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Taxation Managment

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Taxation Management ­ FIN 623
VU
MODULE 6
LESSON 6.25
SALARY AND ITS COMPUTATION
Investment in Shares (Sec. 62)
Restricted to original allotee
A/B x C
A and B are same.
C is lesser of:
- Cost on acquiring shares
- 10% of taxable income
- Rs 200,000
Profit on Debt (Sec. 63)
Profit paid or shares in rent paid on loan for construction of new house or acquisition of a house.
If loan provided by:
 Schedule Bank
 Non-Banking Finance Institution
 Government or Local Authority
 Any Statutory Body
 Listed Public Company
A and B are same as above
C is lesser of:
-  Total amount paid during tax year
-  40% of taxable income
-  Rs 500,000
Valuation of Perquisites
Valuation of Accommodation
Amount that would have been otherwise provided under terms of employment but in no case less
than 45% of MTS or basic salary.
Valuation of Conveyance
5% of cost or 5% of FMV of Vehicle on
Partly for personal and partly for official use.
commencement of lease.
For personal use only.
10% of cost or 10% of FMV of Vehicle.
Employee includes director of a company.
Exemptions:
Salary earned abroad by a Pakistani citizen in the year of leaving Pakistan- exempt vide section 51 (2)
Exemptions available to Diplomatic personnel and their staff--- exempt vide section 42
Salary received by foreign government officials ­ exempt vides section 43.
Salary received by Foreigners working on certain projects- exempt vide section 44 (2)
Any benevolent grant paid from the benevolent fund to the employees or members of their families-
exempt under clause 24 of part 1 of 2nd schedule.
Any special allowance or benefit (not being entertainment allowance or conveyance allowance) or other
perquisites as contained in section 12 specially granted to meet expenses wholly or necessarily incurred in
the performance of the duties of an office or employment of profit- exempt under clause 39 of part 1 of
second schedule.
Concept of MTS (Minimum of Time Scale):
This is the starting point or minimum amount which is available to an employee under a time scale for
example if time scale is:
Rs. 20,000 -- 2000 -- 30000
Here Rs 20,000 is the Minimum of time scale.
Rates of tax for salaried Individuals for tax year 2007
S#
Taxable Income
Rate of tax
39
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Taxation Management ­ FIN 623
VU
(1)
(2)
(3)
1. Where the taxable income does not exceed Rs. 150,000
0%
2. Where the taxable income exceeds Rs. 150,000 but does not exceed Rs. 200,000
0.25%
3. Where the taxable income exceeds Rs. 200,000 but does not exceed Rs. 250,000
0.50%
4. Where the taxable income exceeds Rs. 250,000 but does not exceed Rs. 300,000
0.75%
5. Where the taxable income exceeds Rs. 300,000 but does not exceed Rs. 350,000
1.50%
6. Where the taxable income exceeds Rs. 350,000 but does not exceed Rs. 400,000
2.50%
7. Where the taxable income exceeds Rs. 400,000 but does not exceed Rs. 500,000
3.50%
8. Where the taxable income exceeds Rs. 500,000 but does not exceed Rs. 600,000
4.50%
9. Where the taxable income exceeds Rs. 600,000 but does not exceed Rs. 700,000
6.00%
10. Where the taxable income exceeds Rs. 700,000 but does not exceed Rs. 850,000
7.50%
11. Where the taxable income exceeds Rs. 850,000 but does not exceed Rs. 950,000
9.00%
12. Where the taxable income exceeds Rs. 950,000 but does not exceed Rs. 1,050,000
10.00%
13. Where the taxable income exceeds Rs. 1,050,000 but does not exceed Rs. 1,200,000
11.00%
14. Where the taxable income exceeds Rs. 1,200,000 but does not exceed Rs. 1,500,000
12.50%
15. Where the taxable income exceeds Rs. 1,500,000 but does not exceed Rs. 1,700,000
14.00%
16. Where the taxable income exceeds Rs. 1,700,000 but does not exceed Rs. 2,000,000
15.00%
17. Where the taxable income exceeds Rs. 2,000,000 but does not exceed Rs. 3,150,000
16.00%
18. Where the taxable income exceeds Rs. 3,150,000 but does not exceed Rs. 3,700,000
17.50%
19. Where the taxable income exceeds Rs. 3,700,000 but does not exceed Rs. 4,450,000
18.50%
20. Where the taxable income exceeds Rs. 4,450,000 but does not exceed Rs. 8,400,000
19.00%
21. Where the taxable income exceeds Rs. 8,400,000
20.00%
Rate of Tax for salaried Individuals
Provided that where income of a woman tax payer is covered by this clause, no tax shall be charged if
taxable income does not exceed Rs 200,000.
40
Table of Contents:
  1. AN OVERVIEW OF TAXATION
  2. What is Fiscal Policy, Canons of Taxation
  3. Type of Taxes, Taxation Management
  4. BASIC FEATURES OF INCOME TAX
  5. STATUTORY DEFINITIONS
  6. IMPORTANT DEFINITIONS
  7. DETERMINATION OF LEGAL STATUS OF A PERSON
  8. HEADS OF INCOME
  9. Rules to Prevent Double Derivation of Income and Double Deductions
  10. Agricultural Income
  11. Computation of Income, partly Agricultural,
  12. Foreign Government Officials
  13. Exemptions and Tax Concessions
  14. RESIDENTIAL STATUS & TAXATION 1
  15. RESIDENTIAL STATUS & TAXATION 2
  16. Important Points Regarding Income
  17. Geographical Source of Income
  18. Taxation of Foreign-Source Income of Residents
  19. Exercises on Determination of Income 1
  20. Exercises on Determination of Income 2
  21. SALARY AND ITS COMPUTATION
  22. Definition of Salary
  23. Significant points regarding Salary
  24. Tax credits on Charitable Donations
  25. Investment in Shares
  26. SALARY AND ITS COMPUTATION EXERCISES 1
  27. SALARY AND ITS COMPUTATION EXERCISES 2
  28. SALARY AND ITS COMPUTATION EXERCISES 3
  29. Tax treatment of Gratuity
  30. Gratuity Exercise
  31. PROVIDENT FUND
  32. Exemptions on Business income, Treatment of Speculation Business
  33. Deductions Allowed & Not Allowed
  34. Deductions: Special Provisions, Depreciation
  35. Methods of Accounting
  36. Taxation of Resident Company
  37. Taxation of Companies: Exercises
  38. Computation of Capital Gain
  39. Disposals Not Chargeable To Tax
  40. TAX RETURNS & ASSESSMENT OF INCOME UNIVERSAL SELF ASSESSMENT SCHEME
  41. Normal Assessment, USAS, Provisional Assessment, Best Judgment Assessment
  42. ADVANCE TAX COLLECTION & RECOVERY OF TAX PENALTIES & PROSECUTION
  43. What is Value Added Tax (VAT)?
  44. SALES TAX
  45. SALES TAX RETURNS