Income Tax Ordinance, 2001 — Section 13: Value of perquisites

13. Value of perquisites.— (1) For the purposes of computing the income of an employee for a tax year chargeable to tax under the head “Salary”, the value of 1 Inserted by the Finance Act, 2002 50 Chapter III – Tax on Taxable Income any perquisite provided by an employer to the employee in that year that is included in the employee’s salary under section 12 shall be determined in accordance with this section.

(2)This section shall not apply to any amount referred to in clause (c) or

(d)of sub-section (2) of section 12. 1(3) Where, in a tax year, a motor vehicle is provided by an employer to an employee wholly or partly for the private use of the employee, the amount chargeable to tax to the employee under the head “Salary” for that year shall include an amount computed as may be prescribed.] 2[ ]

(5)Where, in a tax year, the services of a housekeeper, driver, gardener or other domestic assistant is provided by an employer to an employee, the amount chargeable to tax to the employee under the head “Salary” for that year shall include the total salary paid to the domestic assistant 3[such house keeper, driver, gardener or other domestic assistant] in that year for services rendered to the employee, as reduced by any payment made 4[to the employer]for such services.

(6)Where, in a tax year, utilities are provided by an employer to an employee, the amount chargeable to tax to the employee under the head “Salary” for that year shall include the fair market value of the utilities provided, as reduced by any payment made by the employee for the utilities. 1 Substituted by the Finance Ordinance, 2002. The substituted sub-section (3) read as follows: “ (3) Subject to sub-section (4), where, in a tax year, a motor vehicle is provided by an employer to an employee wholly or partly for the private use of the employee, the amount chargeable to tax to the employee under the head “Salary” for that year shall include the amount computed in accordance with the following formula, namely: (A*B)-C Where, A is the cost to the employer of acquiring the motor vehicle or, if the vehicle is leased by the employer, the fair market value of the vehicle at the commencement of the lease; B is

(a)where the vehicle is wholly for private use, fifteen per cent;

(b)where the vehicle is only partly for private use, seven and a half per cent; and C is any payment made by the employee for the use of the motor vehicle or for its running costs.” 2 Sub-section (4) omitted by the Finance Act, 2002. The omitted sub-section (4) read as follows: “(4) Where a motor vehicle referred to in sub-section (3) is available to more than one employee for a tax year, the amount chargeable to tax under the head “Salary” for each such employee for that year shall be the amount determined under sub-section (3) divided by the number of employees permitted to use the vehicle.” 3 The words “domestic assistant” substituted by the Finance Act, 2002 4 The words “by the employee” substituted by the Finance Act, 2002 51 Chapter III – Tax on Taxable Income 1[(7) Where a loan is made, on or after the 1st day of July, 2002, by an employer to an employee and either no profit on loan is payable by the employee or the rate of profit on loan is less than the benchmark rate, the amount chargeable to tax to the employee under the head “Salary” for a tax year shall include an amount equal to

(a)the profit on loan computed at the benchmark rate, where no profit on loan is payable by the employee, or

(d)the difference between the amount of profit on loan paid by the employee in that tax year and the amount of profit on loan computed at the benchmark rate, as the case may be2[:] ] 3[Provided that this sub-section shall not apply to such benefit arising to an employee due to waiver of interest by such employee on his account with the employer 4[:] ] 5[Provided further that this sub-section shall not apply to loans not exceeding 6[one million]rupees.]

(8)For the purposes of this Ordinance not including sub-section (7), where the employee uses a loan referred to in sub-section (7) wholly or partly for the acquisition of 7[any asset or property]producing income chargeable to tax under any head of income, the employee shall be treated as having paid an amount as profit equal to the benchmark rate on the loan or that part of the loan used to acquire 8[ ][asset or property.]

(9)Where, in a tax year, an obligation of an employee to pay or repay an amount owing by the employee to the employer is waived by the employer, the amount chargeable to tax to the employee under the head “Salary” for that year shall include the amount so waived. Chapter III – Tax on Taxable Income

(10)Where, in a tax year, an obligation of an employee to pay or repay an amount 1[owing]by the employee to another person is paid by the employer, the amount chargeable to tax to the employee under the head “Salary” for that year shall include the amount so paid.

(11)Where, in a tax year, property is transferred or services are provided by an employer to an employee, the amount chargeable to tax to the employee under the head “Salary” for that year shall include the fair market value of the property or services determined at the time the property is transferred or the services are provided, as reduced by any payment made by the employee for the property or services. 2[(12) Where, in the tax year, accommodation or housing is provided by an employer to an employee, the amount chargeable to tax to the employee under the head “Salary" for that year shall include an amount computed as may be prescribed.]

(13)Where, in a tax year, an employer has provided an employee with a perquisite which is not covered by sub-sections (3) through (12), the amount chargeable to tax to the employee under the head “Salary” for that year shall include the fair market value of the perquisite, 3[except where the rules, if any, provide otherwise,] determined at the time it is provided, as reduced by any payment made by the employee for the perquisite. 4[(14) In this section,

(a)“benchmark rate” means 1 The word “owed” substituted by the Finance Act, 2002 2 Sub-section (12) substituted by the Finance Act, 2002. The substituted sub-section (12) read as follows: “(12) Where, in a tax year, accommodation or housing is provided by an employer to an employee, the amount chargeable to tax to the employee under the head “Salary” for that year shall include –

(a)where the employer or an associate owns the accommodation or housing, the fair market rent of the accommodation or housing; or

(b)in any other case, the rent paid by the employer for the accommodation or housing, as reduced by any payment made by the employee for the accommodation or housing.” 3 Inserted by the Finance Act, 2002 4 Sub-section (14) substituted by the Finance Act, 2002. The substituted sub-section (14) read as follows: “(14) In this section, “benchmark rate” means the State Bank of Pakistan discount rate at the commencement of the tax year; “services” includes the making available of any facility; and “utilities” includes electricity, gas, water and telephone.” 53 Chapter III – Tax on Taxable Income

(i)for the tax year commencing on the first day of July, 2002, a rate of five per cent per annum; and

(ii)for the tax years next following the tax year referred to in sub-clause (i), the rate for each successive year taken at one per cent above the rate applicable for the immediately preceding tax year, but not exceeding 1[ten per cent per annum] in respect of any tax year;

(b)“services” includes the provision of any facility; and

(c)“utilities” includes electricity, gas, water and telephone.]