Circular No. 02 of 2005, Islamabad, July 6, 2005

COMPUTATION OF INCOME TAX PAYABLE BY THE SALARIED PERSONS FOR TAX YEAR 2006 AND DEDUCTION OF TAX FROM SALARY FOR THE TAX YEAR COMMENCING ON 1ST JULY 2005. GOVERNMENT OF PAKISTAN REVENUE DIVISION CENTRAL BOARD OF REVENUE ***** No.F.4(1)ITP/2005-SAL Islamabad, July 6, 2005 Circular No. 02 of 2005 (Income Tax) Subject: COMPUTATION OF INCOME TAX PAYABLE BY THE SALARIED PERSONS FOR TAX YEAR 2006 AND DEDUCTION OF TAX FROM SALARY FOR THE TAX YEAR COMMENCING ON 1ST JULY 2005. Circular No. 02 of 2005, Islamabad, July 6, 2005:- The tax payable by salaried persons i.e. where salary constitutes more than 50% of the total income from all sources for the tax year 2006 shall be computed in accordance with the provisions of sections 12, 13 and 14 of Income Tax 0rdinance, 2001 read with rules 3 to 9 of Income Tax Rules, 2002. The exemption of basic threshold would be of Rs.100,000/-. 2. The taxpayers would be entitled, under Part III of Second Schedule, to the following relief: a. further reduction of 50% of tax to the senior citizens aged 65 years or more and earning income upto Rs.400, 000/- under clause (1)(1A) of the said schedule ; and b. special reduction in tax liability of 75% in case of a full time teacher or researcher employed in a non profit education or research institution, including Government training or research institution, duly recognized by a Board of Education or a university or Higher Education Commission under clause (1)(2) of the said schedule. 3. TAXATION OF PERQUISITES AND ALLOWANCES WHERE SALARY INCOME EXCEEDS RS.600,000. The method of valuation of perquisites and benefits under Income Tax Rules, 2002 with respect to salary income is the same as explained in circular No.12 of 2002 dated August 9, 2002. However, in case of salaried taxpayer whose income is Rs.600,000 or more, the house rent allowance received in cash upto 45% of the minimum of the time scale or where there is no time scale upto 45% of basic salary subject to maximum of Rs.270,000 shall not be included in his taxable income. Principles of taxation of other perquisites in case of such taxpayers remain the same. 4. INCREASE IN BASIC THRESHOLD. The basic threshold was raised to Rs.100,000…