Special, medical allowances of salaried class not subject to income tax

KARACHI: Special and medical allowances drawn by salaried persons are not subject to income tax while the apex tax authority deducts the tax from their salaries, showed an official document.
All other income of salaried persons is, however, subject to income tax, said an updated income tax law, released by the FBR last week. The document said salary, for the purpose of charging income tax, has been defined under the Income Tax Ordinance, 2001, which includes any pay, wages or other remuneration provided to an employee, including leave pay, payment in lieu of leave, overtime payment, bonus, commission, fees, gratuity or work condition supplements.
It said, however, special allowance or benefit, which does not fall under entertainment or conveyance allowance and that is granted to meet expenses wholly and necessarily incurred in the performance of the duties, has been exempted from income tax. “Further the benefit of exemption is allowed on the free provision to the employee of medical treatment or hospitalisation or both by an employer or the reimbursement received by the employee of the medical charges or hospital charges or both paid to an employee,” it read. “However, such provision of tax exemption is allowed with certain conditions that national tax number (NTN) of the hospital is provided and employer should certifies and attests the medical or hospital bills to which this clause applies.”
Value of other perquisites, allowances and benefits provided by the employer would be included in income of the employee in accordance with the Income Tax Rules, 2002. According to Riaz Ahmed and Company, the value of accommodation provided by an employer to the employee would be taken equal to the amount that would have been paid by the employer in case such accommodation was not provided. However, the value taken for this purpose should not be less than 45 percent of the minimum of the time scale of the basic salary or the basic salary where there is no time scale. In case of house rent, 30 percent allowance is admissible. The cost incurred on conveyance provided by an employer to the employee also admissible to certain rates.