Income Tax Ordinance 2001: total exemption on payment of pension, retirement

Income Tax Ordinance 2001: total exemption on payment of pension, retirement

KARACHI: Any income representing any payment received by way of gratuity or commutation of pension by an employee on his retirement is exempted from income tax.

The Second Schedule of Income Tax Ordinance, 2001 explained the exemption from total income.

Any income representing any payment received by way of gratuity or commutation of pension by an employee on his retirement or, in the event of his death, by his heirs as does not exceed –

(i) in the case of an employee of the Government, a Local Government, a statutory body or corporation established by any law for the time being in force, the amount receivable in accordance with the rules and conditions of the employee’s services;

(ii) any amount receivable from any gratuity fund approved by the Commissioner in accordance with the rules in Part III of the Sixth Schedule;

(iii) in the case of any other employee, the amount not exceeding three hundred thousand rupees receivable under any scheme applicable to all employees of the employer and approved by the Board for the purposes of this sub-clause; and

(iv) in the case of any employee to whom sub-clause (i), (ii) and (iii) do not apply, fifty per cent of the amount receivable or seventy-five thousand rupees, whichever is the less:

Provided that nothing in this sub-clause shall apply –

(a) to any payment which is not received in Pakistan;

(b) to any payment received from a company by a director of such company who is not a regular employee of such company;

(c) to any payment received by an employee who is not a resident individual; and to any gratuity received by an employee who has already received any gratuity from the same or any other employer.

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