Tax Book 2023

Income From Salary Chapter- 07

Solution for case (a): Rupees Rupees

Basic salary 250,000

Dearness allowance 25,000

House rent allowance 80,000

Conveyance allowance 50,000

Employees contribution (already included in salary) 30,000 -

Employers contribution 35,000

Less: 10% of salary (note attached) (275,000 x 10%) 27,500 7,500

Or 15 0,000 whichever is lower shall be deducted

Interest credited (Rs. 650,000 x 18%) 117,000

Less: interest credited @ 16% (Rs. 650,000 x 16%) (104,000)

Or 1/3rd of salary Rs. 275,000 / 3, hence higher is 16%

Amount included in salary income 13,000

Taxable income 425,500

NOTE: Salary for the computation of provident fund is equal to:

Salary = Basic salary 250,000 + dearness allowance 25,000= 275,000

Solution for case (b) and (c):

The answer in both (b) and (c) shall be same as nothing shall be added where the provident fund is

formed under Provident Fund Act, 1925 and in case of (c) the amount to be added in salary income

shall be at the time when accumulated balance received related to unrecognized provident fund.

Hence taxable income shall be Rs. 405,000 in both (b) and (c) cases that are without provident fund

adjustment under the given cases.

Pakistan & Foreign source salary income

Geographical source of salary

income

Received by Taxability

1. Pakistan source salary
   income [Section 101(1)]:
   a. Received from any
   employment exercised in
   Pakistan, wherever paid, or
   b. Paid by, or on behalf of, the
   Federal Government, a
   Provincial Government, or a
   Local Government in
   Pakistan, wherever the
   employment is exercised

Resident / Non-

resident individual

 Taxable [Section 11(5) and (6)]

 In case of residents - their FSI and

in case of non resident – their FSI

the terms of double taxation

treaty agreements, if any shall also

be relevant.

2. Foreign source salary
   income:
   Salary income other than above.

a. Resident Individual

[Section 102]

Any foreign-source salary received by

a resident individual shall be exempt

from tax if the individual has paid

foreign income tax on such salary or

his employer has withheld from the

salary and paid to the revenue

authority of the foreign country in

which the employment was exercised.

[Section 103]