which companies can deduct tax from employe salary

sher.azam · 08-23-2011, 08:34 PM

Hello Friends.
i need your help. I just want to confirm that which companies can deduct tax from their employees salaries.
i am working in a software house which deals with international clients not local clients and our company is not registered.
now do they need to deduct tax from their employee salaries or not?
Please help me to solve this problem, coz as pr my understanding if a company is not registered and its turn over is less than 50 million they have no need to deduct any tax from employees salary.
so Please make it clear for me.
Thanks in Advance.

student_of_law · 09-06-2011, 08:04 PM

<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by sher.azam
 as pr my understanding if a company is not registered and its turn over is less than 50 million they have no need to deduct any tax from employees salary.
so Please make it clear for me.
Thanks in Advance.

<hr height="1" noshade id="quote"></blockquote id="quote">

Firstly, you should tells yourself on what basis you have such understanding. Basis means relevant section, Rules, SRO.

See 149 deals with deduction of tax by employer in respect of salaries. According to it every employer, including individual , has to withhold tax from the salary of its employees. So is the case with your employer. If your employer does not deduct tax he will become personally liable for that{s.161(1)}, will not be allowed deduction in respect of salaries paid (s.21(c)), default surcharge will be imposed on him (s.205(3) and penalty may also be imposed upon him {s.182(1)(15)}.

sher.azam · 09-07-2011, 05:04 PM

<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by student_of_law
 <blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by sher.azam
 as pr my understanding if a company is not registered and its turn over is less than 50 million they have no need to deduct any tax from employees salary.
so Please make it clear for me.
Thanks in Advance.

<hr height="1" noshade id="quote"></blockquote id="quote">

Firstly, you should tells yourself on what basis you have such understanding. Basis means relevant section, Rules, SRO.

See 149 deals with deduction of tax by employer in respect of salaries. According to it every employer, including individual , has to withhold tax from the salary of its employees. So is the case with your employer. If your employer does not deduct tax he will become personally liable for that{s.161(1)}, will not be allowed deduction in respect of salaries paid (s.21(c)), default surcharge will be imposed on him (s.205(3) and penalty may also be imposed upon him {s.182(1)(15)}.

<hr height="1" noshade id="quote"></blockquote id="quote">

Ok thank you so much for your reply.
i have one more question.
can you please let me know which allowances are exempted from tax in our salary.
Please tell me this in detail so that it help us to calculate tax and minimize tax from our salaries.
Thanks in advance

student_of_law · 09-07-2011, 09:15 PM

<blockquote id="quote">quote<hr height="1" noshade id="quote">

can you please let me know which allowances are exempted from tax in our salary.
Please tell me this in detail so that it help us to calculate tax and minimize tax from our salaries.
Thanks in advance
<hr height="1" noshade id="quote"></blockquote id="quote">

Mainly only medical allowance not exceeding 10% of basic salary is exempt [Clause 139 (b) of Part II of Second Schedule]. This is allowed only if free medical treatment or hospitalization or reimbursement is not provided for in the terms of employment.

To minimize tax , suppose if your pay is Rs.50,000

Break this as Rs.45,500 (Basic Salary)
&
Rs. 4,500 as medical allowance

Your annual salary income will become 45,500 x 12 =

However, if your employer is maintaining provident fund account and shows basic salary at lower level, he will not agree to this formula as provident fund contribution is made on the basis of basic salary.
This problem can also be resolved by changing percentage of employer contribution to provident fund.

One other allowance is exempt. That is exempt by virtue of Clause 39 of Part I of Sec Schedule. This allowance is regarding expense which is specially granted to meet expenses wholly and necessarily incurred in the performance of duties of an office. However, this exemption is not allowed on conveyance or entertainment allowance

Further from the language of Clause 39, it is clear that this allowance must be equivalent to amount necessarily and wholly incurred in performance of duties. There is No limits in terms of percentage of salary/ basic salary, are given for this allowance. However, proof of expenditure may be required.

perfectionist · 09-12-2011, 11:01 PM

Dear student_of_law,

Please shed some light on this query

Does Clause 139 (b) of Part II of Second Schedule also require employer to ask for "medical or hospital bills equivalent to exempt 10% medical allowance" from employee and then certify and attest the medical or hospital bills?

Your opinion shall be worth a lot.

Regards.
perfectionist

student_of_law · 09-12-2011, 11:56 PM

<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by perfectionist
 Dear student_of_law,

Please shed some light on this query

Does Clause 139 (b) of Part II of Second Schedule also require employer to ask for "medical or hospital bills equivalent to exempt 10% medical allowance" from employee and then certify and attest the medical or hospital bills?

Your opinion shall be worth a lot.

Regards.
perfectionist
<hr height="1" noshade id="quote"></blockquote id="quote">

Not at all. I will reframe your question as whether employee is bound to furnish bills of actual expenses. Again the answer is no. As allowance is exempt to the extent of 10% irrespective of actual expenses, that may be lower or higher.

Secondly, if the allowance is equivalent to actual expenses then it will more appropriately amount to reimbursement of medical facility rather than allowance.

I would like to mention that earlier there was also para ( c ) of Clause 139 that says that expenditure incurred to the extent of 10% of basic are exempt. After clause (c ) there was Proviso that required submission of bills. Clause (c ) has been omitted. However, in some books the Proviso, is still there. Either it is mistake of book compilers or FBR, that proviso is superfluous, don't get confused by it.

Only condition to avail this exemption of medical allowance is that the Employer should not be required to reimburse medical expenses or hospitalization under the terms and service of employment

perfectionist · 09-13-2011, 05:57 PM

Dear student_of_law,

Thank you very much for your detailed answer. I am really indebted to you and appreciate your knowledge, effort and time. Please keep up the good work.

Regards,
perfectionist