The Central Board of Revenue (CBR) has started an exercise to simplify the income tax procedure for calculation of perquisites and allowances available to employees working in government and private sector.
Official sources told Business Recorder on Friday that valuation of perquisites/benefits and calculation of various allowances is very complex at present under the Income Tax Rules 2002. The legal language is technical which needs simplification for the government and private employees. For example, calculation of conveyance allowance is a complicated procedure for a government employee.
The Income Tax Rules 2002 have given an elaborated procedure for the calculation of conveyance allowance, but its language is so complicated that a normal taxpayer can not calculate these allowances by plainly reading these rules.
However, simplification of these rules is not an easy task, as it requires ample experience of taxation matters for revising the procedure under the Income Tax Rules 2002.
According to CBR Chairman Abdullah Yusuf's directive to income tax department, the department would conduct a comprehensive exercise on salary and allowances (federal/provincial governments and corporate/private sectors). The officials would review the current structure of allowances with emphasise on simplification and reducing the numbers of such allowances.
The income tax department has started examining procedure for the valuation of perquisites and benefits, value of accommodation and housing and other allowances specified in the Income Tax Rules 2002. For the purposes of computing the income chargeable to tax under the head 'Salary', the value of perquisites and benefits included in the income shall be taken as determined under the Income Tax Rules.
Officials said that section 12 of Income Tax Ordinance 2001 and rules 1-9 of the Income Tax Rules 2002 deal with the perquisites and allowances.
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