Tax Book 2023

Income From Salary Chapter- 07

(c) the amount chargeable to tax under the head "Salary".

Example: Mr. Kamran was issued shares under employee share scheme on July 01, 20 22.

Information regarding this is given below:

• FMV of shares on date of issue Rs. 50,000


• FMV of shares on June 30, 20 23 Rs. 60, 000


• FMV of shares on January 01, 2023 Rs. 55,000


• Amount paid by him for shares Rs. 30,000


• Amount paid by him for right Rs. 1,000
  He disposed of all the shares on June 30, 202 3.
  Required: Calculate the incomes chargeable to tax under the heads “income from salary” and
  “capital gain” in the following cases:
  (a) Shares were issued without any restriction on transfer
  (b) Shares were issued with restriction that shares cannot be transferred before January 01, 202 3
  Solution: Case (a) Case (b)
  Rs. Rs.
  Income from salary
  FMV of shares (Note 1) 50,000 55,000
  Less: Amount paid for:
  Shares 30,000 30,000
  Right 1,000 1,000
  31,000 31,000
  Amount chargeable to tax under the head "Income from salary" 19,000 24,000
  Capital gain

Higher of FMV or actual amount received against shares at disposal time

(Note 2) 60,000 60,000

Less: cost of shares:

Amount paid for shares and right (calculated above) 31,000 31,000

Amount taxable under head salary (calculated above) 19,000 24,000

50,000 55,000

Capital gain 10,000 5,000

Note 1:

Case (a) As shares were issued without any restriction on transfer, FMV on issue date shall be taken

into account.

Case (b) As shares were issued with restriction on transfer, FMV on the date the employee has free

right to transfer the shares shall be taken into account.

Note 2: In case of employee share scheme FMV at the time of disposal shall be taken into account

and the same shall not be compared with actual consideration received.

Retirement benefits

Retirement benefits available to taxpayer are as follows:

 Gratuity (treated as pay)

 Super-annuation Fund (treated as Profit in lieu of or in addition to salary)

 Provident fund (treated as Profit in lieu of or in addition to salary)

Gratuity

Gratuity is a sum which is paid at the discontinuation of the employment to the employee computed

by applying the total number of years of service of the employee with the determined/agreed amount

of salary. Gratuity conditional exemptions are as under:

Clause 13 Part I, 2nd Schedule to the Income Tax Ordinance, 2001: