Income

Tax-Salary
6-158
Income

SymopsisofTaxes

HAPTER4
SALARY INCOME

head "Salary" the

rel.

an
income chargeable
under the
the payer and the payeeT
ayee.
ionship ofof hthe
to render exist between
In order
and the employer
must
poyer
employee prospective.
fommer or
current,
may the services by an employee against the res

is the rendering of
EMPLOYMENT i n c l u d e s : [2(22)]
employer. It
from the
receivable
involved in the management ofa companv
office
A directorship or any other
. fixed or ascertainable remuneration:or
A position which
entitles its holderto a
2 office.
The holding or acting in any public
3 employment. [2(20)]
individual who is engaged in an
EMPLOYEE means an
who engages and
remunerates an employee. [2(21)1
EMPLOYER means any person

SALARY [12(2)] limited sense, a fixed

for services pefomed. In a more
Salary is a reward or recompense services rendered by employee is
an
an employer for the
periodical compensation by
paid
of Income Tax, "Salary" means any amount received by
termed as salary. For the purpose
It includes any
an employee from any employment.
2. Wages
1. Pay A. Overtime;
Leave pay
6. Gratuity;
4. Bonus or dangerous wOIN
7. Work conditions supplements (i.e., additional pay for unpleasant
8. Fees; 9 Commission
10. Allowances 11. Perquisites;
and
12 Profit in lieu of or in addition to the salary or wages;
13 Any other benefit provided by the amployer to his employee.
PERQUISITES [13] other

Black's Law Dictionary defines the perquisites as "emoluments, fringe benen a

incidental profits or benefits attaching to an office or position". Under the inco
"perquisites" includes:
1. The value of rent-free accommodation.
2. The value of any concession in rent of any accommodation. Spouse or

3. for the benefit of the employee,

ADy payment by the employer
dependent child, such as:
 Symopsis

ncome Tax- Salary

) Payment of ife insurance, and Income
i) Payment towards a
contract of 6-157)
The value of any benefit annuity.
provided free of cost
The value of any benefit
provided at a
Anv sum paid by an concessional rate
6 employer in respect of any
Cecility of motor vehide obligation of an empioyee
prOvided by
private use of the employee an
employer to his employee and
PROFIT IN LIEU OF OR IN wholly or
partiy for
ADDITION TO SALARY
Profit in lieu of or in addition to
salary" includes
[12(2)
(12(2 e]
e))
Any amount received as
relationship; consideration for an
agreement to enter iinto an
Anv amount received employment
2 as
consideration for an
of employment or any employee's agreerment to any
change therein; conditions
Any amount received as
any compensation compensation for the termination of
for
redundancy or loss of
empioyment employment. it includes
payments and gaiden handshake
Any amount received from any fund
(e.g., provident fund, etc.) constituted by
employer to the extent to which the amount the
is not a
by the employee to the fund; repayment of contributions made

5 Any amount received as consideration

covenant in respect of any past, present for an employee's agreement to a restnctive
or
prospective employment;
6 Any pension annuity or any supplement to a pension or annuity, and
or

7 Any amount chargeable to tax on account of employee share option scheme under
section 14.
SALARY INCOME
The following incomes are chargeable to tax under the head "salary"
1 Any salary received during the year. The receipt may be on account of current saiary
and
arears or advance [12(1)),
2. Valuation of perquisites, allowances and benenits according to sections 13 & 14 of the

and the Income Tax Rules, 2002

Income Tax Ordinance, 2001

Notes: basiIs. It means any salary tha

tax on the recelpt
1. income is chargeable to be
Current salary, arrears of sa
Salary tax year (whicn may
actually received
during the to tax.
Normally,
Nomally. the salary is not taxed ed on
on

shall be
charged to this general rule,
which
and advance salary) two e x c e p u o n s
there are
However, Limited Company the CIR
accrual basis. Pivate
of a
employee
of an
i) In case
 Income Tax
-
Salary Income

Synopsis f Taxes

accrual basis
for taxation of salary income if he has
reasonable
deliberately deferred for grou to 6-150
of salary was
tax
believe that
and
payment

be chared
that his income
yoidance (110
has opted
ii) Where the employee
basis. It is permitted in a case where the taxpayer has rec tax on aco
arrears' resulting in the application of higher rate of tax in thecelved
year of accruain
jved salary
the arrears. [12(7)] eceipt o
entitled to deduct any expenditure
2. An employee shall not be
[12(4)]
incurred by him
deriving salary
income. n

An amount or perquisite shall be treated as received by an employee wheh. .

3.
or provided: paid
i) By employer (including present, past or prospective), an
his assOciate of his
behaf of his employer, or
employer or a third party on
third party on his behalf. [12(5)1
ii)
i) To him, to his associate or to a

TAX FREE SALARY TO

EMPLOYEE (12(3)]
Where an employer agrees to pay the tax liability of his employee, then the amoiin
shall be treated as an additional benefit to the employee. The salary income of the a
shall be increased by the amount of tax paid by the employer. nployee
Example: 6.1
Mr. Ahsan is an employee of a company and draws an annual salary of Rs. 2,500.000 A
per tems of employment his employer has undertaken to pay the amount of tax on hig
salary income. Compute his tax liability tor the year assuming that he is liable to pay tax @
5% of his iaxable income.
Answer:
Salary received Rs. 2,500,000
Add: Tax paid by the Employer (Rs. 2,500,000 5%) 125.000
Total taxable salary income 2.625.000
Tax computation
Total tax liability for the year (Rs. 2,625,000 @5%) 131,250
Less: Tax already paid (by the employer on behalf of Mr Ahsan) 125.000
Net tax payable 6.250
For the simplicity of the calculations a tax rate of 5% has been applied. In order to
Compute the actual tax liability the rates specified in the First Schedule shall be appliea.

Example: 6.2
Compute the exact tax liability of Mr. Ahsan under the Income Tax Ordinance, 2001 Dy us
the infomation of Example 6.1.
Answer:
Rs. 2,500,000
Salary received
Adc: Tax paid by the Employer on Rs. 2,500,000 [N-1] 195.000
Total taxable salary income 2.695.000
SynopsiS OJ T a t e s
Income "ax - Salary Income
Tax computation [6-159]
Rs. 2,500,000
Tax o n
Tax on Rs. 195,0O @ 17.5%
Tax paid by the 195,00o
Less:
employer 34.125
Net tax payable 229,125
N-1 Amount of tax is as
provided in the tax table. 195.00O
N
rAX AMOUNTS RECEIVED ON 34,1225
The mount of any profit in lieu TERMINATION OF
or loss of
of or in
employment, golden handshake addition to salary EMPLoYMENT
(12(2)(e)
(i.e., compensation for(ii) 12(6)]
&
employee, be a x e d in

1.
any
It may be included in
of the
following ways:payments, etc.)
et
may, at the redundancy
option of the
received; or total income of the
It may be
employee for the tax
year in which it
2 taxed as a separate block. is
be computed in accordance with the
The
rate of
tax applicable to such
AIB %
following formula: amount shall
Where: A is total tax
for the three
paid or
payableby the employee on his
B is the preceding tax
years; and total taxable
income
Notes: employee's total taxable income
for the three
In the
preceding tax years.
above formula total
taxable income
computing the applicable tax
under NTR shall be rate, income
has been
of the
used, which depicts that while
2.
taken into account. employee from all sources
taxable
Withdrawal from accumulated
50% of the balance from
accumulated balance. Treatmentthe voluntary pension fund is exempt
for the
[Clause (23A) upto
remaining 50% shall be a s below:
i Withdrawal in case of
be added in disability or death of the person, the excess
salary income and charged to tax under amount shall
ii) NTR.
Withdrawal in case of retirement,
(either before retirement
after retirement age) excess of age or at time of o r
fifty percent (50%)
be taxed u/s 12(6) a s
separate block of income and of accumulated balance, shall
tax (ART) based o n charged at average rate of
preceding three taX years (as specified above).
Example: 6.3
Mr. Azeem has a taxable salary income of Rs. 2,500,000
ne year he opted to retire under a scheme duringhiS
the tax year. At the end of
announced Dy employer and received
S,000,000
.
a s a golden handshake
payment. The taxaDie incomes and tax liabilities of
Azeem for the three immediately preceding tax years were a s below:
Tax Year Taxable income Tax Liability
1. Rs. 800,000 Rs. 10,000
2 1,200,00 30,000)
1,800,O00 90,000
 IncomeTax-Salary Income
Synopsisof Taxes

Alternate Treatment
employer has ded,
is operative
treatment
where the
deducted wou ould have been
ucted tax at
The above
makingpayment of
salary. The tax
so

so there may be a for the

refund of tax for depositedby
the year in ne emplove
in the
Government treasury; which arreann ar
received.
the employer is
not a withholding agent h
It is equaly possible
that
ar 200B shall
for tax year 200B shall be detar
hence, cannot
tax at source. In this case tax liability determined as belw
accrual basis (Rs. 180,000+ 180 0n
Total tax liability for both years on
paid for the tax year 200A (by
employee on cash basis)
[see no
note] Rs. 360 000
Less: Tax
Tax payable for tax year
200B 20 000
taxable 240.0
Note: While return of income' a person
filing has to pay the tax due
lue on an .
the
deducted tax from salary, the employe9e ine
Where employer has not has to
of tax year 20OA in the instant
himself, (es is the cese
example), which pay t
adjusted. lb
PERQUISITES, ALLOWANCES AND BENEFITS (Section 13 Rule-3
Section 13 ofthe Income Tax Ordinance, 2001 and Rule-3 through Rule-7 ofth.
Rules, 2002 discuss the provisions regarding the valuation of diferent nea Incom
allowances and other benefits for the purposes of determining the salary incomechae
to tax under the Income Tax Ordinance, 2001. 1argeable
SERVICES OF DOMESTIC SERVANTS [13(5)]
The total amount of salary paid by the employer to the domestic servants of an emdovee
(eg., housekeeper, driver, gardener or other domestic servants) shll be indludedin the
salary income of the employee for the tax year in which the services are rendered.
Example: 6.5
Mr. Raza is an officer in an autonomous corporation. He is in pay scale of 15,000-1,00
25,000. During the tax year he received Rs. 240,000 as basic salary. Further, he was als
paid the following amounts:
1. Dearness allowance Rs. 18,000
2. Cost of living allowance 24,000
3. Bonus 20,000
4. Commission 30,00
The Employer of Mr. Raza has also provided the services of a driver and a house eper

The Corporation paid Rs. 4,000 p.m. to each of these employees. Compute taxable

income of Mr. Raza.

Answer:
Taxable Income
Basic salary 240,000

Dearness allowance 18,000

Cost of living allowance 24,000

Bonus 20,000
 IncomeTax Salary -

Tlares
Income
fdomesticS e r v a n t s
[6-163]
(Rs. 4,000 x 12)
Dnver
(Rs.4,000x 12) 30,000
Housekeeper
48,000
abeMcoe
48.000
TO
EMPLOYEE (13(6)) 96.000
TIES

ployer has provide any faciliy

428,000
ihe
to his
ofthe employee shall be employee in the form of
income

value of theutilities provided detemined as below

market
Aya
ount paid by the employee for utilities utities, the

includes the following facilities:

Electricity:
Gas
Water, and
) Telephone.

ites nay be in the fom of a free

Under
Cash. Under both the cases or
concessional facility or a
ilities
unt of utilities shall
shall be any benefit
taxable and incdudedprovided by an utility allowance receivable
ample: 6.6
t 85Sume to the
in
salary incomeemployer
of the
to an
employee on
example 6.5 that employee.
e dso paid by his
employer during the year
1.
Telephone following domestic bills of Mr.
2. Water Raza
3.
Electricity 12,000
Gas 6,000
9,600
emine the taxable income 4,800
of Mr. Raza.
KSwer:
ble Income
Te as
axabledetermined
utilities. in Example 6.5
Telephone
Water 12,000
428,000

Elect
Gas
e income
ricity 6,000
9,600
4,800 32,400
AFROM EMPLOYER [13(7)) 460,400
ealoan is receceived from
eam an employer
ng two amounts shall (whether
be added to interest
the salary bearing
income otherwise) then any
of theoremployee:
amount OFinterest/profit
computed at the benchmark rate, if no interest/profit is
 Income Tax Salary Income
Symopsis of Taxes

or
payable by the employee;
the "benchmark rate less the act al amount
2 The amount computed at
profit paid by an employee, if lower rate is applicable on the loan.
od intereat
loan amount is upto
o Rs.
Rs. 1,000,000
Note: This benefit shall not be
taxable
ifthe 1.0m

Benchmark rate', means a rate of ten percent (10%) per annum.

Example: 6.7
with the data of example 6.6, i.e., Mr. D.
Take another assumption along aza obtaine
obtained
of Rs 1,200,000 from his employer
on the first dayof tax
year, which
income in each of the following situatioalned
end of the year. Compute taxable ions
1. The loan was interest-free;

employer charged interest at a rate 8%

of p.a.; and
2.
2 The

3 The employer charged interest15% p.a.

Answer
1. Interest-Free Loan
Income as detemined in Example 6.6
Add: Taxable benefit on account of interest-free loan
Loan amount Benchmark Rate (Rs. 1,200,000 x 10 %)
460,400
Taxable Income 120.000
2 Interest Charged8% 580,400
Income as detemined in Example 6.6
Add Taxable benefit on account of interest at a lower rate: 460,400
Interestat benchmark rate (1,200,000x 10%) 120,000
Less: Interest charged by employer (1,200,000 x 8%)
(96.000) 24.000
Taxable Income
484400
3. Interest Charged @ 15%
As the employer has charged the interest at a rate, which is higher than the
benchmark rate thus nothing will be included in the income of Mr. Raza. Hs taxabe
income and the tax liability shall remain the same as given in example 6.6, ie,
Taxable Income 46040
Important Note:
The
Finance Act, 2010, inserted a proviso to sub-section (7) of section 13 Wich
reproduced below:
an
Provided that this sub-section shall not apply to such benefit ansiTg
the
employee due to waiver of interest by such employee on his accoun
employer." esentationof
TNote on Clauses" of the Finance Act. 2010. issued by FBR at the time P
Finance Bil, 2010 on this
proviso describes as below:
nopsis of
Tateres Income Tar -Salary Income [6-165]

This amendment seeks to provide exemption to the benefit arising to an

due to the waiver of his right of interest"
nployeedue
employee
combined study of the proviso and its explanation given by FBR it may be
rOmd that any notional benefit añsing to an employee due to waiver of his nght of
0ns on his.
his account with the employer shall be exempt from tax.
o n s t r u e d

ntereston

wFROM EMPLOYER USED FOR ACQUISTION OF AN ASSET (13(8)]

OANFROM
an employee has utilized a loan obtained from his employer for the acquisition of any
Nhearproperty the income of which is chargeable to tax under any head of income then
Ount of interest on such oan (whether paid to the employer or and treated as
a m o u n t

deduction against income from such asset. The amount to be

hete) shall be allowedbeasdetemined
as deduction
shall as below
owed
Interest-Free Loan or Mark-up upto Benchmark Rate
deduction under any of
An amount equal to the "Benchmark Rate" shall be allowed as
the following cases:

a) Where the employer has not charged interest on the loan; or

a) rate does not
b) Where the employer has charged the interest but the interest
exceed the "Benchmark Rate".

Interest at aHigher than Benchmark Rate

Rate
2. the
the employer is higher than the "benchmark rate",
Where the interest charged by
shal be allowed as deduction.
whole amount paid by the employee
Example:6.8 to
of ABC Limited. He purchased a machine amounting
Rehan is an employee besides his own savings, utlized a
For purchase of this machinery he,
Rs. 2,000,000.
from the company.
loan of Rs. 1,200,000 obtained
annual rent of Rs. 400,000. He spent an
Rehan rented out the machinery against
an
Determine the
and maintenance of the machinery.
amount of Rs. 14,400 on repair account of machinery
under each of
taxable income on
amount to be included in his
the following cases.
interest-free;
1. The loan from employer is
and
2. The employer charged
interest on the loan8% p.a.,
interest on the loan @ 15% p.a.
.3. The employer charged Interest Interest
No
@8% @15%
Answer: Interest
400,000 400,000
400,000
Annual Rent 14,400
Less Allowable Deductions: 14,400 14,400
180,000
120,000
RepairsNfrom Employer
Repairs [N-11
Interest on loan from Employer [N-2] 134400)
120,000J
(134,400) (134,400
(194,400)
205,600
-265,600
Total deductions
sources
265,600
axable income from other
 Income Tax-Salary Income
Synopsis ofTaxes

de
Notes:
1 While computing the taxable
income
allowed.
from others sources aa
deduction on acr
machinery is od
repairs of the
the interest ted at
computed at the benchmark
rate
interes(.e.,pai10h
first two cases
2. Underthe
Underthefirst Whereas in thethird case, actual
is allowed as
deduction.

is @ 15%) is
allowed as deduction. d by pathe
employee (which
EMPLOYEE (13(91
AMOUNT PAYABLE BY
WAIVER OF AN
out of the amount payable by the
waived of by the employer
en.

Any amount
included in the income of
the employee.

THE EMPLOYER [13(101

OBLIGATION OF AN EMPLOYEE PAID BY
an obligation oft
of
Any payment by the employer to another person on account he
(eg., insurance premium, etc.,) shall be included in the salary income of the employs mployee
TRANSFER OF PROPERTY OR PROVIsiON OF SERVICES TO EMPLOYEE (13/11
1)
Where an employer transfers his property or provides services to the employee. the amo
calculated as below shall be included in the income of the employee: unt

Fair market value of the property, etc.

XXX
Less: Payment made by the employee, if any.
Amount to be included in the salary incomne
XX
ANY OTHER PERQUISITE [13(13)]
The amount calculated as below shall be included in the income of the
employee:
Fair market value of the
Less: Payment made by the
perquisite. XXX
Amount to be induded in the
employee, if any. (XXX
salary
income XXX
Example: 6.9
Using the data available in
following additional infomationexample
is also
6.6, compute the taxable income of Mr.Raza, the
provided.
1. The employer has waived of
a loan of Rs.
20,000 receivable from Mr. Raza
Life insurance
premium of Mr. Raza amounting to bynis
.

employer, and Rs. 12,000 has beenpa

3. A car with fair market value of Rs. against

Rs. 300,000 400,000 has been transferred to Mr. N

Answer:
Total Income as determined 460,400
in Example 6.6
Add: The value of benefits
provided to Raza
i) Waiver of an amount
payable by Raza 20,000
Synopsis of Taxes Income Tax Salary Income
-

[6-167]
ii) Life insurance premium of Raza paid by his
ii) Fair market value of the car employer 12,000
Less: Payment made by Raza 400,000
Taxable income (300,000) 100,000 132,000
EMPLOYEE SHARE SCHEME [14 592,400
Cmoloyee Share Scheme' means an
issues shares to the following agreement or
arrangement under which a
persons: company
1. An employee of the
company
An employee of an associated company; or
3. The trustee of a trust. Under such a
the employee of the
situation, the trustee may transfer the shares to
company or an
employee of an associated company.
Where a company implements employee share scheme it
employees which may be dealt with as follows. provides a benefit to its
1. The value of any right or option to acquire shares (in itself) is not chargeable to tax.
2. The right or option may be given to an
the company may receive
employee without receiving any amount for it or
some amount in addition to the
against the shares. consideration received
3. The amount to be included in the
salary income of an employee shall be computed as
below
Fair market value of shares at the date of issue
XXX
Less: Consideration given by
employee for shares XXX
Amount paid for the right or option, if any XXX XXX)
Amount chargeable to tax under "Salary" XXX
Example: 6.10
On 14h August 200A, Sindh Limited has issued a scheme under which every
employee of the company is entitled to acquire 2,000 ordinary shares of the company.
Considering the following information, compute the amount to be included in "Salary
income" of Mr. Riaz who is one of the employees of the company:

Face value of each share Rs. 10

Value of the right Rs. 4

Price to be paid to the company for each share Rs. 20

Market value of the shares Rs. 35

Also determine the value of shares in the hands of Mr Riaz assuming that:

A) The company has not charged any amount for granting the right/ option to

purchase shares; or
B) An employee has to pay Rs. 2 per share as a price for obtaining the right to

purchase shares
 Income
IncomeTar -Salary
Synopsis of Taxes
I6-16
Answer:
be included in Salary Income
Amount to
Purchase Free of Cost.
Share is Granted
Where The Right to
A) the shares (2,000 x Rs. 35)
Fair Market Value of
Less: Amount paid for
Purchase of shares (2,000 x Rs. 20) 70,000
Taxable as salary income
The Right
A0.0,000
000)
B) Where Amount is Payable For Acquiring
Rs. 35)
Fair Market value of the Shares (2,000x
Less: 70,000
Amount paid for purchase of Shares (2,000 x Rs. 20) 40,000
Amount paid for acquiring the right (2,000 x Rs. 2)
Taxable as Salary income
4.000 (44.000)
26,000
Cost of the Share
A) Where Right is Acquired Free of Cost
Amount paid for purchase of shares
Amount taxable as "Salary Income"
40,000
TotaB cost of shares
30.000
70,000
Cost per share (70,000 2,000) Rs. 35
Where Some Amount is Payable for Acquiring the Right
B)
Amount paid for purchase of shares 40,000
Amount paid for acquiring the right 4,000
Amount taxable as "Salary Income" 26.000
Total cost of shares Z0,000
Cost per share (Rs. 70,000 2,000) Rs. 35

Notes:
The face value of the shares has no concern with the amount to be detemined
i)
under the Income Tax Ordinance. It is the fair market value and the price paid
shares, Whicn
for acquiring or/and exercising the right/option to purchase
determines the amount to be included in income of the employee.
Under both options, the fair market value of the shares shall be the total cost
i)
the shares acquired by an employee.
Where t h e s h a r e s a r e issued with a restriction o n their t r a n s f e r then n o a a s a shall
fre
4 ree
he nas r
De included in an employee's income until the earlier of the date when shares.
of the
ngnt to transfer the shares or the employee has actually disposed
Such a case the amount to be included shall be determined as beloW
Fair market value at time the employee has free right to transfer or has XXX

actually disposed of the shares

Less: XXX
Consideration given for shares
Amount paid for right or option, if any
XXX XXX
Amount chargeable to tax
Synopsisof1ares Income Tax Salary Income
-

[6-169
Example: 6.11
ising the data or example 6.10, compute the amount to be included in
f Mr. Riaz if the company has imposed a salary income
restriction that the
ntitled to dispose of the shares within one year of the employees will not be
er

August, 200B issue of shares, i.e. 14h

The fair market valueon

The 14-08-200B is Rs. 37
Answer:
per share
A) Where Right is given Free of Cost
Fair market value on 14-08-200B (2,000 x
Rs. 37) 74,000
Less: Consideration paid for shares
(2,000 x Rs. 20) 40.000
Taxable as Salary income
34,000
8)Where
B) an Amount is Received
for Granting Right
Fair market value of shares on 14-08-200B
(2,000 x Rs. 37) 74,000
Less: Price paid for right (2,000 x Rs. 2) 4,000
Consideration for shares (2,000 x Rs. 20) 40.000 44,000
Taxable as salary income
30.000
Example: 6.12
Assume that Mr Riaz, with the permission of the company, disposed of the shareson
23d March 200B, when the fair market price was Rs. 32 per Share. Compute the
amount to be included in salary income of Mr. Riaz by using the data of example6
Answer:

A) Where Right is Given Free of Cost

Fair market value as on 23-03-200B (2,000 x Rs. 32) 64,000
Less: Consideration for shares (2,000 x Rs. 20) 40.000
Taxable as salary income 24.0C
B) Where an Amount is Received for Granting Right
Fair market value of Shares on 23-03-200B (2,000 x Rs. 32) 64,000
Less: Price paid for right (2,000 x Rs. 2) 4,000
Consideration for shares (2,000 x Rs. 20) 40,000 44.000
20.000
Taxable as salary income
calculated by adding the folilowing
Ihe cost of the shares to an employee shall be
items shares XXX
The consideration given by an employee for XXX
or option; if any
Amount paid for obtaining right determined above) XXX
A m o u n t chargeable to tax
under the head salary (as
XXX
option, disposes o
of obtaining shares against a right or
instead salary income
ere an employee,
as below shall
be included in his
calculated
C
nght, then an amount XXX
disposal of the right XXX
Consideration received against of the right
XXX
Le Any cost incurred in respect
Synopsis of Taxes
Income Tax - Salary Income
6-1701
Example: 6.13
induded in salary income
of Mr. Riaz if he in
amount to be stead of exerci
of ey
value f(i.e. d
the at the fair market value
Compute
his right to purchase the shares, sells the right market Rs.,A4 per sing
assuming that:
and
shvare
1 The nght is given free of cost;
The company has received Rs. 2 tor granting nght to purchase one share
are.
Answer
Where the Right is Given Free of Cost
Consideration received on disposal of the right (2,000 x Rs. 4)
Less: Cost incurred for obtaining right 8,000
Taxable salary income N
Where an Amount is Received For Granting Right
8.000
2
Consideration received on disposal of the right (2,000 x Rs. 4)
Rs. 2)
8,000
Less: Cost incurred for obtaining right (2,000 x

Taxable salary income

4.000
4.000
VALUATION OF ACCOMMODATION [13(12) & Rule-4]
Facility in respect of housing may either be in the form of house rent allowance or an
accommodation provided by the employer. House rent allowance receivable in cash by an
empioyee is totally taxable.
Where an employer has provided
accommodation to his employee, the value of
an
accommodation shall be the amount that would have been paid by the employee ifsuch
the
accommodation was not provided to him. This amount shall be induded in the salary income
of the employee.

However, the value shall not be taken less than forty-five

the time scale of the basic
percent (45%) of the minimum
salary (MTS) or the basic salary if the time scale IS not pro
In other words the value to be
included in salary income on account of accommouauu
provided by an employer shall be an amount which is
higher of the following amounls
. Fair market rent of the
accommodation; or
2 Fury-five percent (45%) of MTS or basic salary.
Accommodation in Small Cities
In smail cities house
rent allowance is MTS or basic salary.
accommodation is provided in those areas allowed @ 30% of then
value taken for the where rate for house rent allowance basic salary
salay
accommodation shall not be less than 30% of MTS
Under this case the
amount to be included in Or
salary income will be higher or u
1. Fair market rent of the
2
accommodation;
or
30% of the MTS or the basic
salary.
Synopsisof Tares Income Tax -Salary Income
6-17
SELF-HIRING OF A PROPERTY

a/here an employee or
nis spouse is the owner of any such
atment) that is rented out to the
employer and the
building (i.e., house, flat or

Hilding to the
employee against his entitlement
employer has provided the same
for rent-free accommodation,
a
ave two-fold
ha enect under the income Tax then it v
Law. The same is discussed below.
1. Property Income
Receipt of rent ofbuilding is chargeable to tax under the head "Income from
Any rent received by the employee or his spouse shall be a property income Property
of the
recipient and be treated accordingly
2. Salary Income
The building is provided by the employer to his employee as a rent-free
accommodation. It will be a perquisite and will be included in the 'salary income of
the employee as per Income Tax Rules.

VALUATION OF CONVEYANCE [13(3) & Rule-5]

Where an employer has provided a conveyance to an employee, the value to be included in
salary income of the employee shall be determined as per the table given below
Use of Motor Vehicle Amount to be Included in Salary

Only for private use of the 10% of the cost to the employer for acquiring the motor
vehicle or the fair market value of the vehicle at the
employee. commencement of lease, if it is taken on lease.

Partly private use of the | 5% of the cost to the employer

for for acquiring the motor
or the fair market value of the
vehicle at the
employee and partdy for official vehicle
of
commencement if it is taken on lease.
lease,
use.
"employee" includes a whole time
Rule-5 the term
Note: For the purposes of Rule-3 through
working director of a company. [Rule-6)
EXEMPTIONS available to a salaried
concessions or rebates in tax liability in the
EXemptions from tax and tax of the Income Tax Ordinance as well as
in various sections chapter Exemptions
axpayer are specified relevant legal provisions are discussed in the of that chapter
Schedule. All
oECond reader may refer the relevant part
the
For details,
and Concessions".

SALARY INCOME
COMPUTATION OF TAXABLE
Rs. Rs
XXX
XXX
Basic salary XXX
Dearness allowance XXX

Cost of living allowance (COLA) XXX

Overseas allowance [N-1]

Bonus