Income From Salary Chapter- 07
Taxable Income 1,190,000Tax Liability under normal rates:
Tax on Rs. 1,190,000 [2.5% x (1,190,000 - 6 00,000)] 14 , 7507.2 Salaries of servants provided by employer Rule 3 [U/s 13(5)]
Salaries of housekeeper, gardener, driver or other servants of employee paid by the employer in the
tax year for services rendered by such persons for the employee shall be included in the salary
income of the employee.7.3 Utilities provided by employer [U/s 13(6)]
The amount of utilities (includes electricity, gas, water and telephone) facility provided by an
employer then the fair market value of utilities shall be included in the salary of the employee. Utilities
benefit may be provided by employer free or at concessional rate or utility allowance in cash.7.4 Actual amount waived off or obligation discharged by employer on behalf of the employee
[U/S 13(9) & (10)]
Actual amount waived off and obligation discharged by employer on behalf of employee shall be
included in the salary income of the employee.
7.5 Property is transferred or services are provided by employer [u/s 13(11)]
Where in a tax year, property is transferred or services are provided by an employer to an employee,
the amount included in the salary income of the employee shall be the fair market value of such
benefit at the date of transfer or providing of services:7.6 Valuation of Accommodation - Rule-4 [u/s 13(12)]
(1) Facility of accommodation or Housing
Where in the tax year, accommodation or housing is provided by an employer to his employee,
the value of such accommodation shall be the amount that would have been paid by the
employee if the accommodation was not provided to him.
The value of accommodation under this rule shall not be less than from the 45% of minimum of
time scale or basic pay where minimum time scale not given.
Important note: In short the following meaning may be derived from this rule:
(a) Firstly compute 45% of minimum of time scale or basic pay (where MTS not given) and
30% in case of Mufasal areas then
(b) Compute Fair market value of accommodation
First preference to calculation (a) however where calculation in (b) above is more than (a) then
the same shall be added in the salary income of the employee.
Example: Miss Hira, an employee of HBL as managing director has provided the following
details of her expected income and expenses for the year ending June 30, 202 3.
Basic Salary Rs. 1,800,000 per year
Dearness allowance 10% of basic salary
Bonus Rs. 50,000
Conveyance allowance Rs. 50,000
Leave fare assistance Rs. 60,000
The company disbursed on July 1, 202 2 to her, Rs. 3 million interest free loan to be recovered
from the final dues on retirement.
Company has paid Rs. 850,000 as annual rent for the accommodation provided to Managing
Director.
She has been provided with a company maintained car for business and personal use. The
purchase price of the car is Rs. 12 million. The company also pays salary to official driver at Rs.
8,000 per month. You are required to compute her taxable income and tax thereon and show all
workings and assumptions.