1. INCOME FROM SALARY By: M Luqman Rafiq
(Principal: Escribir College) (Consultant at Rafiq & Co.)

2. INCOME FROM SALARY Salary means any amount RECEIVED by
an EMPLOYEE from any EMPLOYMENT,
whether of a revenue or capital nature:

3. Key Definitions - Salary
EMPLOYEE means any individual engaged in employment;
EMPLOYER means any person who engages and remunerates an
employee;
EMPLOYMENT includes –
a directorship or any other office involved in the management of a company;
(b) a position entitling the holder to a fixed or ascertainable
remuneration; or
(c)the holding or acting in any public office;

4. Receipt of Income
69. Receipt of income.—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; or
(c) made available to the person.

5. Circumstances – Due Basis
110: Salary paid by private companies. — Commissioner might include Salary of an earlier tax year in the calculation of Income for that Earlier Year if in his opinion Salary was Deferred 12(7) Salary Received in Arrears: Option for taxpayer to elect salary to be taxed as if it was received in a relevant tax year

6. What Constitutes Salary
Remuneration
Allowances
Perquisites
Amounts in addition to Salary
Post Employment Benefits
Tax paid on Salary (Tax on Tax)
Employee Share Scheme
Reimbursement of Personal Expenditure

7. REMUNERATION

8. Remuneration Pay Wages Other remuneration including Leave pay,
Payment in lieu of leave,
Overtime payment,
Bonus,
Commission,
Fees,
Gratuity or
Work condition supplements

9. ALLOWANCES

10. Allowances Cost of living, Subsistence, Rent, Utilities Education
Entertainment
Travel allowance
SHALL NOT INCLUDE ANY ALLOWANCE SOLELY
EXPENDED IN THE PERFORMANCE OF THE EMPLOYEE’S
DUTIES OF EMPLOYMENT; 

11. PERQUISITES

12. Perquisites General Rule= FMV of Benefit LESS Paid by Employee
Motor Vehicle
Interest Free Loan
Rent Free Accommodation / Housing
Amount Waived by Employer
Obligations of Employee Settled
Property Transferred
Domestic Servant
Utilities
Any other Perquisites

13. Perquisites
Motor Vehicle

14. Perquisites 2) Interest Free Loan
Applicable on a loan made, on or after the 1st day of July, 2002, by an
employer to an employee;
No Profit is payable; or
Profit on Loan is less than Benchmark Rate (10%);
Amount to be included in Salary is
Profit on loan computed at the benchmark rate, where no profit on loan is payable by the employee, or
Difference B/w Profit on Loan Paid and Profit Computed Using Benchmark Rate 
Provided further that this sub-section shall not apply to loans not
Exceeding five hundred thousand rupees.

15. Perquisites
3) Rent Free Accommodation: Exemption up to lower of : Fair Market Rent 400, % of MTS or Basic 325,000 Amount to be included in Salary 75,000/- Basic Salary shall be applicable only when there is no MTS

16. AMOUNTS IN ADDITION TO SALARY

17. Amounts in Addition to Salary
Joining Allowance
Modification to Employment Conditions
Termination Payments
Withdrawal from Provident Funds (excluding Employees proportion)
Payments for Restrictive Covenants

18. Termination Benefits
An employee may by notice in writing to the Commissioner,
elect for the amount to be taxed at the rate computed in
accordance with the following formula, namely: —
A/B%
where —
A is the total tax paid or payable by the employee on the employee’s total taxable income for the three preceding tax years; and
B is the employee’s total taxable income for the three preceding tax years.

19. Termination Benefits

20. Termination Benefits

21. POST EMPLOYMENT BENEFITS

22. Post Employment Benefits
Pension
Gratuity
Provident Funds
Annuities

23. Post Employment Benefits
Pension
Pension received by the citizen of Pakistan from the former employer shall be
exempt from tax except where the person continues to work for the same
employer or an associate of the employer.
Where a person receives more than one pension, the exemption shall apply to
higher of such pensions.
Pension received in respect of services rendered by a member of Armed
Forces of Pakistan or Federal Government or a Provincial Government is
exempt from tax.
For a person over 60 years of age, all such pensions are exempt irrespective
of the above mentioned conditions (Circular 28 of 1991)

24. Perquisites 2) Gratuity
Exemption in respect of unapproved gratuity shall not apply in the following
cases:
Any payment not received in Pakistan
Any payment received by a director of a company who is not a regular employee of such company
Any payment received by a non-resident
Any gratuity received by an employee who has already received any gratuity from the same or other employer.

25. Perquisites

26. TAX ON TAX

27. Tax Paid by Employer amount of the employee’s income
Where an employer agrees to pay the tax
chargeable on an employee’s salary, the
amount of the employee’s income
chargeable under the head “Salary” shall be
grossed up by the amount of tax payable
by the employer.

28. Tax Paid by Employer

29. EMPLOYEE SHARE SCHEME

30. EMPLOYEE SHARE SCHEME
a) Option / Right Shall not be Chargeable to Tax b) Shares: Unrestricted Include amount in the year the option is exercised and Shares Acquired:: FMV of Shares on date of Issue LESS Consideration for Shares & Share options Restricted Amount shall be chargeable to tax upon the earlier of : a) the time the employee has a free right to transfer the shares; or b) the time the employee disposes of the shares; and In the above case, use FMV of the earlier of date when Restrict to Transfer Expires / Disposal Date Cost of Share: Consideration given by Employee for Share: XXXX Consideration given by Employee for Right / Option XXXX

31. SPECIFIC EXEMPTIONS

32. Exemptions Benefits by virtue of Employment
Benefits by virtue of Employment
[(53A) The following perquisites received by an employee by virtue of his employment, namely:-
(ii) free or subsidized food provided by hotels and restaurants to its employees during duty hours;
(iii) free or subsidized education provided by an educational institution to the children of its employees;
(iv) free or subsidized medical treatment provided by a hospital or a clinic to its employees; and
(v) any other perquisite or benefit for which the employer does not have to bear any marginal cost, as notified by the[Board].]

33. Exemptions Medical Allowance
Medical Allowance
(139) (a) The benefit represented by free provision to the employee of medical treatment or hospitalization or both by an employer or the reimbursement received by the employee of the medical charges or hospital charges or both paid by him, where such provision or reimbursement is in accordance with the terms of employment:
Provided that National Tax Number of the hospital or clinic, as the case may be, is given and the employer also certifies and attests the medical or hospital bills to which this clause applies;
any medical allowance received by an employee not exceeding ten per cent of the basic salary of the employee if free medical treatment or hospitalization or reimbursement of medical or hospitalization charges is not provided for in the terms of employment; or

34. Exemptions
SEAFARER
Any income chargeable under the head “Salary” received by
(a) a Pakistani seafarer, working on Pakistan flag vessels for one hundred and eighty three days or more during a tax year; or
a Pakistani seafarer working on a foreign vessel provided that such income is remitted to Pakistan, not later than two months of the relevant [tax year], through normal banking channels.
102. Foreign source salary of resident individuals.— (1) Any foreign- source salary received by a resident individual shall be exempt from tax if the individual has paid foreign income tax in respect of the salary.

35. Q/A Session

36. Thank You