Tag: salary income

ISLAMABAD: A person deriving income salary is required to retain salary certificate indicating amount of salary and tax deducted for six years, sources said on Friday.

The sources said that the requirement of retaining record for six years is mandatory under income tax laws.

Similarly taxpayers deriving income from property are required to retain following records for six years:

a. Tenancy agreement, if executed;

b. Tenancy termination agreement, if executed;

c. Receipt for amount of rent received; and

d. Evidence of deductions claimed in respect of premium paid to insure the building, local rate, tax, charge or cess, ground rent, profit/interest or share in rent on money borrowed, expenditure on collecting the rent, legal services and unpaid rent.

In case taxpayers deriving income from capital gains, the following documents shall be retained for six years:

a. Evidence of cost of acquiring the capital assets;

b. Evidence of deduction for any other costs claimed; and

c. Evidence in respect of consideration received on disposal of the capital asset.

In case taxpayers deriving income from other sources are required to keep following records for six years:

a. Dividend; dividend warrants.

b. Royalty; Royalty agreement

c. Profit on debt: Evidence and detail of profit yielding debt; Evidence of profit on debt and tax deducted thereon, like certificate in the prescribed form or bank account statement; and evidence of Zakat deducted, if any.

d. Ground rent, rent from the sub-lease or land or building, income from the lease of any building together with plant or machinery and consideration for vacating the possession of a building or part thereof: Lease agreement; and lease termination agreement.

e. Annuity or pension: evidence of amount received.

f. Prize money on bond, winning from a raffle, lottery or cross word puzzle: Evidence of income and tax deducted thereon, like certificate in the prescribed form.

g. Provision use or exploitation of property: agreement

h. Loan, advance, deposit or gift: evidence of model of receipt of a loan, advance, deposit or gift i.e. by a crossed cheque or through a banking channel.

i. General: Evidence of deduction for any other expenditure claimed.

ISLAMABAD: Tax collection from salary increase has sharply increased by 75 percent during first half (July – December) of current fiscal year 2019/2020 owing to changes brought in tax rates through Finance Act, 2019.

According to official data, the Federal Board of Revenue (FBR) collected Rs57.5 billion from salary income during July – December 2019/2020 as compared with Rs32.8 billion in the corresponding period of the last fiscal year.

It is pertinent to mention here that the threshold income has been enhanced to Rs600,000 for calculation of income tax for tax year 2020 as compared with Rs400,000 prevailed during tax year 2019.

The FBR issued withholding tax card for tax year 2019/2020 effective from July 01, 2019 under which every employer paying salary to employees above threshold income shall deduct withholding tax.

The FBR said that every person responsible for paying salary to an employee shall deduct tax from the amount paid under Section 149 of Income Tax Ordinance, 2001.

As per Finance Act, 2019, the provisions of newly inserted 10th schedule of the Income Tax Ordinance, 2001 shall not apply on tax deducted under section 149. Under the Tenth Schedule the withholding tax so collected shall be increased by 100 percent in case of persons not appearing on the Active Taxpayers List (ATL).

As per Finance Act, 2019, the salary slabs as well as tax rates have been revised with effect from 01.07.2019. As such all withholding tax agents disbursing salary are required to implement the revised tax rates from the same date.

Following are the salary slabs and rates on annual salary income:

TABLE

Salary Slabs	Tax Rates on salary slabs
1. Where taxable income does not exceed Rs. 600,000.	0 percent
2. Where taxable income exceeds Rs. 600,000 but does not exceed Rs. 1,200,000.	5% of the amount exceeding Rs. 600,000
3. Where taxable income exceeds Rs. 1,200,000 but does not exceed Rs. 1,800,000.	Rs. 30,000 plus 10% of the amount exceeding Rs. 1,200,000.
4. Where taxable income exceeds Rs. 1,800,000 but does not exceed Rs. 2,500,000.	Rs. 90,000 plus 15% of the amount exceeding Rs. 1,800,000
5. Where taxable income exceeds Rs. 2,500,000 but does not exceed Rs. 3,500,000	Rs. 195,000 plus 17.5% of the amount exceeding Rs. 2,500,000
6. Where taxable income exceeds Rs. 3,500,000 but does not exceed Rs. 5,000,000	Rs. 370,000 plus 20% of the amount exceeding Rs. 3,500,000
7. Where taxable income exceeds Rs. 5,000,000 but does not exceed Rs. 8,000,000	Rs. 670,000 plus 22.5% of the amount exceeding Rs. 5,000,000
8. Where taxable income exceeds Rs. 8,000,000 but does not exceed Rs. 12,000,000	Rs.1,345,000 plus 25% of the amount exceeding Rs. 8,000,000
9. Where taxable income exceeds  Rs. 12,000,000 but does not exceed Rs.30,000,000	Rs. 2,345,000 plus 27.5% of the amount exceeding Rs. 12,000,000
10. Where taxable income exceeds Rs. 30,000,000 but does not exceed Rs.50,000,000	Rs. 7,295,000 plus 30% of the amount exceeding Rs. 30,000,000
11. Where taxable income exceeds Rs. 50,000,000 but does not exceed Rs.75,000,000	Rs. 13,295,000 plus 32.5% of the amount exceeding Rs. 50,000,000
12. Where taxable income exceeds Rs.75,000,000	Rs. 21,420,000 plus 35% of the amount exceeding Rs 75,000,000″;

The FBR said that every person responsible for making payment for directorship fee or fee for attending board meeting or such fee by whatever name called under Section 149(3) of Income Tax Ordinance, 2001 shall collect 20 percent of gross amount paid.

KARACHI: The collection of income tax has registered sharp growth of 85 percent on salary received by executives/directors of companies.

The unprecedented growth has been witnessed due to changes in salary tax slabs introduced through Finance Act, 2019.

The collection of income tax has increased to Rs3.1 billion during first seven months (July – January) 2019/2020 as compared with Rs1.667 billion in the same period of the last fiscal year.

Sources in Large Taxpayers Unit (LTU) Karachi, a collecting office of Federal Board of Revenue (FBR), said that the higher tax rates on the salary income received by executives and directors of companies revised through the Finance Act, 2019 resulted in improved tax revenue under this head.

They said that the tax slab was increased to 35 percent on the salary income above Rs75 million.

The tax officials also attributed the increase in tax revenue to effective monitoring and audit of executives /directors of companies.

They said that previously directors of companies avoid taxes by taking advantage of tax laws.

The salary income has been explained in section 12 of Income Tax Ordinance, 2001.

Salary.— (1) Any salary received by an employee in a tax year, other than salary that is exempt from tax under this Ordinance, shall be chargeable to tax in that year under the head “Salary”.

(2) Salary means any amount received by an employee from any employment, whether of a revenue or capital nature, including —

(a) any pay, wages or other remuneration provided to an employee, including leave pay, payment in lieu of leave, overtime payment, bonus, commission, fees, gratuity or work condition supplements (such as for unpleasant or dangerous working conditions);

(b) any perquisite, whether convertible to money or not;

(c) the amount of any allowance provided by an employer to an employee including a cost of living, subsistence, rent, utilities, education, entertainment or travel allowance, but shall not include any allowance solely expended in the performance of the employee’s duties of employment;

(d) the amount of any expenditure incurred by an employee that is paid or reimbursed by the employer, other than expenditure incurred on behalf of the employer in the performance of the employee’s duties of employment;

(e) the amount of any profits in lieu of, or in addition to, salary or wages, including any amount received —

(i) as consideration for a person’s agreement to enter into an employment relationship;

(ii) as consideration for an employee’s agreement to any conditions of employment or any changes to the employee’s conditions of employment;

(iii) on termination of employment, whether paid voluntarily or under an agreement, including any compensation for redundancy or loss of employment and golden handshake payments;

(iv) from a provident or other fund, to the extent to which the amount is not a repayment of contributions made by the employee to the fund in respect of which the employee was not entitled to a deduction; and

(v) as consideration for an employee’s agreement to a restrictive covenant in respect of any past, present or prospective employment;

(f) any pension or annuity, or any supplement to a pension or annuity; and

(g) any amount chargeable to tax as “Salary” under section 14.

(3) 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.

(4) No deduction shall be allowed for any expenditure incurred by an employee in deriving amounts chargeable to tax under the head “Salary”.

(5) For the purposes of this Ordinance, an amount or perquisite shall be treated as received by an employee from any employment regardless of whether the amount or perquisite is paid or provided —

(a) by the employee’s employer, an associate of the employer, or by a third party under an arrangement with the employer or an associate of the employer;

(b) by a past employer or a prospective employer; or

(c) to the employee or to an associate of the employee or to a third party under an agreement with the employee or an associate of the employee.

KARACHI: The tax collection from salary income of companies’ directors has increased by 93 percent during first six months of current fiscal year.

According to Large Taxpayers Unit (LTU) Karachi, the major revenue arm of Federal Board of Revenue (FBR), the tax collection increased to Rs2.7 billion during first half (July – December) of current fiscal year as compared with Rs1.4 billion in the corresponding period of the last fiscal year.

The tax officials of LTU Karachi attributed the increase in tax revenue under this head to revision in salary slabs in the budget 2019/2020 which is effective from July 01, 2019.

They said that the tax slab was increased to 35 percent on the salary income above Rs75 million.

The tax officials also attributed the increase in tax revenue to effective monitoring and audit of executives /directors of companies.

They said that previously directors of companies avoid taxes by taking advantage of tax laws.

The salary income has been explained in section 12 of Income Tax Ordinance, 2001.

Salary.— (1) Any salary received by an employee in a tax year, other than salary that is exempt from tax under this Ordinance, shall be chargeable to tax in that year under the head “Salary”.

(2) Salary means any amount received by an employee from any employment, whether of a revenue or capital nature, including —

(a) any pay, wages or other remuneration provided to an employee, including leave pay, payment in lieu of leave, overtime payment, bonus, commission, fees, gratuity or work condition supplements (such as for unpleasant or dangerous working conditions);

(b) any perquisite, whether convertible to money or not;

(c) the amount of any allowance provided by an employer to an employee including a cost of living, subsistence, rent, utilities, education, entertainment or travel allowance, but shall not include any allowance solely expended in the performance of the employee’s duties of employment;

(d) the amount of any expenditure incurred by an employee that is paid or reimbursed by the employer, other than expenditure incurred on behalf of the employer in the performance of the employee’s duties of employment;

(e) the amount of any profits in lieu of, or in addition to, salary or wages, including any amount received —

(i) as consideration for a person’s agreement to enter into an employment relationship;

(ii) as consideration for an employee’s agreement to any conditions of employment or any changes to the employee’s conditions of employment;

(iii) on termination of employment, whether paid voluntarily or under an agreement, including any compensation for redundancy or loss of employment and golden handshake payments;

(iv) from a provident or other fund, to the extent to which the amount is not a repayment of contributions made by the employee to the fund in respect of which the employee was not entitled to a deduction; and

(v) as consideration for an employee’s agreement to a restrictive covenant in respect of any past, present or prospective employment;

(f) any pension or annuity, or any supplement to a pension or annuity; and

(g) any amount chargeable to tax as “Salary” under section 14.

(3) 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.

(4) No deduction shall be allowed for any expenditure incurred by an employee in deriving amounts chargeable to tax under the head “Salary”.

(5) For the purposes of this Ordinance, an amount or perquisite shall be treated as received by an employee from any employment regardless of whether the amount or perquisite is paid or provided —

(a) by the employee’s employer, an associate of the employer, or by a third party under an arrangement with the employer or an associate of the employer;

(b) by a past employer or a prospective employer; or

(c) to the employee or to an associate of the employee or to a third party under an agreement with the employee or an associate of the employee.

KARACHI: Federal Board of Revenue (FBR) has said that for determination of tax the salary income shall include the value of all perquisites, allowances and benefits received by employees.

FBR officials said on Tuesday that the salaried persons should include all such income while filing their annual income tax returns, if their employers had not deducted tax on such prerequisites.

For the purposes of computing the income chargeable to tax under the head ‘salary’, the value of all perquisites, allowances and benefits provided by the employer to the employee shall be included in the said income.

The value of accommodation provided by an employer to the employee shall be taken equal to the amount that would have been paid by the employer in case such accommodation was not provided.

Provided that the value taken for this purpose shall, in any case, not be less than forty five percent of the minimum of the time scale of the basic salary or the basic salary where there is no time scale.

Provided further that where House Rent Allowance is admissible at the rate of thirty percent, the value taken for the purpose of this rule shall be an amount not less than thirty percent of minimum of the time scale of basic salary or the basic salary where there is no time scale.]

The value of conveyance provided by the employer to the employee shall be taken equal to an amount as below:- (i)

Partly for personal and partly for official use

The tax rate shall be five percent of:

(a) the cost to the employer for acquiring the motor vehicle; or,

(b) the fair market value of the motor vehicle at the commencement of the lease, if the motor vehicle is taken on lease by the employer;

For personal use only

The tax rate shall be 10 percent of:

(a) the cost to the employer for acquiring the motor vehicle; or,

(b) the fair market value of the motor vehicle at the commencement of the lease, if the motor vehicle is taken on lease by the employer; and

For the purpose of this part, “employee” includes a director of a company.