Income From Salary Chapter- 07
Less: paid by employer (22,500)
Balance tax excess paid ( 16 , 937 )
Important note: Tax on tax amount depends on the terms and conditions settled between employer
and employee.
The salary income will be charged to tax on its gross value after deduction of exempt salary income
or allowances and perquisites. However, no expense or other deduction shall be allowed with respect
to any expenditure incurred in deriving salary income. Section 12(4) of the ordinance states that:
No deduction shall be allowed for any expenditure incurred by an employee in deriving amounts
chargeable to tax under the head “Salary”.
Marginal perquisites [Clause 53A of Part I of Second Schedule]
Some employers provide concessional benefits to their own facilities e.g. a Hospital may allow its
employee free medical treatment or concessional medical facility or a school allow its children of its
employees to get free or concessional fee and a railway, bus or air transport providing free or
concessional transport facility to its employees.
Marginal perquisites are exempt except free or concessional passage provided by transporters
including airlines to its employees (including the members of their household and dependants). For
this purpose, we have to take the market value of facility provided to employees and add the same in
the salary income of employee after deducting any cost borne by the employee.- Value of Perquisites [U/s 13]
The value of perquisites to the extent of provided by an employer to his employee shall include the
following:
(1) Motor vehicle used wholly or partly for private purposes
(2) Salary of housekeeper, driver or other domestic assistant.
(3) Fair market value of utilities.
(4) Actual amount waived off or obligation discharged by employer on behalf of the employee.
(5) Transfer of property or services provided
(6) Facility of accommodation or housing
(7) Interest free loan or loan at concessional rate
(8) In addition to the above the value of any other benefit.- Non applicability of this section [U/s 13(2)]
This section shall not apply to any amount of allowances provided by employer and expenditure
incurred by employee for the performance of official duties of employment.- Valuation of perquisites, allowances and benefits
7.1 Valuation of conveyance Rule- 5 and [U/s 13(3)]
In case of motor vehicle provided by an employer to his employee partly or wholly for personal use,
then the amount chargeable to tax under the head salary income shall be computed according to
following rules:
It is worthwhile to mention here that where the motor vehicle provided by employer has only been
used for the business purposes then there will be no treatment of the same in the hands of the
employee.
(A) Partly for personal and business use
5% of the cost of vehicle or the fair market value (excluding mark up) at the commencement of
the lease where vehicle is taken on lease by employer.
(B) For personal use only
10% of the cost of vehicle or the fair market value (excluding mark up) at the
commencement of lease where vehicle is taken on lease by employer.
Example