“CHAPTER-II

Government of Pakistan revenue division (central board of revenue)
Islamabad, the September 10, 2002.
NOTIFICATION
(INCOME TAX)

S.R.O.609(I)/2002:- In exercise of the powers conferred by sub-section (1) of section 237 of the Income Tax Ordinance, 2001 (XLIX of 2001), the Central Board of Revenue is pleased to direct that the following further amendments shall be made in the Income Tax Rules, 2002, the same having been previously published as required by sub-section (3) of the said section, namely:-

In the aforesaid rules, in Chapter II for PART-I, the following shall be substituted, namely:-

3. Valuation of perquisites, allowances benefits.- For the purposes of computing the income chargeable to tax under the head “salary”, the value of perquisites, allowances and benefits includable in the said income shall be determined in accordance with the rule 4 to 9.

(4) For the purpose of determining the value of perquisites, allowances and benefits under rule 3,-
(a) “annual value” of an accommodation means the sum for which the accommodation might reasonably be expected to let from year to year;

(b) “basic salary” means the pay and allowances payable monthly or otherwise, but does not include-
(i) dearness allowance or dearness pay unless it enters into the computation of superannuation or retirement benefits of the employee concerned;

(ii) employer’s contribution to a recognised provident fund or a fund to which the Provident Funds Act, 1925 (XIX of 1925), applies and the interest credited on the accumulated balance of an employee in such fund;

(iii) allowances which are exempt from the payment of tax under any provision of this Ordinance;

(iv) allowances and perquisites referred to in sub-clauses (b) to (f) of sub-section (2) of section 12, sub-section (3) of section 12, section 14; and

(v) allowances, perquisites, annuities and benefits referred to in rules 5 to 9;

(c) “salary” means remuneration or compensation for services rendered, paid or to be paid at regular intervals and includes overseas, dearness or cost of living allowance by whatever name it may be described, and bonus or commission which is payable to an employee in accordance with the terms of his employment as remuneration or compensation for services including any amount received by an employee from any employment, whether of a revenue or capital nature, including the amounts referred to in sub-section (2) of section 12, but does not include the employer’s contribution to a recognized provident or superannuation fund or gratuity fund or any other sum which does not enter into the computation for pension or retirement benefits;

(d) “employee” includes a director of a company working whole-time for one company

(e) "unfurnished accommodation or housing" includes electric fans, built in cupboards, cooking range and water heater; and

(f) "furnished accommodation or housing" includes basic furniture and furnishing, appliances for cooking, refrigeration and heating and cooling appliances in addition to the items available in respect of "unfurnished accommodation or housing".

5. House rent allowances receivable in cash.- Where the house rent allowance is receivable by the employee in cash, the amount, if any, by which the house rent allowance so receivable exceeds forty-five per cent of the minimum of the time scale of the basic salary or the basic salary where there is no time scale, shall be included in his income.

5A. Rent-free unfurnished accommodation.- Where rent-free accommodation is provided to an employee, there shall be included, in the total income of such employee, an amount calculated as under:-

Value of accommodation	Amount to be included in the total income.
(a) Where the annual value of the accommodation does not exceed an amount equal to forty-five per cent of the minimum of the time scale of his basic salary or the basic salary where there is no time scale.	Nil
(b) Where the annual value of the accommodation exceeds an amount equal to forty-five per cent of the minimum of the time scale of his basic salary or the basic salary where there is no time scale.	The amount exceeding forty-five per cent of the minimum of the time scale of his basic salary or the basic salary where there is no time scale, subject to a maximum of fifteen percent of salary.

5B. Rent free furnished accommodation.- Where rent free furnished accommodation is provided to the employee, an amount equal to ten percent of his salary over and above the amount determined for inclusion under rule 5A shall be added to his income.

5C. Accommodation hired by the employee with rent payable by the employer.- Where the accommodation is hired by the employee in his own name but the rent is payable by the employer, the amount includable in the salary shall be determined under rule 5A or 5B, as the case may be as reduced by any payment made by the employee for such accommodation.

5D. Accommodation provided at a concessional rate.- Where the accommodation is provided to the employee, other than a person in the civil or military employment of the Government, at a concessional rate, the difference between the rent actually paid by him and the amount determined to be includible in an employee’s salary under rule 5A or 5B shall be added to his income.

5E. House rent allowance receivable in addition to accommodation, etc.- Where any house rent allowance is receivable by the employee in addition to the benefits referred to in rules 5A, 5B, 5C or 5D, the whole amount of the allowance shall be added in his income in addition to the amount computed under any of the said rules.

6. Conveyance allowance receivable in cash with no conveyance facility.- Where neither any conveyance is provided by the employer nor any conveyance owned or maintained by the employee is used by him in the performance of the duties of office held by him and conveyance allowance is receivable by him in cash, the amount of such allowance exceeding Rs. 3600 or the actual expenditure incurred by the employee, which ever is less, shall be included in his income.

6A. Motor vehicle provided exclusively for personal or private use.- Where a motor vehicle is provided by the employer for the use of the employee exclusively for personal or private purposes, there shall be included in the employee’s income an amount equal to-

(a) the sum actually expended by the employer on running and maintenance of the motor vehicle (including normal depreciation, where the motor vehicle is owned or the amount of rental where the motor vehicle is hired by the employer) if the motor vehicle is used by one employee; and

(b) the sum arrived at by dividing the amount as computed under sub-rule (a) by the number of persons entitled to use the motor vehicle if the motor vehicle is used by more than one employee.

6B. Additional conveyance allowance.- Where any conveyance allowance is receivable by an employee in addition to the perquisite mentioned in rule 6A, the whole amount of such allowance plus the amount determined under the rule 6A shall be included in his income.

6C. Motor vehicle used partly for personal and partly for business purposes.- Where the motor vehicle is used by the employee partly for his personal and partly for business purposes, there shall be included in his income,-

(a) where the motor vehicle is owned or hired by the employer and its running (including hire and maintenance) costs are also borne by the employer and the motor vehicle is used exclusively by one person, 50 per cent of the sum actually expended on the running of the motor vehicle (including maintenance and normal depreciation where the motor vehicle is owned or the amount of rental where it is hired by the employer) or Rs.3600, whichever is the less;

(b) where the motor vehicle is owned or hired by the employer and its running (including hire and maintenance) costs are also borne by the employer and the motor vehicle is used by more than one person, the sum arrived at by dividing the amount representing 50 per cent of the sum actually expended by the employer on the running of the motor vehicle (including maintenance and normal depreciation where the motor vehicle is owned or the amount of rental where it is hired by the employer) by the number of such persons or Rs.2400, whichever is the less;

(c) where the motor vehicle is owned or hired by the employer and its running cost is borne by the employee, the amount, if any, by which the conveyance allowance paid by the employer exceeds Rs.2400 or 7.5 per cent of the basic salary, whichever of these two sums is the higher;

(d) where the motor vehicle is owned by the employee and its running (including hire and maintenance) costs are also borne by him the amount by which the conveyance allowance paid by the employer exceed Rs.3600 or 10 per cent of the basic salary, whichever of these two sums is the higher; and

(e) where the motor vehicle is owned by the employee and its running (including hire and maintenance) costs are borne by the employer, the amount, if any, by which the conveyance allowance paid by the employer exceeds Rs.1200 or 2.5 per cent of the basic salary, whichever of these two sums is the higher.

6D. Motor vehicle used exclusively for business purposes.- Where the motor vehicle is used by the employee exclusively for business purposes, there shall be included in his income,-

(a) where the motor vehicle is owned or hired by the employer and its running (including hire and maintenance) costs are also borne by him, the whole amount of the conveyance allowance, if any, receivable by the employee;

(b) where the motor vehicle is owned or hired by the employer and its running (including hire and maintenance) costs are borne by the employee, the amount, if any, by which the conveyance allowance paid by the employer exceeds the actual expenditure incurred by the employee on the running (including maintenance) of the motor vehicle;

(c) where the motor vehicle is owned or hired by the employee and its running (including maintenance) costs are borne by him, the amount, if any, by which the conveyance allowance paid by the employer exceeds Rs.4800 or 10 per cent of the basic salary, whichever of these two sums is the higher; and

(d) where the motor vehicle is owned by the employee and its running (including maintenance) costs are borne by the employer, the amount, if any, by which the conveyance allowance paid by the employer exceeds Rs.2400 or 7.5 per cent of the basic salary, whichever of these two sums is the higher.

7. Provision of passage for travel.- (1) Where free or concessional passage for travel abroad or within Pakistan is provided by the employer to an employee (including the members of his household and dependants), there shall be included in the income of the employee-
(i) where the passage is provided in accordance with the terms of employment, an amount equal to the sum by which the cash payment, if any, made by the employer exceeds the actual expenditure on fare incurred by the employee; or

(ii) where the passage is not in accordance with the terms of employment, the whole of the amount paid in cash, if any, or if no cash payment is made, the amount which would have been expended by the employee had the free or concessional passage, as the cash may be, not been provided by the employer:

Provided that where free or concessional passage for travel abroad is availed of by the employee more than once in two years and more than once in three years for the members of his household and dependants, the whole of the amount paid to him in cash, if any, for such additional passage or if no cash payment is made the amount which would have been expended by him, had the additional passage not been provided by the employer shall be included in his income.

(2) Where the transport is provided free of cost, or at the concessional rate, by an undertaking engaged in the transport of passengers or the carriage of goods to any employee of the undertaking (including the members of the household and dependants) in any conveyance owned or chartered by the undertakings for the purpose of the transport of the passengers or carriage of goods, nothing shall be added in his income.

8. Minor Perquisites.- The provision by an employer to an employee of tea, coffee and other similar refreshment at the employer’s business premises during the course of work shall not be treated as salary of employee.

9. Valuation of perquisites, allowances, benefits where salary is Rs.600,000 or more.- (1) Where income chargeable under the head “Salary” of an employee including the value of perquisites as determined under rule 4 to 8 is six hundred thousand rupees or more for any tax year, the value of allowances perquisites and benefits shall be determined in accordance with sub rule (2 to 5) of this rule.

(2) Where any perquisite is receivable in cash the whole amount shall be included in employee’s salary

(3) Where any perquisite is receivable otherwise, than in cash, the amount chargeable to the employee under the head “salary” for that year shall include the fair market value of the perquisite, determined at time it is provided, except provision of housing or accommodation, and provision of motor vehicle, as reduced by any amount paid by the employee for the perquisite.

(4) The value of accommodation or housing for the purposes of sub-section (12) of section 13 shall be determined as under:
(a) Where free unfurnished accommodation or housing is provided to the employee, the value for addition to the income shall be made on the following basis:

Accommodation or housing-	Value for areas falling within the limits of Metropolitan Corporation, Municipal Corporation, Cantonment Board or the Islamabad Capital Territory	Value for other areas
With land area upto 250 sq. yards.	Rs.40,000	Rs.27,000
With land areas exceeding 250 sq. yards but not exceeding 500 sq. yards.	Rs.106,000	Rs. 66000
With land area exceeding 500 sq. yards but not exceeding 1000 sq. yards.	Rs.1,99,000	Rs.106,000
With land area exceeding 1000 sq. yards but not exceeding 2000 sq. yards.	Rs. 370,000	Rs.198,000
With land area exceeding 2000 sq. yards.	Rs.462,000	Rs. 264,000

(b) Where free furnished accommodation is provided to the employee, the value for addition to income shall be the amount determined under clause (a) of this sub-rule as increased by and a further sum equal to 15 per cent of the said amount.

(5) The value of perquisite representing provision of a motor vehicle, for the purposes of sub-section (3) of section 13, shall be determined as under:-

(a) where the motor vehicle is provided by an employer wholly for private use of the employee, 10% of the cost to the employer for acquiring the motor vehicle or the fair market value of the vehicle at the commencement of lease, if the motor vehicle is taken on lease by the employer;

(b) where the motor vehicle is provided by an employer partly for private use of the employee, 5% of the cost to the employer for acquiring the motor vehicle or the fair market value of the vehicle at the commencement of lease, if the motor vehicle is taken on lease by the employer;

(c) where the motor vehicle is used by more than one employee, the amount as determined in clause (a) or (b), as the case may be, divided by number of employees using the motor vehicle;

(d) where an employee makes any payment to the employer in respect of the use of motor vehicle, the value of perquisite as determined under clause (a), (b) or (c) as reduced by the amount paid by him.”.

[No.F.4(29)ITP/2002]

VAKIL AHMAD KHAN)
Member (Direct Taxes)/Additional Secretary