical allowance is exempt upto 10% of Basic Salary. (Clause 139, Part I, 2nd Schedule)
3. Life insurance premium paid by the employer is taxable.
2
Example 3
Mr. C is the employee of M/s CDE Ltd. Mr. C prov ided following particulars.
Compute his tax able income and tax liability for the Tax Year 2010
Mr. C
M/s CDE Ltd.
Salaried Individual
Tax Year: 2010
Notes:
1. Annual v alue of accomodation is less than 45% of Basic salary, so 45% of BS is taken. (Rule 4)
2. Vehicle prov ided f or personal use, so 10% of the cost of v ehicle is taken. [Rule 5(ii)]
3. Medical allowance is exempt upto 10% of Basic Salary. (Clause 139, Part I, 2nd Schedule)
3
Example 4
Mr. D is the employee of M/s DEF Ltd. Mr. D prov ided following particulars.
Compute his tax able income and tax liability for the Tax Year 2010
SOLUTION
Mr. D
M/s DEF Ltd.
Salaried Individual
Tax Year: 2010
Notes:
1. Annual v alue of accomodation is less than 45% of Basic salary, so 45% of Basic salary is taken. (Rule 4)
2. Vehicle prov ided f or partial use, so 5% of the cost of v ehicle is taken. [Rule 5(i)]
3. Medical allowance is exempt upto 10% of Basic Salary. (Clause 139, Part I, 2nd Schedule)
4. Employer's contribution in Recognized provident fund is ex empt upto 10% of Salary (excluding
perquisites & allowances) or Rs. 100,000 whichever is less. [Rule 3(a) Part I, 6th Schedule]
COMPUTATION OF TAX LIABILITY
Taxable income 736,000
Tax payable 44,160
Less: Tax deducted by the employer u/s 149 (41,000)
Less: Tax paid on mobile phone u/s 236 (1,200)
Less: Tax paid with motor vehicle tax (1,000)
Net Tax payable / (refundable) 960
4
Example 5
Mr. E is the employee of M/s EFG Ltd. Mr. E provided following particulars.
Compute his tax able income and tax liability for the Tax Year 2010
SOLUTION
Mr. E
M/s EFG Ltd.
Salaried Individual
Tax Year: 2010
Notes:
1. Annual v alue of accomodation is not given, so 45% of Basic salary is taken as minimum value. (Rule 4)
2. Vehicle prov ided only for business use, so nothing should be taken in the income of employee.
3. Medical allowance is exempt upto 10% of Basic Salary. (Clause 139, Part I, 2nd Schedule)
4. Employer's contribution in Recognized provident fund is ex empt upto 10% of Salary (excluding
perquisites & allowances) or Rs. 100,000 whichever is less [Rule 3(a) Part I, 6th Schedule]
5. Provident fund employee's contribution, no treatment.
5
6 Interest on recognized provident fund contribution. "Interest credit on the balance is ex empt upto 1/3rd of
the salary or is allowed at the rate fixed by Federal Government in this behalf (i.e. 16%). If interest credited
exceed 1/3rd of the Salary or is allowed at a higher rate, the amount exceeding the salary of the said rate
shall be taxable". [Rule 3(b), Part I, 6th Schedule]
6
Example 6
Mr. F is the employee of M/s FGH Ltd. Mr. F provided following particulars.
Compute his tax able income and tax liability for the Tax Year 2010
SOLUTION
Mr. F
M/s FGH Ltd.
Salaried Individual
Tax Year: 2010
Notes:
1. Annual v alue of accomodation is not given, so 45% of Basic salary is taken as minimum value. (Rule 4)
2. Vehicle prov ided f or partial use, so 5% of the cost of v ehicle is taken. [Rule 5(i)]
3. Medical reibursement according to the terms of employment is ex empt. (Clause 139, Part I, 2nd Sch.)
4. Employer's contribution in Recognized provident fund is ex empt upto 10% of Salary (excluding
perquisites & allowances) or Rs. 100,000 whichever is less [Rule 3(a) Part I, 6th Schedule]
5. Provident fund employee's contribution, no treatment.
6 Interest on recognized provident fund contribution. "Interest credit on the balance is ex empt upto 1/3rd of
the salary or is allowed at the rate fixed by Federal Government in this behalf (i.e. 16%). If interest credited
exceed 1/3rd of the Salary or is allowed at a higher rate, the amount exceeding the salary of the said rate
shall be taxable". [Rule 3(b), Part I, 6th Schedule]
7
7. Zakat paid under Zakat & Ushr Ordinance, 1980 is deductible allowance (Section 60), so directly deducted
from total income of the taxpayer.
8. Bonus amount shall be treated as separate block of income and tax ed @ 30%. [Prov iso section 12(2)(a)]
Provided that any bonus paid or payable to corporate employees receiving salary income of one million
rupees or more (ex cluding bonus) in tax year 2010, shall be chargeable to tax at the rate provided in
paragraph (2) of Div ison I of Part I of the First Schedule (i.e. 30%)
8
Example 7
Mr. G is the employee of M/s GHI Ltd. Mr. G provided following particulars.
Compute his tax able income and tax liability for the Tax Year 2010
SOLUTION
Mr. G
M/s GHI Ltd.
Salaried Individual
Tax Year: 2010
Notes:
1. Annual v alue of accomodation is less than 45% of Basic salary, so 45% of Basic salary is taken. (Rule 4)
2. Vehicle prov ided f or personal use, so 10% of the cost of v ehicle is taken. [Rule 5(ii)]
3. Medical reibursement not in accordance with the terms of employment is taxable
(Clause 139, Part I, 2nd Schedule)
4. Employer's contribution in Recognized provident fund is ex empt upto 10% of Salary (excluding perquisites
& allowances) or Rs. 100,000 whichev er is less [Rule 3(a) Part I, 6th Schedule]
5. Provident fund employee's contribution, no treatment.
9
6 Interest on recognized provident fund contribution. "Interest credit on the balance is ex empt upto 1/3rd of
the salary or is allowed at the rate fixed by Federal Government in this behalf (i.e. 16%). If interest credited
exceed 1/3rd of the Salary or is allowed at a higher rate, the amount exceeding the salary of the said rate
shall be taxable". [Rule 3(b), Part I, 6th Schedule]
7. Loan is made by an employer to an employee without prof it or the rate of prof it is less than the benchmark
rate (i.e. 12% for TY 2010), the amount of prof it at benchmark rate or the difference between the amount of
profit paid by the employee and the amount of profit computed at the benchmark rate as the case may be
shall be included in the income of the employee.
Notes:
1. Donation paid to recognized charitable organization. Tax credit is av ailable u/s 61.
10
Example 8
Mr. H is the employee of M/s HIJ Ltd. Mr. H prov ided following particulars.
Compute his tax able income and tax liability for the Tax Year 2010
SOLUTION
Mr. H
M/s HIJ Ltd.
Salaried Individual
Tax Year: 2010
11
Notes:
1. Medical allowance is exempt upto 10% of Basic Salary. (Clause 139, Part I, 2nd Schedule)
2. Loan is made by an employer to an employee without prof it or the rate of prof it is less than the benchmark
rate (i.e. 12% for TY 2010), the amount of prof it at benchmark rate or the difference between the amount of
profit paid by the employee and the amount of profit computed at the benchmark rate as the case may be
shall be included in the income of the employee.
3 Amount received on job agreement is tax able in the hands of employee[Section 12(2)(e)(i)]
4 Vehicle transferred to employee on book v alue Rs. 200,000 but the FMV was Rs. 275,000,
the difference of Rs. 75,000 will become taxable [Ref. Section 13(11)]
Notes:
1. Profit paid on loan for construction of house. Tax credit is av ailable u/s 64. Total amount taken f or credit
(Actual Paid + added into the income of the employee on the basis of benchmark rate)
(Actual paid Rs. 50,000 added due to benchmark rate Rs. 70,000 total Rs. 120,000 av ailable for credit)
12
Example 9
Mr. I is the employee of M/s IJK Ltd (Unlisted company) and terminated on April 30,2009 under Golden
Handshake sheme. Mr. I prov ided following particulars. Compute his taxable income and tax liability for
the Tax Year 2010
13
SOLUTION
Mr. I
M/s IJK Ltd.
Salaried Individual
Tax Year: 2010
Notes:
1. Consideration paid for any change in conditions of employment is taxable u/s 12(2)(e)(ii).
2. Golden handshake payment - option is avaialable with tax payer to add in the current year income or to be
taxed at an av erage rate of tax for preceeding three years. Section 12(6)
3. Employer's contribution in Recognized provident fund is ex empt upto 10% of Salary (excluding perquisites
& allowances) or Rs. 100,000 whichev er is less [Rule 3(a) Part I, 6th Schedule]
4. Provident fund employee's contribution, no treatment.
5 Interest on recognized provident fund contribution. "Interest credit on the balance is ex empt upto 1/3rd of
the salary or is allowed at the rate fixed by Federal Government in this behalf (i.e. 16%). If interest credited
exceed 1/3rd of the Salary or is allowed at a higher rate, the amount exceeding the salary of the said rate
shall be taxable". [Rule 3(b), Part I, 6th Schedule]
6. Pension received from former employer is exempt from tax under clause 8, Part I of second schedule.
7. Vehicle prov ided f or personal use, so 10% of the cost of v ehicle is taken for 10 months, because he
worked for 10 months. [Rule 5(ii)]
8. Annual v alue of accomodation is less than 45% of Basic salary, so 45% of Basic salary is taken. (Rule 4)
Basic salary is for 10 months so the v alue of accomodation is not apportioned to number of months
occupied.
9. Medical reibursement in accordance with the terms of employment is ex empt from tax .
(Clause 139, Part I, 2nd Schedule)
10. Facility of medical actual reimbursement is prov ided in accordance with terms of employment, therefore
medical allowance is tax able.
14
11. Arrear received by a taxpayer .. Option is av ailable to the taxpayer to add in the current year's income
or add in the relev ant year for which arrears are paid, it depends on the tax liability. Section 12(7)
12. Driver or any other serv ant provided by the employer, the salary of the servant should be added to the
income of the employee. Section 13(5)
13. Shares issued under Employee Share Scheme, Section 14. The diff erence between Fair Market Value
of the share and the cost borne by the employee should be added to the income of the employee.
14. Balance amount receiv ed from Recognized prov ident fund is exempt. (Rule 4, Part I, 6th schedule)
15. Gratuity received from unapprov ed gratuity scheme is exempt upto Rs. 75,000 or 50% of the amount
of gratuity, whichev er is less. Remaining should be taxed at an av erage rate of tax for the preceeding
three years or added in the current year's income. Option is with the tax payer.
(Clause 13, Part I, 2nd Schedule)
Notes:
1. Tax on Golden handshake payment is computed on the basis of preceding three years average rate
i.e. 14% as giv en in the question, if this amount is added in the current year's income then applicable tax
rate will be 22.08%. Section 12(6)
2. Tax on Gratuity payment from unapprov ed gratuity scheme is computed on the basis of preceding three
years average rate i.e. 14% as giv en in the question, if this amount is added in the current year's income
alongwith golden handshake payment then applicable tax rate will be 16.1%. (Circular # 17 of 1959,
Circular # 16 of 1967, C. # 4(23)-IT-3/77, 30/10/77)
15
Example 10
SOLUTION
Mr. J
Central Board of Rev enue
Salaried Individual
Tax Year: 2010
Pay scale: 25,000 - 3,000 - 35,000
Notes:
1. This is Statutory Prov ident Fund for Government Departments. Amount received from this fund is ex empt
from tax under clause 22 of Part I of 2nd schedule. Therefore, no treatment is required during the y ear on
contribution and credit of interest.
2. Vehicle prov ided f or personal use, so 10% of the cost of v ehicle is taken. As well as running and
maintenance expenses are concerned no treatment is available in the rules, therefore not taken into account.
16
3. Accomodation provided - 45% of Basic salary is Rs. 167,400, but MTS is given so, 45% of MTS will be
taken and 45% of MTS i.e Rs. 135,000 is less than the actual value. So, actual value is taken.
4. Medical reibursement in accordance with the terms of employment is ex empt from tax .
(Clause 139, Part I, 2nd Schedule)
5. Facility of medical actual reimbursement is provided in accordance with terms of employment, therefore
medical allowance is taxable.
6. Driv er or any othe serv ant provided by the employer, the salary of the servant should be added to the
income of the employee. Section 13(5)
7. TA/DA is exempt from tax, because it is paid for official duties. Reference Circular # 12 of 1980.
8. Special allowance for official duties is ex empt from tax under clause 39, Part I of 2nd schedule.
17
Example 11
Mr. K is a full time teacher working with KLM College, a recognized educational institution
Mr. K prov ided f ollowing particulars. Compute his taxable income and tax liability for the Tax Year 2010
SOLUTION
Mr. K
KLM College
Salaried Individual
Tax Year: 2010
Notes:
1. Employer's contribution in Recognized provident fund is ex empt upto 10% of Salary (excluding perquisites
& allowances) or Rs. 100,000 whichev er is less [Rule 3(a) Part I, 6th Schedule]
2. Provident fund employee's contribution, no treatment.
3 Interest on recognized provident fund contribution. "Interest credit on the balance is ex empt upto 1/3rd of
the salary or is allowed at the rate fixed by Federal Government in this behalf (i.e. 16%). If interest credited
exceed 1/3rd of the Salary or is allowed at a higher rate, the amount exceeding the salary of the said rate
shall be taxable". [Rule 3(b), Part I, 6th Schedule]
4. Pension received from former employer is exempt from tax under clause 8, Part I of second schedule.
18
5. Annual v alue of accomodation is not given, so 45% of Basic salary is taken as minimum value. (Rule 4)
6. Medical reibursement not in accordance with the terms of employment is exempt upto 10% of Basic
Salary. (Clause 139, Part I, 2nd Schedule)
7. Home serv ant provided by the employer, the salary of the servant should be added to the
income of the employee. Section 13(5)
Notes:
1. 75% tax rebate is available to full time teachers and researchers. Clause 2, Part III, 2nd schedule.
19
Example 12
Mr. L (Age 68 years) is a full time teacher working with LMN University, a recognized gov ernment owned
educational institution. Mr. L provided following particulars. Compute his taxable income and tax liability
for the Tax Year 2010
SOLUTION
Mr. L
LMN University
Salaried Individual
Tax Year: 2010
Notes:
1. Employer's contribution in Recognized provident fund is ex empt upto 10% of Salary (excluding perquisites
& allowances) or Rs. 100,000 whichev er is less [Rule 3(a) Part I, 6th Schedule]
2. Provident fund employee's contribution, no treatment.
3 Interest on recognized provident fund contribution. "Interest credit on the balance is ex empt upto 1/3rd of
the salary or is allowed at the rate fixed by Federal Government in this behalf (i.e. 16%). If interest credited
exceed 1/3rd of the Salary or is allowed at a higher rate, the amount exceeding the salary of the said rate
shall be taxable". [Rule 3(b), Part I, 6th Schedule]
4. Medical reibursement in accordance with the terms of employment is ex empt from tax .
(Clause 139, Part I, 2nd Schedule)
20
COMPUTATION OF TAX LIABILITY
Taxable income 339,000
Tax on salary 2,543
Less: Tax rebate (50%) Senior Citizen [Clause (1A), Part III, 2nd Schedule] (1,272)
Tax af ter 1st rebate 1,272
Less: Tax rebate (75%) Full time teacher [Clause (2) Part III, 2nd Schedule] (954)
Tax payable 318
Less: Tax deducted by the employer u/s 149 (1,255)
Net Tax payable / (refundable) (937)
Notes:
1. 50% tax rebate is available to Senior Citizen age 60 years or more. Clause 1A, Part III, 2nd schedule.
2. 75% tax rebate is available to full time teachers and researchers. Clause 2, Part III, 2nd schedule.
21