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  • Senate advises salary increase by 10 percent

    Senate advises salary increase by 10 percent

    ISLAMABAD: The Senate of Pakistan has recommended increase in salary of government employees by at least 10 percent for fiscal year starting July 01, 2020.

    As per the general consensus recommendations of the upper house after the debate on budget 2020/2021, it is recommended that salary of government employees should be enhanced at least 10 percent.

    The upper house further recommended that the federal government should double the budget for education and health sectors.

    It is recommended that all important debt agreements must be placed before the parliament for scrutiny immediately.

    The budget allocation for ministry of national health services, regulations and coordination must be enhanced to a minimum five percent as per WHO recommendations.

    The 11 percent cut imposed on the share of the provinces in violation of National Finance Commission (NFC) Award must be revised immediately.

    The Senate of Pakistan recommended to the National Assembly that the allocation for Ministry of Education must be increased by 20 percent.

    It is recommended that salaries of the medical and para-medical staff working in ICT should be enhanced reasonably.

    The Senate recommended that the government should allocate more funds for management of rain water reservoirs. A special fund should also be allocated for construction of new small/mini dams.

    Budgetary allocation of Higher Education Commission (HEC) should be enhanced to Rs100 billion.

    The upper house recommended that the government should allocate funds for improvement in the aviation sector and to upgrade airports all over the country.

    The government should expedite the process of loss making projects in a transparent manner.

    The government should raise the amount of funds allotted for locust control in 2020/2021, from Rs4 billion to Rs8 billion keeping in view of the losses suffered by small farmers in locusts affected areas.

    It is recommended to raise at least 50 percent in the corona stimulus package for fertilizer subsidy, loan remission and other relief to the farmers, keeping in view of covid-19 situation and food insecurity on account of locusts attacks.

  • Tax deduction allowed on salary up to Rs25,000 paid in cash

    Tax deduction allowed on salary up to Rs25,000 paid in cash

    KARACHI: The Finance Bill 2020 has proposed major changes related to tax deduction in order to provide relief to business community. Under the proposed amendments the threshold amount has been increased up to Rs25,000 for tax deduction in case salary is paid.

    According to interpretation of the Finance Bill 2020 by BDO Pakistan, the Finance Bill proposed amendments to Section 21 of the Income Tax Ordinance, 2001.

    (l) The Bill seeks to enhance threshold of deduction for cash payment against business income under single account head from Rupees fifty thousand to Rupees two hundred and fifty thousand per annum.

    This proposal seeks to relieve businesses from making transactions through banking channel, as it is difficult for business to make every transaction through banking channel.

    Further The Bill seeks to increase the threshold of expenditure liable to be disallowed as a business expense if the same is not made through a crossed banking instrument/ online transfer of payment from Rs.10,000/- to Rs.25,000/ per transaction.

    Furthermore, The Bill seeks to enhance threshold from Rs.15,000/- to Rs.25,000/- as allowable deduction against business income if the salary is paid in cash.

    (p) & (q) The Bill seeks to add two new clauses to regulate limit of expenditure on account of utility bill and sales made to persons required to be registered but not registered under the Sales Tax Act, 1990 as an admissible deduction against business income where sales equal to or exceed Rs. 100 million per person. However, the disallowance of expenditure shall not exceed 20 percent of total deduction claimed.

  • Sindh unveils Rs1.2 trillion budget 2020/2021 with no new tax, 10 percent salary increase

    Sindh unveils Rs1.2 trillion budget 2020/2021 with no new tax, 10 percent salary increase

    KARACHI: Sindh Chief Minister Syed Murad Ali Shah on Wednesday presented Rs1.2 trillion provincial budget 2020/2021 with announcing no new tax and increase of 10 percent salary of the provincial government employees.

    On the floor of the house while delivering speech for budget 2020/2021, the chief minister said that the total outlay of budget for the next financial year 2020-2021 is Rs.1.2 trillion.

    The total size of current revenue expenditure is Rs.968.9 billion.

    “It is important to highlight here that for the next financial year, we have tried to align our Development as well as non-development expenditure priorities in line with the post COVID-19 situation,” the chief minister said.

    He said that during financial year 2019-20, the province faced financial constraints due to COVID-19 which significantly affected development progress in the entire country. Sindh was no exception.

    Government of Sindh budgeted Rs.284 billion as total development outlay in financial year 2019-2020, wherein Rs.208 billion were earmarked for Provincial ADP, Rs.20.0 billion for District ADP, Rs.51.0 billion in foreign projects assistance, and Rs.4.9 billion from Federal PSDP grant.

    Looking at the financial constraints, stakeholder departments are likely to complete 425 schemes during 2019-20, 33 schemes less as compared to 458 completed in 2018-19.

    “For the next financial year 2020-2021, the Administrative Departments in Sindh were earlier advised to prepare proposals for Provincial ADP 2020-21 at the size same as that of 2019-20 while allocating 85 percent for on-going schemes and 15 percent new schemes.

    “However, in a post Covid-19 scenario, with a reduction in federal transfers and funding for development, the total development outlay for Sindh for the next financial year 2020-2021 is proposed at Rs.232.9 billion, allocating Rs.155.0 billion to Provincial ADP and Rs.15.0 billion to District ADP schemes.”

    It would be pertinent to highlight that in this context Rs.54.6 billion are expected from Foreign Projects Assistance (FPA) and Rs.8.3 billion from Federal Government in Federal PSDP for 10 schemes under execution by Government of Sindh.

    The government had earlier decided to keep the size of development budget for the next financial year 2020-21 for important sectors such as Education, Health, Social Safety & Poverty Reduction and Water & Sanitation nearly same as that of 2019-20. In exceptional cases such as Health, allocation has been increased from Rs.13.50 billion to Rs.23.50 billion in order to meet the challenges of COVID-19 situation.

    The throw-forward amount in Provincial ADP 2020-2021 for 2209 schemes has reached at Rs.564.00 billion as compared to Rs.606.0 billion for 2705 schemes in 2019-2020.

    Keeping in view above non-development and development expenditure priorities, the major milestone of our objectives are:

    1. Exercise maximum austerity measures in our non-development expenditures.

    2. Provide maximum resources for Health sector.

    3. Enlarge substantially our social protection net through increased cash transfers to poverty inflicted people.

    4. Provide ways and means for employment generation as well sustaining economic activity for the poorest of the poor, in rural as well as urban areas.

    5. Continuing our focus on education, through increased allocations in financial year on development and non-development, despite huge resource constraints.

    6. Fashion our development spending in sync with the above mentioned post Covid preferences with increased focus on Public Private Partnership (PPP) projects.

    During his speech the chief minister said that the provincial government had decided not to introduce new tax in the budget 2020/2021.

    Further, in order to provide relief the salary of provincial government employees has been increased by 10 percent for grade 1-16 and five percent for grate 17 and above.

  • Commission constituted to review salary, perks of government employees

    Commission constituted to review salary, perks of government employees

    ISLAMABAD: The federal government has constituted a pay and pension commission to review existing salary and perks.

    According to the finance ministry, the government of Pakistan had constituted a Pay and Pension Commission, with effect from 14-04-2020.

    The Composition of the Commission shall be as follows:

    Mr. Wajid Rana, Former Federal Secretary, Chairman.

    Mr. Nazar Hussain Mahar, Retired Civil Servant, Member.

    Dr. Noor Alam, Retired Civil Servant, Member.

    Ms. Seema Kamil, President, United Bank Limited, Karachi, Member.

    Mr. Zubyr Soomro, Chairman, Board of Directors, National Bank of Pakistan, Member.

    Ms. Nausheen Ahmed, Company Secretary, ICI (Pakistan) Limited, Member.

    MEMBERS EX-OFFICIO

    Secretary, Finance Division, Government of Pakistan, Member.

    Secretary, Establishment Division, Government of Pakistan, Member.

    Secretary, Defence Division, Government of Pakistan, Member.

    Secretary, Finance Department, Government of Punjab, Member.

    Secretary, Finance Department, Government of Khyber Pakhtunkhwa, Member.

    Secretary, Finance Department, Government of Sindh, Member.

    Secretary, Finance Department, Government of Balochistan, Member.

    Secretary, Finance Department, Government of AJ&K, Member.

    Secretary, Finance Department, Government of Gilgit Baltistan, Member.

    An Officer of BS-21 of the Auditor, General of Pakistan, Government of Pakistan, Member.

    An Officer of BS-21, Controller General of Accounts, Government of Pakistan, Member.

    Joint Secretary (Regulations), Finance Division, Government of Pakistan, Member/Secretary.

    The terms of Reference of the commission are as following.

    i) PAY & ALLOWANCES

    a) Study the adequacy of existing Basic Pay Scale System and to evaluate the current salaries of Government employees throughout the federation including the provincial government and recommend measures for its improvement and uniformity. Also make recommendations for the streamlining of existing classification from BPS 1-22.

    b) Study the separations of existing Basic Pay Scales for specialized departments/occupations/cadres.

    c) Review of Special Scales such as Management Grades, Management Position Scales (MP Scales), Special Professional Pay Scales (SPPS), Project Pay Scales etc. and propose measures for uniformity and improvement.

    d) Review of admissible Regular allowance, Special incentives and all other allowances with a view to highlight prevalent distortions and recommend corrective measures.

    e) Review of existing perks and facilities and make recommendations, including possibility of their monetization.

    1)  PENSION

    To Review the Pension system of the Government of Pakistan:

    A) Highlight existing distortions and anomalies in the Pension Scheme and recommend remedial measures. Verify the sustainability of the current model after critically evaluating future liabilities through an actuarial study.

    B) Evaluate alternate system of Pension like defined contribution and setting up of pension funds in light of international best practices and recommend a system with clear timelines that is more efficient and sustainable, considering the available recourses.

    iii) To Review the existing incentive regime (honorarium and special rewards) and recommend improvement in it.

    iv) To evaluate and recommend legislative measures to protect and streamline Pay, Pension and Allowances regime for government employees.

    v) The Commission may, if so desired by the Government, make interim recommendation to provide interim relief, pending the submission of its final report.

    vi) The Commission shall have power to co-opt any person or agency to assist it in its deliberations>

    vii) The Finance Division shall provide Secretariat support to the Commission and the Commission shall make its recommendations within 6 Months of its constitution. While formulating its proposal/recommendations on the above terms of reference, the pay and pension commission would take into consideration the financial recourses of the Government.

    The scope of work of the Commission will include Federal and Provincial civil servants, other government servants, civilians paid from defence estimates, all Armed Forces/Civil Armed Forces personnel and holders of the posts in Management Scales and employees of such Public sector corporations/autonomous/semi-autonomous bodies, other than Banks and DFIs, which have adopted the scheme of Basic Pay Scales in toto.

    Employees of Public Sector Corporations/Autonomous/Semi-Autonomous bodies who are regulated under the Pay Scales prescribed by these organizations and the employees governed under the Industrial Relations Ordinance, 1969 and/or whose financial terms of service are settled through Collective Bargaining Agents, are executed from the scope of work of the Pay & Pension Commission.

  • Salary tax potential much higher than existing collection: FBR

    Salary tax potential much higher than existing collection: FBR

    KARACHI: Federal Board of Revenue (FBR) has said that income tax from salary is an important source of revenue the world over. The real potential is much higher than the present collection, according to an official document.

    Monitoring of withholding tax on salaries is a regular feature. Nevertheless, there is scope for further improvement in view of great potential for payment of considerable perquisites, generally undisclosed.

    All payments made to the employees have tax implications. Strong and well coordinated communication with the employers is needed for promoting greater compliance in a supportive mode with a friendly interface between FBR and the stakeholders.

    The Commissioner can advise to look into the following aspects through systems of large employers like Pakistan Steel, PIA, ICI , CAA& Banks etc :-

    — Comprehensive review of the statements, filed by the Employers;

    — Sector-wise salary surveys regarding trends of pay and allowances in different sectors;

    — Salary structure analysis of major employers;

    — Random selection of cases of senior executives of various corporate sectors including banking, oil and telecom, receiving huge salaries and perquisites, while devising monitoring plan of an organization;

    — Payments in the following heads should be reviewed along with relevant documents for ensuring proper deduction:

    — CBA agreement.

    — Appointment letter / contract (job letter).

    — Contribution to Provident Fund/Annuity.

    — Re-imbursement of medical, petrol, and entertainment.

    — Cars provided by the employers and expenditure on their acquisition and maintenance and Concessional loan facility provided by the company.

    — House accommodation – furnished/unfurnished.

    — Club bills / Hotel bills/Club subscriptions.

    — Utility bills of employees paid by the employer.

    — Free household items like Air-Conditioner, Fridge and furniture items provided.

    — Concessional travelling/Leave Fair Assistance.

    — Stock options offered and connected arrangements for payments and deduction of tax.

    — Formula of deduction of tax and mechanism for recording thereof in the books of accounts and deposit of tax.

    — Receipts of Capital nature which fall under the head “salary”.

    — Compensation for redundancy or loss of employment and golden handshake payments.

    — Scholarships/ tuition fee of children paid by the employer.

    — Liabilities accounted for by the employer especially when new executives are hired, who owe liability to the ex-employer.

    — Concessional mark-up/free loans provided, especially, in the cases of banks and financial institutions.

    — Provision of services of Mali, Chowkidar, security system, driver and cook etc. or re-imbursement of pay of servants.

    — Provision of free electricity, gas, telephone, travel and other products by the employers who deal in such business.

    — Commission and rewards including sales targets achievements and other rewards.

    — Services hired from abroad.

    — Cash medical assistance/hospitalization paid to the employees.

    — Any other allowance or perquisite provided by the employer paid in cash or in any other manner.

    — Salary payments chargeable to Withholding Tax under section 149 of the Ordinance as shown in the Annual Statements should match with the amount of expenses under this head, charged to manufacturing and P&L Account/Audited Statement of Accounts. In case of any difference, the Withholding Tax Agent may be asked to reconcile and explain the reasons for not withholding such tax.

    — Meal and entertainment claimed as business expenditure that may actually be personal, non-deductible.

    — In closely held companies and family owned enterprises, unreasonable compensation to Directors and employees should be checked with reference to work done and contribution made.

    — In the cases of Banks, actual deduction of tax from payment of salary to Branch staff and its deposit should be confirmed with reference to the separate challan for each such deposit. Payments of taxes deducted under various Sections through combined challan always create confusion. It should be ensured that each type of payment is duly supported by the relevant tax deposit challan. Misuse of one challan for various deposits is reported and should be adequately checked.

    The Department should conduct System audit of Mega corporations / large companies in public and private sectors and should be replicated / shared in other cases on national basis.

    It may be re-emphasized that non-cash perquisites are usually not declared in the statements. It is imperative to study terms and conditions of service provided in the service contracts/appointment letters.

    Non-deduction of tax on such perquisites is a common practice observed in many cases for which cognizance, as per law, has to be taken.

  • 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.

  • Cash payment above Rs15,000 as salary not to be treated as income

    Cash payment above Rs15,000 as salary not to be treated as income

    KARACHI: An amount above Rs15,000 paid in cash as salary will not be treated as income and employers will not be allowed adjustment.

    The FBR officials said that any salary paid or payable exceeding Rs15,000 per month other than by a crossed cheque or direct transfer of funds to the employee’s bank account will not be allowed deduction as expenditure to an employer.

    The FBR said that Section 21 of Income Tax Ordinance, 2001 explained the deductions that are not allowed.

    Section 21: Deductions not allowed

    Except as otherwise provided in this Ordinance, no deduction shall be allowed in computing the income of a person under the head “Income from Business” for —

    (a) any cess, rate or tax paid or payable by the person in Pakistan or a foreign country that is levied on the profits or gains of the business or assessed as a percentage or otherwise on the basis of such profits or gains;

    (b) any amount of tax deducted under Division III of Part V of Chapter X from an amount derived by the person;

    (c) any expenditure from which the person is required to deduct or collect tax under Part V of Chapter X or Chapter XII, unless the person has paid or deducted and paid the tax as required by Division IV of Part V of Chapter X:

    Provided that disallowance in respect of purchases of raw materials and finished goods under this clause shall not exceed twenty per cent of purchases of raw materials and finished goods:

    Provided further that recovery of any amount of tax under sections 161 or 162 shall be considered as tax paid.”

    (ca) any amount of commission paid or payable in respect of supply of products listed in the Third Schedule of the Sales Tax Act, 1990, where the amount of commission paid or payable exceeds 0.2 percent of gross amount of supplies thereof unless the person to whom commission is paid or payable, as the case may be, is appearing in the active taxpayer list under this Ordinance;

    (d) any entertainment expenditure in excess of such limits 2[or in violation of such conditions] as may be prescribed;

    (e) any contribution made by the person to a fund that is not a recognized provident fund3[,]4[approved pension fund], approved superannuation fund or approved gratuity fund;

    (f) any contribution made by the person to any provident or other fund established for the benefit of employees of the person, unless the person has made effective arrangements to secure that tax is deducted under section 149 from any payments made by the fund in respect of which the recipient is chargeable to tax under the head “Salary”;

    (g) any fine or penalty paid or payable by the person for the violation of any law, rule or regulation;

    (h) any personal expenditures incurred by the person;

    (i) any amount carried to a reserve fund or capitalised in any way;

    (j) any profit on debt, brokerage, commission, salary or other remuneration paid by an association of persons to a member of the association;

    (l) any expenditure for a transaction, paid or payable under a single account head which, in aggregate, exceeds fifty thousand rupees, made other than by a crossed cheque drawn on a bank or by crossed bank draft or crossed pay order or any other crossed banking instrument showing transfer of amount from the business bank account of the taxpayer:

    Provided that online transfer of payment from the business account of the payer to the business account of payee as well as payments through credit card shall be treated as transactions through the banking channel, subject to the condition that such transactions are verifiable from the bank statements of the respective payer and the payee:

    Provided further that this clause shall not apply in the case of—

    (a) expenditures not exceeding ten thousand rupees;

    (b) expenditures on account of —

    (i) utility bills;

    (ii) freight charges;

    (iii) travel fare;

    (iv) postage; and

    (v) payment of taxes, duties, fee, fines or any other statutory obligation;]

    (m) any salary paid or payable exceeding 3[fifteen] thousand rupees per month other than by a crossed cheque or direct transfer of funds to the employee’s bank account;

    (n) except as provided in Division III of this Part, any expenditure paid or payable of a capital nature; and

    “(o) any expenditure in respect of sales promotion, advertisement and publicity in excess of ten percent of turnover incurred by pharmaceutical manufacturers.”

  • Budget 2019/2020: salary, pension increased up to 10 percent

    Budget 2019/2020: salary, pension increased up to 10 percent

    ISLAMABAD: The government has announced increase up to 10 percent in salary and pension in the federal budget 2019/2020.

    Hammad Azhar, State Minister for Revenue presented Budget 2019/2020 on Tuesday and announced following relief measures for government employees and pensioners.

    Ad-hoc Relief Allowance at 10 percent on running Basic Pay of BPS 2017 to civil government employees in BPS grade 1 to 16, and employees of Armed Forces Civil employees BPS 17 – 20 will be given ad-hoc Relief Allowance at 5 percent.

    Civil employees in BPS 21 and 22 will receive no increase in pay as they have decided to sacrifice for the sake of improvement in economic situation of the country.

    Increase in net pension at 10 percent will be given to all civil and armed forces pensioners of federal government.

    Special conveyance allowance for disabled employees will be enhanced from Rs.1,000 per month to Rs.2,000 per month.

    Special pay admissible to SPS/PS/APS to Ministers, Ministers of State, Parliamentary Secretaries, Additional Secretaries, and Joint Secretaries will be enhanced by 25 percent.

    In addition to the above, minimum wage is being increased to Rs.17,500 per month.