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Taxation Managment

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Taxation Management ­ FIN 623
VU
MODULE 6
LESSON 6.21
SALARY AND ITS COMPUTATION
There are followings heads of income, we start from the first head that is salary i.e. Income from Salary.
Salary
Income from Property
Income from Business
Capital Gains
Income from other sources
Employer and Employee Relationship between Payer and Payee
 Salary represents amount received by an employee from an employment.
 Employee sec 2(20): means any individual engaged in employment.
 Employer sec 2(21): means any person who engages and remunerates an employee.
Employment Sec. 2(22)
Employment includes:
A directorship or any other office involved in the management of a company;
A position entitling the holder to fixed or ascertainable remuneration; or
Holding or acting in any public office
Significant Points:
Salary from more than one source during a tax year is taxable income.
Salary may be from former employer, present employer or prospective employer.
Salary may be from former employer, present employer or prospective employer.
No deductions are allowed under the head "Income from Salary"
In case of Tax Free Salary by the employer, the amount of tax paid by employer shall be added
back to employee's salary. It tantamount to Tax on Tax
Voluntary Payments Taxable
Tax year of a salaried Person shall be Normal Tax year
In case of Tax Free Salary by the employer, the amount of tax paid by employer shall be added
back to employee's salary. It tantamount to Tax on Tax
Voluntary Payments Taxable
Tax year of a salaried Person shall be Normal Tax year
Tax on salary income for Tax year 2007 (1st July 2006 to 30th July 2007) shall be computed
according to amendments as made by Finance Act, 2006.
Salary by members of AOP is not treated as Salary but treated as appropriation of profit and
charged under the head "Income from Business"
Treatment of Salary by members of AOP:
Any salary drawn by a member of an AOP [as defined in section 80] is appropriation of profits and is
chargeable to tax as `Income from Business' being share of a member in the total income of AOP in view of
provision contained in section 93(6).
Taxation of members of an associations of persons Section 93(6)
Sec 93 (6) the share of a member in the total income of a association of persons shall be determined
according to the member's interest in the association and shall include any profit on debt, brokerage,
commission, salary or other remuneration received or due from the association.
Salary sec 12(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".
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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