C. No. IT. JI. 1(28)/85-P Islamabad, the 1st July, CIRCULAR NO. 15 OF 1992 (INCOME TAX)

Transcription

1 C. No. IT. JI. 1(28)/85-P Islamabad, the 1st July, CIRCULAR NO. 15 OF 1992 (INCOME TAX) SUBJECT: COMPUTATION OF INCOME TAX PAYABLE BY SALARIED PERSONS FOR ASSESSMENT YEAR The undersigned is directed to explain, for guidance of the tax-payers, the provisions relating to the computation of tax on salaries for the assessment year Returns of income for the assessment year have to be filed on or before the 31st August, The amount of wealth-tax paid, zakat deducted under the Zakat and Ushr Ordinance, 1980 or paid into a Zakat Fund established under the said Ordinance and voluntary donation made to Baitul-Mal Fund established under the Pakistan Baitul Mal Act, 1992, during the financial year shall be deducted from the gross income for arriving at the total income. 4. For computation of tax, however, income from the following sources is treated as a separate block chargeable to tax at the rates specified against each and is not required to be included in the total income. A statement under Section 143B, has, however, to be filed:- Block of Income Tax Rate (a) Dividend income 10% of such income. (b) Income representing profit or interest 10% of such income. on an account or deposit maintained with a banking company, any other company, or a finance society. (c) Income representing profit or interest 10% of such income. on bonds, certificates, debentures or instruments of any kind issued by a banking company, any other company, a local authority or a finance society. (d) Income by way of prize on prize bonds 7.5% of such income. or income representing winnings from a raffle, lottery or a cross-ward puzzle. 5 Income-tax on total income will be computed as under:- A. WHERE THE TOTAL INCOME DOES NOT EXCEED RS. 100,000/-

2 (iii) 10% will be charged on the total income excluding separate blocks of income mentioned above. A tax credit of Rs will be allowed if the income under the head Salary'' exceeds 50% of the total income. In other cases, tax credit will be allowed atrs A rebate in tax computed at the average rate of tax will be allowed in respect of-- (a) (b) donations for religious or charitable purposes made to the recognised or approved funds and institutions and personal expenditure incurred on legal or medical services as shown in the receipts issued by known medical or legal practitioners. (iv) Tax rebate for investment in certain certificates and shares, contribution made towards provident fund, premium paid in respect of life insurance and the amount spent on the purchase of books etc. is no longer admissible in any case. B. WHERE THE TOTAL INCOME EXCEEDS RS. 100,000. Income-tax will be charged at the rates as given inannex-i on the total income excluding income from sources mentioned in paragraph 4 above which are to be treated as separate blocks of income and taxed separately at the fixed rates. Note:- Tax rates applicable to the total income were generally reduced through the Finance Act, 1991, and the old method of arriving at the taxable income after reducing the basic exemption limit of Rs from the total income has been discarded. (ii) The tax thus calculated on the total income will be reduced by a rebate computed at the average rate of tax in respect of-- (a) (b) donations for religious or charitable purposes made to the recognised or approved funds and institutions; and personal expenditure incurred on legal or medical services as shown in the receipts issued by known medical or legal practitioners. (iii) Tax rebate for investment in certain certificates and shares, contribution made towards provident fund, premium paid in

3 respect of life insurance and the amount spent on the purchase of books etc. is no longer admissible in any case. 6. Where the total income marginally exceeds Rs. 100,000 the Income-tax payable will not exceed an amount equal to- (ii) income-tax which would have been payable if the total income were Rs. 100,000 plus a sum equal to 50% of the amount by which the total income exceeds Rs. 100, The examples in Annex-II illustrate the computation of tax in the case of salaried persons at different levels of income.

4 Annex-I RATES OF INCOME TAX Where the total income exceeds Rs. 100,000, the income tax shall be charged at the following rates:- 1. Where the total income exceeds Rs. 7,000 plus 20 per cent of the amount Rs. 100,000 but does not exceeds exceeding Rs. 100,000. Rs. 200, Where the total income exceeds Rs. 27,000 plus 30 per cent of the amount Rs. 200,000 but does not exceeds exceeding Rs. 200,000. Rs. 300, Where the total income exceeds Rs.57,000 plus 35 per cent of the amount Rs 300,000 exceeding Rs. 300, % of the Income-tax payable for the year shall be levied in case total income is Rs. 200,000 or more. Note:- The above rates were introduced through the Finance Act, 1991 and made effective (ii) from 1st July, 1991, for the purposes of deduction of tax from salaries and from assessment year for the purposes ofassessment of incomes. ANNEX-II EXAMPLE-I (for income below Rs. 100,000) Salary Income 50,000 Dividend income, profit or interest on bank deposits, 10,000 mbonds, certificates and debentures etc. (taxable as separate block of income). Prize on prize bonds, (taxable as separate block of 35,000 income) Total: 95,000 Less: Zakat deducted from incomes treated as separate 500 blocks Balance income 94,500 Tax on dividend profit & interest 1,000

5 @ 10% (10,000 X 10/100) Tax on prizes of prize 7.5% 2,625 (35,000 X 7.5/100) Gross tax on salary 10% (94,500-45,000 = 49,500) (49,500 X 10/100) 4,950 Less Tax Credit 4,950 Net tax on salary 4,000 Total net tax 4,575 EXAMPLE-II (For income over Rs. 100,000) Salary income 120,000 Less: Zakat deducted/paid 1000 Wealth Tax paid 6000 Donation to Baitul Mal Fund ,000 Total income 112,000 Tax calculation: Income-tax on first Rs. 100,000 = 7000 Income-tax on balance Rs. 20% = 2400 Gross tax. 9,400 Less : Tax rebate Amount donated to recognised or 1000 approved religious charitable institutions etc. (ii) Personal expenditure incurred on legal or 4000 medical services Total: 5000 Gross tax X Amount for rebate Total income i.e X 5000 = 420 1,12,000 Net tax 8,980 EXAMPLE-III (for income over Rs. 200,000) Salary income 2,60,000 Less: Zakat, wealth-tax and donation to Baitul Mal Fund 20,000 2,40,000 Tax calculation: Income-tax on first Rs. 100,000 Rs. 7,000 Income-tax on 20% Rs. 100,000 Rs. 20,000

6 Income-tax on 30% Rs. Rs. 12,000 40,000 Gross tax: 39,000 Less: Tax rebate:- Amount donated to recognised or approved religious or charitable Rs. 2,000 institutions etc. Personal expenditure incurred on legal or medical services. Rs. 8,000 Total: 10,000 Gross tax X Amount for rebate Total income i.e. Rs. 39,000 X 10,000 1,625 Rs. 2,40,000 Net Income tax: 37,375 Add: 10% of Income-tax Total tax. 41,113