Question

Salary is considered as bread and butter for any employee, people tend to spend golden years of their lives by doing job to earn for their family. Many of these employees are not aware about the benefits and deductions in the income tax due to which sometime higher amounts are deducted at source by their employers against their income tax. After learning this course, how would you educate the people in your communities about the less-known features of Income from Salary as per Income Tax Ordinance, 2001?

Answer 1

INCOME TAX ORDINANCE , 2001

Pakistan's current taxation system is known by the name Income Tax ordinance 2001 ( for direct taxes ) and sales tax act 1990 ( for indirect taxes ) . It is administered by Federal Board Of Revenue ( FBR ). Inorder to update the tax laws and also meet the international standards of tax law, the Income Tax Act was enacted on september 13th 2001.

Direct taxes/ Income tax

1. corporate income tax is 29% for tax year 2009 and onwards.
2. corporate tax rate for banking industry is 35 % in 2009 onwards.
3. Super tax, minimum tax and tax on undistributed reserves.

Indirect taxes

1. sales tax on goods = 17%
2. sindh sales tax on services = 13%
3. punjab sales tax on services = 16%
4. islamabad capital territory = 16%
5. Baluchistan sales tax on services = 15%
6. kpk sales tax on services = 15%

Features of income from salary as per Income Tax Ordinance Act , 2001

• According to section-9 , of Income Tax Ordinance Act,2001 the taxable income of a person for a tax payer shall be the total income of the person minus any total allowances of the person during the year.
• Any amount recieved as salary during the tax year, which is not exempted from the taxes under Income Tax Ordinance Act 2001 , shall be treated as an taxable income under the head "salary".
• As per the finance act 2019, the salary slabs and tax rates are revised with effect from 1st july 2019.
• Under the section 149, of Income Tax Ordinance Act, 2001 ,every employer who is responsble to pay salary to employee have to deduct tax from the employees average rate of tax computed
• Deduction shall not be allowed for any expenditure by an employee in deriving amounts chargeable under the head " income from salary ".
• Where an employee is agreed to pay for the taxes of employee under the head of salary, then income from such head will be grossed up by the amount of tax payed by the employer.
• Salary includes ; 1. any pay , wages payed by employ    2. any perquisites,which is convertible or not. 3. any allowances paid by employer . 4. any amount of expenses incurred by an employee and it is reimbursed by an employer. 5. the amount of any profit in lieu in addition to salary or wages
• For the purposes of computing income of an employee under the tax year chargeable under the head "income from salary" the value of any perquisites , that is provided by the employer to employee shall be included.