Heads of Income

(a) Salary (b)Income from house property (d) Capital gains (e) Income from other source (c) Income from business or profession

Salary
Scope of Salary:
1) Salary & Wages

4) Perquisites

2) Annuity, pension or Gratuity 3) Fee, Commission or Allowances 5) Profits in lieu of or in addition to salary or wages.

Perquisite
a) Value of rent fee accommodation provided by the employer.

b) Value of an accommodation provided by employer at concessional rate. c) Insurance premium paid by employer. d) Value of conveyance facility provided by the employer Profit in lieu of or in addition to salary or wages a) Compensation received from employer on termination of employment. b) Compensation on modification of terms of employment. c) Amount received from provident fund or any other fund which is contributed by employer. d) Overtime payment received from employer. e) Allowances such as dearness allowance, conveyance allowance, medical allowance, entertainment allowance, utility allowance, etc received from employer f) Bonus received from employer Note: however, in case of certain amounts of bonus a special one time treatment has been made applicable. The details are as follows: i) The bonus for the year 2010 shall be separately taxable at a fixed rate of 30% ii) This is one time taxation which will be known as internally displaced persons tax (IDPT) iii) It will be applicable on the bonus paid to corporate employees receiving salary income of Rs 1,000,000/- or more (excluding bonus).

Facilities provided by employer:

The Facilities provided by the employer to employees will be taxable in the following manner.

1. Accommodation
a) House rent Allowance If an employer provided any accommodation allowance or house rent allowance, the whole amount so received will be taxable b) Accommodation allowance If the employer provided a furnished or unfurnished accommodation, the following amount will be added in the total income of the employee as value of this perquisite: (a) The amount that would have been paid by the employer in case such accommodation was not provided; or (b) 45% of the minimum of time scale of the basic salary; Whichever of (a) or (b) is higher (c) Accommodation facility in the areas where House rent allowance is Admissible@ 30%

2. Conveyance Allowance
If the employer provides conveyance allowance to his employees, the whole allowance will be fully taxable.

(a) Conveyance provided by Employer for personal use of employee.

If the employer has provided a conveyance to employee for personal use, 10% of the cost which employer paid for acquiring the motor vehicle will be included in the taxable income of employee, every year. For example employer car purchase for his employee personal use car value Rs 150,000/- 10% tax Rs 15,000/- charge employee in his income.
(b)Conveyance

provided by employer partly for personal and partly for official Use.

If the employer has provided a conveyance to employee both personal and official use, 05% of the cost which employer paid for acquiring the motor vehicle will be included in the taxable income of employee, every year.

(c) Employer Acquires the conveyance on Lease

In case the motor vehicle is acquired by the employer on leased, the fair market value at the commencement of the lease will be ascertained. In case of (a) above 10% of fair market value and in case of (b) above 5% of such value will be added in the total income.
3.

Medical charges, Hospital Charges or Medical Allowance

In case of employee: (i) Receives free medical treatment or hospitalization or both by the employer or receives reimbursement of the medical expenses under the terms of employment whole such benefit will be exempt from tax. It is necessary, however, the national tax number of the hospital or clinic is provided and the employer also certifies and attests the medical or hospital bill. (ii) In case where the above mentioned facilities are not provided for in the terms of employment any medical allowance given by the employer will be exempt up to 10% of basic salary of employee.

4. Entertainment Allowance
The Following is the summary of tax rules regarding entertainment: (a) Actual entertainment expenditures incurred by employee for entertainment on behalf of the organization and then reimbursed to him by employer are also not taxable. (b) If any employee is provided tea coffee etc at the office at course of his work is not taxable (c) Free or subsidized foods provided to employee during duty hours are also not taxable. (d) In all the remaining cases, the entire amount of entertainment allowance received by the employee will be added in his total income for tax purpose.

5. Special Additional Allowance.

Government of Pakistan has allowed special additional allowance to its employees with effect from July 1, 1999. For the employees up to grade 16, the allowance is paid as 25% of Minimum Pay Scale whereas for employees of higher ranks the rate is 20%. This amount is totally exempt.

6. Loan to employee

Where a loan is made by employer to an employee and either no profit on loan is payable by the employee or the rate of profit on loan is less then benchmark rate (benchmark rate 11%), the amount chargeable to tax to the employee under the head salary for a tax year shall include an amount equal to:(a) The profit on loan commuted at the benchmark rate, where no profit on loan is payable by the employee, or (b) The difference between the amount of profit on loan paid by the employee in that tax year and the amount of profit.

7. Special Allowance
If an employee receives a special allowance provided that it is not conveyance or entertainment allowance) granted to meet the expenses which are incurred in the performance of official duties, such allowance will be exempt from tax. Even if the expenses actually incurred are less than the amount of allowance, the excess amount is not liable to tax. Example of such allowances is Traveling Allowance, Daily Allowance, and Uniform Allowance.

8. Provident Fund