Clarification of Tax on Salary, Pension, GP Fund and Gratuity

Last Updated on August 17, 2021 by Galaxy World

The Federal Board of Revenue (FBR) has issued the clarification regarding the Clarification of Tax on Salary, Pension, GP Fund, and Gratuity. There were rumours in the newspaper that FBR has imposed a tax on Medical reimbursement, Pension, Gratuity/Commutation, General Provident Fund and Pay and Allowances.


Clarification of Tax on Salary, Pension, GP Fund and Commutation


                FBR clarified that withdraw of concession in tax on the salaried person and imposing a tax on low rates, may not be considered as an increase in Tax.  FBR has removed article 19 of the 2001 Income Tax Ordinance on a technical basis. Under this article, the Govt had given relaxation on the reimbursement of expenses.

The Government imposed income tax on the GP Fund where the annual interest of the GP Fund increases from 5 lac (0.5 million). The rate of tax on such an amount is 10%.  There is also a proposal to remove the concession on Medical Reimbursement Charges. The reason for the same is that there were some bogus cases.





Clarification of Tax on Salary, Pension, GP Fund and Gratuity


Summary of Income Tax on Pay and Allowances and Expenses


As the Federal Board of Revenue issued a clarification on all the situation and employees should not worried about the new tax. There are changes in the slabs and some concession that the FBR had already favored the employees, they have now withdrawn. Only the employees whose annual interest in General Provident Fund is more than five lac will have to deduct the income tax @ ten percent.

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