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
- 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.
- 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]