Income Tax Ordinance, 2001 — Section 149: Salary

149. Salary. — (1) Every 6[person responsible for] paying salary to an employee shall, at the time of payment, deduct tax from the amount paid at the employee’s average rate of tax computed at the rates specified in Division I of Part I of the First Schedule on the estimated income of the employee chargeable under the head “Salary” for the tax year in which the payment is made 7[including tax under section 4AB] after making 8[adjustment of tax withheld from employee under other heads and tax credit admissible under section 61 9[and 63] during the tax year after obtaining documentary evidence], as may be necessary, for 10[:] 1 The words “all other goods” substituted by the Finance Act, 2024. 2 The word “and” omitted by the Finance Act, 2024. 3 Clause (c) added by the Finance Act, 2024. 4 The Explanation omitted through Finance Act, 2020 dated 30th June, 2020 the omitted explanation read as follows: “Explanation.- For the purpose of this section the expression “edible oils” includes crude oil, imported as raw material for manufacture of ghee or cooking oil” 5 Section 148(A) omitted through Finance Act, 2020 dated 30th June, 2020 the omitted section read as follows: “148A. Tax on local purchase of cooking oil or vegetable ghee by certain persons.— (1)The manufacturers of cooking oil or vegetable ghee, or both, shall be chargeable to tax at the rate of two percent on purchase of locally produced edible oil.

(2)The tax payable under sub-section (1) shall be final tax in respect of income accruing from locally produced edible oil.” 6 The word “employer” substituted by the Finance Act, 2013. 7 Expression inserted by the Finance Act, 2024. 8 The words “such adjustment” substituted by the Finance Act, 2007. 9 The expression “62, 63 and 64” substituted by the Finance Act, 2022. 10 Inserted by the Finance Act, 2007. 308 Chapter X – Procedure 1[(i) tax withheld from the employee under this Ordinance during the tax year;

(ii)any excess deduction or deficiency arising out of any previous deduction; or

(iii)failure to make deduction during the year;] 2[(1A)Notwithstanding the provisions of sub-section (1), any person responsible for paying pension to a former employee who is below the age of seventy years and deriving pension income during a tax year in which the payment exceeds rupees ten million, shall at the time of payment, deduct tax from the amount which is over and above rupees ten million at the rate provided in Division I of Part I of the First Schedule of the Ordinance, along with tax deducted under section 4AB after making adjustment of tax withheld from former employee under other heads and tax credit admissible under sections 61 and 63 of the Ordinance during the tax year after obtaining documentary evidence, as may be necessary, for –

(i)tax withheld from the former employee under this Ordinance during the tax year; or

(ii)any excess deduction or deficiency arising out of any previous deduction; or

(iii)failure to make deduction during the year.]

(2)The average rate of tax of an employee for a tax year for the purposes of sub-section (1) shall be computed in accordance with the following formula, namely:– A/B where – A is the tax that would be payable if the amount referred to in component B of the formula were the employee’s taxable income for that year; and B is the employee’s estimated income under the head “Salary” for that year 3[plus tax chargeable under section 4AB]. 4[(3) Notwithstanding anything contained in sub-sections (1) and (2), every person responsible for making payment for directorship fee or fee for attending board meeting or such fee by whatever name called, shall at the time of payment, deduct tax at the rate of twenty percent of the gross amount payable.

(4)Tax deductible under sub-section (3) shall be adjustable.] 1 The words “any excess deduction or deficiency arising out of any previous deduction or failure to make a deduction during the year.” substituted by the Finance Act, 2007. 2 Sub-section (1A) inserted by the Finance Act, 2025. 3 Expression inserted by the Finance Act, 2024. 4 Sub-section (3) and (4) added by the Finance Act, 2014. 309 Chapter X – Procedure