Tag: gratuity

  • FBR directs issuing exemption certificates to gratuity, provident funds

    FBR directs issuing exemption certificates to gratuity, provident funds

    ISLAMABAD: Federal Board of Revenue (FBR) has issued directives for grant of income tax exemption to gratuity and provident funds.

    Through an office order, the FBR issued directives on complaints received from taxpayers that tax offices were refusing to grant income tax exemption against gratuity funds/ provident funds.

    The FBR expressed concern on the treatment being given by some field formations on the provident funds/ gratuity funds requests for exemption certificates under section 159/150/151 of the Income Tax Ordinance, 2001.

    The FBR said that the taxpayers had pointed out the exemption granted to the funds prior to tax year 2013, the tax offices were refusing the request for exemption certificates.

    The tax offices were asking the taxpayers to move fresh applications for recognition of the funds on the pretext that the fact of their approval is not available/evident in the FBR’s system IRIS.

    The FBR clarified the position by stating that the exemption requests of recognized provident/gratuity funds cannot be refused. Therefore, the revenue body directed the tax offices to process the exemption certificate requests of all the provident / gratuity funds who produce evidence of recognition under the relevant rules framed under the Income Tax Ordinance, 2001 or repealed law Income Tax Ordinance, 1979.

    “Further, asking for fresh applications for recognition merely on the pretext that such recognition is not available on the system is not a valid excuse,” the FBR directed.

    However, the FBR cautioned the tax offices: “Mere issuance of exemption certificate under section 159 of the Income Tax Ordinance, 2001 does not foreclose the possibility of reviewing/recalling such action in case it is later-on discovered that the taxpayer produced some incorrect/invalid or wrong evidence for obtaining the favor.”

  • Gratuity to be treated as salary for tax matters

    Gratuity to be treated as salary for tax matters

    KARACHI: Federal Board of Revenue (FBR) has said that gratuity received by an employee during his lifetime shall be treated as salary income and will be subject to tax under Income Tax Ordinance, 2001.

    Officials at the FBR said that where any gratuity is paid to an employee during his life-time, the gratuity shall be treated as salary paid to the employee for the purposes of this Ordinance.

    They further said that if a gratuity fund for any reason ceases to be an approved gratuity fund, the trustees of the fund shall nevertheless remain liable to tax on any gratuity paid to any employee.

    Where any contributions by an employer (including the interest thereon, if any,) are repaid to the employer, the amount so repaid shall be deemed for the purposes of tax to be the income of the employer of the income year in which they are so repaid.