The State Bank of Pakistan
The State Bank of Pakistan:
Income of the State Bank of Pakistan and the State Bank of Pakistan Banking Services Corporation is fully exempt from tax.
Gratuity, Commutation of Pension:
Any amount of gratuity, commutation of pension received by an employee on his retirement or his heirs upon the death of an employee is exempt from tax subject to the following limits:
i) If gratuity, commutation of pension is received from:
a) The Government
b) A local authority
c) A statutory body or corporation. It is fully exempt from tax.
ii) Any amount received from gratuity fund approved by the Commissioner of Income Tax is fully exempt from tax.
iii) Any amount received from gratuity fund approved by the FBR is exempt upto Rs. 200,000.
iv) In case of an employee to whom sub-clause (i), (ii), (iii) do not apply. It is exempt upto 50% of amount receivable or Rs.75,000 whichever is less.
Note: Exemption shall not be granted if:
i) The payment is not received In Pakistan.
ii) The payment is received by a director (who is not a regular employee) of a company.
iii) The recipient is a non-resident; and
iv) The gratuity is received by an employee who has already received a gratuity from any other employer.
Compensatory Allowance Abroad:
Any income representing compensatory allowance payable to a citizen of Pakistan locally recruited in Pakistan Mission Abroad is exempt upto 75% of the gross salary of the employee.
Mr. Imran is a citizen of Pakistan who got immigration in last year for Saudi Arabia. Pakistani Embassy in Saudi Arabia recruited Mr. Imran as a Passport Investigator.
Point to be noted:
Mr. Imran has been recruited locally (Recruitment has not been made in Pakistan) in Pakistan Embassy, so any compensatory allowance received by Mr. Imran shall be exempt upto 75% of gross salary.
Facility of Accommodation:
The facility of rent-free accommodation provided to the following persons is not taxable:
a) President of Pakistan;
b) Provincial Governors;
c) Chiefs of Staff of Pakistan Army, Navy and Air Force;
d) Corps Commanders;
e) Federal Government Ministers;
f) Judges of Supreme Court and High Courts;
Facility of Conveyance and Entertainment Allowance:
The facility of conveyance provided by the government and entertainment allowance given by the government to the following persons is exempt from tax:
a) Provincial Governors;
b) Chiefs of Staff of Pakistan Armed Forces;
c) Corps Commanders;
d) Ministers of the Federal Government.
Any conveyance facility provided by the Government of the Punjab to Mr. Salman Taseer, Governor of the Punjab is fully exempt from tax. It has no concern with the value of conveyance and nature of conveyance and quantum of expenditures incurred by the Government.
In other words, all the facilities in the form of conveyance and entertainment received by the above mentioned authorities are fully exempt from tax.
Any special allowance or benefit (not being entertainment or conveyance allowance) granted to meet expenses wholly and necessarily incurred in performance of the duties of an office or employment are fully exempt.
Examples of Special Allowance:
Traveling allowance (T/A), Daily allowance (D/A)
Mr. Sheraz is a Finance Manager in Pacific Pharmaceutical Ltd. He went Islamabad to attend the Meeting of a company. Company provided him Rs.15,000 as traveling allowance (T/A) and Rs.8, 000 as daily allowance (D/A). Actual expenses incurred by Mr. Sheraz in such tour were Rs.15, 000.
Traveling allowance represents special allowance and special allowance is fully exempt from tax, although actual expenses incurred by Mr. Sheraz are less than actual amount of traveling allowance received. So, all amount received by Mr. Sheraz is fully exempt from tax.
Note: Special allowance is fully exempt from tax; it has no concern with actual amount of expenses
Perquisites without Marginal Cost Incurred by the Employer: (Clause 53A)
The following perquisites received by an employee by virtue of his employment are fully exempt from tax.
1) Free or concessional passage:
Free or concessional passage provided by transporters (including airlines) to their employees or family members or dependents of the employees is fully exempt from tax.
Mr. Atta Ullah is working as a flight engineer in Aero Asia Airlines. His son visited London and company provided him free return ticket in Aero Asia Airbus. It is fully exempt from tax; although it is perquisite by the employer to Mr. Atta Ullah.
2) Free or subsidized food:
Free or subsidized food provided by hotels and restaurants to its employees during duty hours is fully exempt from tax.
Mr. Khalid is working as a sales manager in Marriot hotel Islamabad. He always takes free lunch from hotel during duty hours. It is fully exempt from tax although it is perquisite by the employer.
3) Free or subsidized education:
Free or subsidized education provided by an educational institution to the children of its employees is fully exempt from tax.
Mr. Mubashar Malik is working as a registrar in Minhaj University Lahore. University has provided a free admission and education facility during current year to his daughter. This is fully exempt from tax.
4) Free or subsidized medical treatment:
Free or subsidized medical treatment provided by a hospital or a clinic to its employees is fully exempt from tax.
Mr. Ahsan is working as a Neuro Surgeon in SheikhZaidHospital, Lahore. Unfortunately, he met with serious accident. He was provided a free medical treatment in SheikhZaidHospital. It is fully exempt from tax. It has no concern with the amount of actual medical expenditures.
5) Any other perquisite or benefit without marginal cost:Any other perquisite or benefit for which the employer does not have to bear any marginal cost, as notified by the FBR shall be fully exempt from tax.