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INCOME FROM SALARY (Section 12)

Sr.
Rule
No Details
Taxable/Exempt
.
Accommodation:
(a). House Rent Allowance Taxable
(b). Accommodation Facility
If the Employers provides a Furnished or
Unfurnished accommodation, the following
amount will be added:
1. The amount that would have been paid by
the Employers in case such
accommodation was not provided or Whichever of (1) 0r (2) is
2. 45% of the minimum of time scale of the higher
basic salary Taxable
Notes:
1. If there is no time scale, basic salary
should be taken for computation.
2. Same procedure is to be adopted whether
accommodation provided is furnished or
unfurnished.
1. (C). Accommodation Facility in the Areas Where
House Rent Allowance is Admissible (Allowable
or Acceptable) @30%
1. The amount that would have been paid by
the Employers in case such
accommodation was not provided or
2. 30% of Minimum of time Scale of the
Basic Salary
Whichever of (1) 0r (2) is
Notes:
higher
1. If there is no time scale, basic salary
Taxable
should be taken for computation
2. In case it is not known whether the area of
accommodation is a big city or not, any
assumption can be taken. However, in this
book it is assumed that person is
employed in a big city unless otherwise
mentioned.

6. Conveyance: Taxable
1. If Conveyance Allowance is given
2. If Conveyance Provided by Employers for 10% of the cost of Motor
Personal or Private use of Employee Vehicle etc. should be
included in Taxable
Income
3. Conveyance Provided by Employers Partly 5% of the cost of Motor
for Personal or Private and Partly for Vehicle etc. should be
Official Use included in
Taxable Income
4. Employers Acquires (Obtain, Gain, Get,
10% of Fair Market Value
Attain) the Conveyance on Lease:
will be included in the
(1. If Conveyance Provided by Employers for
total income.
Personal or Private use of Employee
(2. Conveyance Provided by Employers Partly 5% of Fair Market Value
for Personal or Private and Partly for will be included in the
Official Use total income.

Medical Facility:
Medical Charges or Hospitalization or
Reimbursement
Exempt
If Under Terms
If Not Under Terms Taxable
11. If Silent Provision then consider (Under Terms) Exempt
Medical Allowance:
Remaining Taxable
Exempt Upto 10% of Basic Salary
When both Medical Allowance and Medical
Facility is given:
Taxable
Medical Allowance is fully
Entertainment:
16. Reimbursement of Entertainment Exempt
Entertainment Allowance Fully Taxable
Loan to Employee: Taxable (Difference
(a). More than Five Lac. (Rs. 500000). between 10% and the rate
18.
(b). Interest Rate less than 10% given) and it is applied on
loan
Special Allowance:
19. It is also known as TA (Travelling Allowance), DA Fully Exempt
(Daily Allowance)
Provident Fund:
1. Government Provident Fund:
(a. Employee Contribution (Already included
20. Fully Exempt
in Salary)
(b.Employers Contribution Exempt
(c. Interest Credited Exempt
(d.Receipt of Accumulated Balance Exempt
2. Recognized Provident Fund:
(a. Employee Contribution (Already included
Fully Exempt
in Salary)
(b.Employers Contribution Exempt upto Lesser of
Note: (a. 10% (Basic Salary +
(See Note No.10) Dearness Allowance)
(b. Rs.100000
(c. Interest Credited Exempt upto Lesser of
Note: (a. 16% of Rate of
(See Note No.10) Interest
(b. 1/3 (Basic Salary +
Dearness Allowance)
(d.Receipt of Accumulated Balance Exempt
3. Unrecognized Provident Fund:
(a. Employee Contribution (Already included
Fully Exempt
in Salary)
(b.Employers Contribution Fully Exempt
(c. Interest Credited Fully Exempt
(d.Receipt of Accumulated Balance:
Employers Contribution + Interest on this
Taxable
Contribution
Employee Contribution + Interest on it Exempt
Re-imbursement of Entertainment (It belongs to
34. Exempt
office)
Obligation (Loan) of an Employee paid by
35. Taxable
Employers
36. Special (Qualification) Pay Taxable
37. Life Insurance Premium Paid by Employers Taxable
Domestic Servant Salary Paid by Employers
38. Domestic Servant such as Gardener, Chowkidar, Taxable
Watchman, Gardener and Sweeper etc.
39. Club Fee (Lahore Gymkhana) Paid by Employers Taxable
40. Children Education Fee Paid by Employers Taxable
41. Free Education Facility in Employers Institution Exempt
Hotel Bills relating to Pleasure Trip Paid by
42. Taxable
Employers
Hotel Bills relating to Official Duty Paid by
43. Exempt
Employers
Compensation of Loss of
Employment/Termination:
44. Compensation received from previous
Taxable
Employers
Compensation for Temporary Disablement
45. Efficiency Honorarium Taxable
46. Reward on Passing Departmental Exam Taxable
47. Overtime Payment Taxable
48. Non Practicing Allowance received by a Doctor Taxable
49. Compensation for Temporary Disablement Taxable
50. Performance Award or Incentive Award Taxable
Golden, Hand Shake received
51. Taxable
(If average rate of last 2 or 3 years is not given)
52. Refresher Course Fee Paid by Employers Exempt
53. Free logging and Boarding Facility Exempt
54. Pick and Drop facility provided by Employers Exempt
Cash Amount/Award/Medal given by President of
55. Exempt
Pakistan
56. If Cash Amount/Award/Medal given by others Taxable
57. Leave Fair Assistant Taxable
58. Free U. S. A, Lahore Return Ticket Taxable
59. Gas and Electricity Allowance Taxable
Leave Encashment:
60. For Private Company Taxable
Government Company Exempt
Pension:
Pension received by a former Exempt
employee of Pakistan Armed Forces,
Government or Provincial Government
The Pension received from the United
Nations or its specialized agencies by Exempt
a citizens of Pakistan
The Pension received by any citizen of
62. Exempt
Pakistan from his former employer
Any Pension granted under the rules to
the families and dependents of
Exempt
Shaheeds, belonging to Pakistan
Armed Forces
In case a person receives more than
Only the amount of Higher
one pension,
Pension will be Exempt
Gratuity or Accommodation of Pension :
67. (a). If received from Government Exempt
(b). If Gratuity is Approved by Commissioner Exempt
(c). If Gratuity is Approved by FBR (Federal Exempt Upto two lac
Board of Revenue) (Rs.200000)
In all other cases (Not Approved) Which Ever is less will be
70.
50% of Amount of Gratuity or Rs.75000 Exempt
Encashment of Leave Preparatory to Retirement
(a. If Silent Provision then it is known as for
Taxable
71. Private Employee
(b. Encashment of Leave Preparatory to
Exempt
Retirement (Government)
Conveyance Provided by Employers Partly for
73. Personal and Partly for Official Purpose Exempt
Expenditure
Bonus or Incentives
74. Taxable
Tax Paid by the Employers
75. Taxable

Commission
76. Taxable

Senior Post Allowance


77. Taxable

Lunch Facility
78. Taxable

Utilities Allowance (Including Petrol for


79. Taxable
Generator)
Relocation Allowance
80. Taxable

Orderly Allowance
81. Taxable

Adhoc Relief
82. Taxable

Research Allowance
83. Taxable

Qualification Pay
84. Taxable

Special Additional Allowance


85. Taxable

Cost of Living Allowance


86. Taxable

Residential Bills Paid By Employers


87. Taxable

House Servant Salary Borne By Employers


88. Taxable

Coking Range Provided by Employers


89. Taxable

Dearness Allowance
90. Taxable

Ph.D. Allowance
91. Taxable

Efficiency Honorarium
92. Taxable
Special Pay
93. Taxable

Annual Leave fare Assistance


94. Taxable

Fixed Education Allowance for Children


95. Taxable

Incentive Award
96. Taxable

Pay in Lieu of Leave


97. Taxable

Project Allowance
98. Taxable

Telephone Bills Reimbursed


99. Taxable

Free Transport Facility to the Employees Family


100. Taxable

Agricultural Income
101. Exempt

Any amount received out of Recognized


102. Exempt
Provident Fund

103. Exempt

INCOME FROM PROPERTY [Section 15]



)( 1.
5/1 )(

INCOME FROM BUSINESS (Section 18)


Sr. Details
Taxable / Exempt
No.
1. Income from export of computer Fully Exempt
2. Income from computer related services
Fully Exempt
For Example: Networking.
3. Income from Private Sector Project Fully Exempt
4. Income from Speculation Business Fully Taxable
5. Income from Fish Catching/ Poultry Farming/Yarn
Fully Taxable
Business
6. Royalty on Professional Books Fully Taxable
7. Income from Hotel/ Internet/ Petrol Pump/Parlor/
Fully Taxable
Medical Store/ Catering
8. Income from Timber Store/ Photo state Machine Fully Taxable
9. Income from Rent a Car. Fully Taxable
10. Income from Business Abroad UK/Canada/Saudia Fully Taxable
11. Any other Source of Business Fully Taxable

INCOME FROM CAPITAL GAINS (Section 37)

Income From Other Source


Sr
. Rule
Details
N Taxable / Exempt
o.
1. Agricultural Income Exempt
2. Amount Received from Abroad Exempt
3. Amount Through Inheritance Exempt
4. Gift from Anyone (Mother, Father etc.) Exempt
5. Insurance money Received on Maturity of Policy Exempt
6. Profit on Sale of Personal Car Exempt
7. Income from Hire of Furniture Fully Taxable
8. Income from Sub Lease of Property Fully Taxable
9. Income from Non-Professional Writer Fully Taxable
10. Amount/ Consideration received for Vacating Fully Taxable
(Leave) the Property
[Amount Received Amount Paid 10]
11. Annuity Received from Pakistan Postal Annuity Exempt upto Rs.10000
Certificate
12. Annuity Granted by Life Insurance Company Fully Taxable
(Other than Postal Annuity Certificate then)
13. Remuneration for Examination Paper Setting/ Talk
Delivered on T.V
Gross Amount Taxable
If Gross Amount is not given, we will gross up as:
Amount 10093
15. Rent of Furnitures / Taxable
The items which are Deducted from Total Income are
given below:
Total Income

Direct deduction:

1. Zakat under Zakat & Usher Ordinance 1980


2. Workers Welfare Fund
OR
Worker Participation Fund
3. Donation to Approved Institution
(Restricted Upto 30% of total Income)
(Under Clause 61, Schedule II)

Steps for Calculation Tax Payable


Name of the Tax Payer

Tax Year

Tax Year Ended

Residential Area

Computation of Tax Payable

Income from Salary (Section 12)

Income from Property (Section 15)

Income from Business (Section 18)

Income from Capital Gains (Section 37)

Income from other Source (Section 39)


_________________
Total Income
Rs. XXXXXXXX

Less: Zakat

Donation (Clause 61 (Schedule 2))

Worker Welfare Fund

Or

Worker Participation Fund


________________

Taxable Income Excluding from Share of AOP (Actual Taxable Income)


Rs. XXXXXXXX

Add: Share of AOP (Association of Persons)


________________

Taxable Income for Rate Purpose (Including Share of AOP)


Rs. XXXXXXXX

_______________

Computation of Gross Tax /Tax Payable

First Method
For Calculating Tax on Share from AOP:

Tax Payable /Taxable Income Including Share of AOP X Share from AOP
Then:

Gross Tax Tax on Share from AOP = Tax Payable on Actual Taxable Income

Second Method
For Calculating Tax on Actual Taxable Income:

Tax Payable /Taxable Income Including Share of AOP X Actual Taxable Income
Then:

Gross Tax Tax on Actual Taxable Income = Tax on Share from AOP
Less: Special Tax Rebate for Senior Citizens

(50% of Tax Payable)

Concession for Teachers, Researchers for

Recognized University or Board of Education

(40% of Tax Payable)

Foreign Tax Credit

a) Tax Paid in Foreign Country (On Foreign Income)


b) Tax Payable_______________ X
Foreign Income
Taxable Income Actual (Excluding from Share from AOP)

Whichever is less will be deducted from Tax Payable

Average Relief

Gross Tax (Tax on Income for Rate Purpose)_ ___ X Amount


Admissible
Taxable Income for Rate Purpose for
Average Relief

(See Below Mentioned Detail about Average Relief)

Tax Deducted At Source/Advance Tax Paid


___________

Tax Payable with Return Rs.


XXXXXX

SPECIAL TAX REBATE FOR SENIOR CITIZENS

Special Tax Rebate will be admissible only in cases:

1. Taxable Income Not More Than Rs.10 Lac


2. Age will be 60 years or more

EFFECT:

50% of Tax Payable is Deduct from Tax Payable


AVERAGE RELIEF
1. Donation for Charitable Purpose [Section 61]
Tax concession is granted if a person, company donates any amount in cash
or kind during the year to a non-profit organization:

Government Education Centre or Any Board of Education or


University in Pakistan (Established by under any federal or
provincial law or local authority)
Government Hospital
Relief Fund Approved by Government
Any Non-Profit Organization

Sr. Details Treatment


N
o.
1. If a company donates to above organization 20% of Taxable
1. Income
2. In case of individual or Association of Persons (AOP) 30% of Taxable
Income
Note:-
If donation is given in kind, the value of such articles or goods donated
would be ascertained by the Board.
Point to be kept in mind

All the donations given in cash will be entitled to tax concession only if the
amount is paid by a crossed cheque drawn on a bank, or fair market value
of any property given as donation.
Note:- If Charity is given in the question then
No treatment (Not Allowed)

2. Investment in Shares and Insurance [Section 62]


Sr. Details Treatment
No.
Average Relief Enhanced
Shares Purchased Whichever is less
1. 20% of Taxable Income
Or Rs. 10,00,000
(Holding Period two or more than two years)
:


1
183
183

2




3



2. Contribution to An Approved Pension Fund [Section 63]


Any Pakistani individual salaried person or businessman who contributes as
premium in approved pension fund during the year is entitled to a tax incentives on
such payment. The details are as under:-

The person contributing should possess a valid National Tax Number


Valid CNIC (Computerized National Identity Card)

The concession is available for contribution to only one approved


employment pension or annuity scheme.

Sr. Explanation Treatment


NO.
1. A person maintains an Approved Pension Fund, he is 20% of Taxable Income
eligible for
:


2

3. Mark up on Housing Finance Scheme/Profit on Debt


[Section 64]
The loan is utilized for construction of new house or the
acquisition of a house.
The amount will not include the return of capital
The amount should not have been deducted from Income from
Property.

Sr. Explanation Treatment


No.
1. The amount eligible for relief will be
(a. 50% of Taxable Income Whichever is less
(b. or Rs. 750000 (will be our relief)

4. Tax Credit for Registration Under Sales Tax Act-1990


[Section 65A]
Every Manufacturer registered under the "Sales Tax Act-1990", shall be
entitled to a tax credit of 2.5% if tax payable for a tax year. This concession
will apply if:-

Ninety Percent (90%) his Sales to the Peron who is Registered


under the" Sales Tax Act-1990"
Complete details of the Buyers or Purchasers are provided to
Authorities.

:

2.5 1990 -

) (


1990 -

NOTE 1:

If Share from AOP (Association of Persons) is given then we take the following
step

Tax Payable

Less: Average Relief

[Tax on Taxable Income for Rate Purpose / Taxable Income for Rate Purpose X
Amount Allowed]

NOTE 2:

If Prize on Prize Bond is given then there is no effect of this on Taxable


Income but it will be written at Footnote.

NOTE 3:

If Zakat is deducted on behalf of Approved Zakat Fund then it will be


deducted from Taxable Income.

Sub-Note
If Zakat is given and there is no explanation about Zakat then it will be
treated as Zakat is transferred to Government Fund and it will be deducted from
Total Taxable Income.

If Zakat is transferred other than Government Fund then it will not be


deducted from Total Taxable Income.

NOTE 5

We take utilities bills etc as Private and remaining as Official.

NOTE 10

(Sr. No.7 (2))

Suppose, this type of data is given:

1. Basic Salary Rs.450000


2. Employees Contribution Rs.54000
3. Employers Contribution Rs.54000
4. Interest on Accumulated Balance @20% Rs.21600

Solution:

Basic Salary Rs.450000


Employees Contribution (Already Rs.54000
Included) Rs.54000
Employers Contribution
(i). 10% of B. S(Rs.450000) -Rs.45000 Rs.9000
Rs.45000
(ii). Or Rs.21600
Rs.100000
(10%(Basic Salary + Dearness
Allowance)) -Rs.17280 Rs. 4320
Interest Credited
Exempt upto 16%
(i). Rs. 21600 X 16/20
Rs.17280
(ii).1/3 X Rs.450000
Rs.150000

(1/3 (Basic Salary + Dearness


Allowance)
(Related to Sr. No.7)

------------------------------------------------------------------------------------------------------
------------------------------------

Rates on Income Tax and Separate Block of Income for


Salaried Persons

Or

Computation of Tax on Income under FTR (Final Tax Regime)

Sr. No. Block of Income Tax Rates


Dividend Income
(Public or Private Company Shares or NIT 10% of Such Income
Units)
Royalty Payment to Non-Resident 15% of Payment
Income by way of Prize on Prize Bond/Cross
15% of Such Winning
Word Puzzle
Income Representing Winning from a Raffle or
20% of Such Winning
Lottery
Flying Allowance (Received from Pakistan
Armed Forces, PIA or Civil Aviation Authority)
Submarine Allowance (Received by the 2.5% of Such Allowance
officers of Pakistan Navy)
Profit on Debt 10% of Such Income
For the tax year 2014 Withholding tax on
Income from Property is under:
Upto Rs.1,50,000 Nil
Rs.1,50,0000 to Rs. 10,00,000 10% of the amount
Exceeding Rs.1,50,000
Rs.85,000 + 15% of the
More than Rs. 10,00,000
amount Exceeding
Rs.10,00,000
For the Tax year 2014 Capital Gain
Arising within 6 Months 10% of Capital Gain
Arising After 6 Months but less than
8% of Capital Gain
12 Months
Profit on Security issued by Banking
10% of Such Profit
Company/Government Security
Tax Deducted At Source or Advance Tax

1. Tax Deducted from Salary


2. Tax Paid by the Employers
3. Tax Paid on the Purchase of Domestic Air Ticket
4. Tax on Property Income
5. Tax Collected on Purchase of Motorcar or with Motor Vehicle tax
6. Tax Paid on Telephone Bill
7. Tax Paid on Mobile Bill
8. Remuneration for Services Rendered non under Employment
Agreement e-g, Examiner-ship/Paper Setting/Paper Checking etc.

Irrelevant Data for Taxation, so it needs no treatment:


1. Zakat Paid Personally
2. Charity
3. Donation to Baitul Mal Fund
4. Personal Medical Expenditures
5. Purchase of Domestics Air Ticket
6. Legal Installment Paid
7. Interest on Private Company Shares
8. Purchase of Certificates (Special Savings, Khas Deposit, Defence
Saving Certificate (DSC))
9. Loss on Sale of Private Company Shares (Section 37)
10. Interest Free Loan Received from Friends or other than from
Employers
11. Purchase of Books
12. Purchase of Shares from Stock Exchange (Section 62)
13. Accident Insurance Paid by Employee
14. Purchase of NIT (National Investment Trust) Units
15. Bonus Shares Received from Public Limited Company
16. Children Education Expenditures
17. Life Insurance Premium on Policy of His Wife
18. Telephone Bill Paid By Employee