LECTURE TAXATION

05 INCOME TAX -
SALARY
COMPUTATION OF TAX LIABILITY
AND TAX RATES

Tax rates for salaried individual

A salaried taxpayer means a taxpayer
whose salary income constitutes more
than 75% of his taxable income.
TAXATION OF WOMEN
ENTERPRISES
 Woman enterprise means a start-up established
on or after first day of July 2021 by woman.
 Tax payable by women enterprise on profits and
gains derived from business chargeable to tax
under the head income from business shall be
reduced by 25%, However, this benefit will not
be available to business that is formed by the
transfer or reconstitution or splitting up of an
existing business.
 INCOME TAX - SALARY
Salary means any amount received by an employee from any employment, whether of
a revenue or capital nature, and includes:
•Any pay, wages or other remuneration including leave pay, overtime, bonus,
commission, fees, gratuity, work condition supplements (such as for the un-
pleasant or dangerous working conditions):
•any perquisite whether convertible into money or not;
•any allowance provided to employee including cost of living, rent, utilities,
education, entertainment, travelling etc. excluding allowance solely expended in
the performance of duties of employment;
•allowance which is paid in monthly salary on fixed basis or percentage of salary; or
•allowance which is not wholly, exclusively, necessarily or actually spent on behalf of the
employer
 INCOME TAX - SALARY
any expenditure reimbursed by employer other than expenditure incurred solely in
the performance of duties of employment

•profits in lieu of, or in addition to, salary including:

•(a) consideration received for entering into an employment agreement or for agreement to any
condition of employment or changes to the employment conditions or to a restrictive covenant to
any past, present or future employment.
•(b) amount received on the termination of employment, including golden handshake payments.
•(c) amount received from provident fund except for a contribution made by the employee in respect
of which the employee was not entitled to a deduction.
 INCOME TAX - SALARY
 any pension or annuity or any supplement to a pension or annuity received /

receivable from employer;

 any amount of gain earned under “Employee Share Scheme”;

 amount of tax chargeable on employee’s salary and borne by employer

 SALARY - BASIS OF CHARGEABILITY
 Salary is taxable on receipt basis i.e. any salary received by an employee in a tax

year shall be chargeable to tax.

 A person shall be treated as having received an amount, benefit, or perquisite if

it is

 actually received by the person

 applied on behalf of the person, at the instruction of the person or under any law

 made available to the person.

 SALARY - EXERCISE
 Mr. Bilal, a citizen of Pakistan, is working with PMX (Pvt.) Limited as their head of treasury for the

last 15 years. He has provided you with the following information for the year ended June 30, 2023.
 (i) His salary was Rs. 300,000 per month (inclusive of all allowances) till June 30, 2022, which was
increased to Rs. 400,000 per month effective from 1 July 2022

 (ii) Salary and allowances are deposited into each employee’s bank account on the 8th working day of the
following month.

 (iii) On 31 December 2022, Bilal opted for early retirement and final settlement was made on 8 January
2023

 Required: Compute Mr. Bilal’s taxable income for the tax year 2023
 INCOME TAX - SALARY
 Deductions not allowed

 In computing the income under the head

salary, no deduction shall be allowed for

expenses incurred by the employee in earning
such income.
 TERMINATION OF EMPLOYMENT
 If an employee has received compensation on the termination of employment, the

employee may, by notice to Commissioner, elect for the amount to be taxed at the rate
computed as:
 TERMINATION OF EMPLOYMENT
 MFD Ltd paid a sum of Rs. 500,000 under the Golden Hand-shake scheme to Mr. X in addition to the

taxable salary of Rs. 1,600,000 in the tax year 2023. The past three years assessed tax results of his
assessment are as under:

 Mr. X is interested to know the options available to him for taxation of Golden Hand-shake scheme

for the tax year 2023.

 INCOME TAX - SALARY AREARS

 Relief where salary is received in arrears

 In case of receipt of amount under salary which is paid in arrears and is expected to

be charged at rate higher than the rate which would have been charged if the amount
was received in its relevant tax year, the employee may by a notice to the
Commissioner elect for tax rate applicable in the tax year in which such salary was
earned.
WRAP UP (QUOTE OF THE DAY)
Muhammad Sadam