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    Income From Salary (Chapter 6)

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    Fahim Shahriar Mozumder
    Salary is a regular payment from an employer to an employee for services provided and includes basic pay, allowances, bonuses, and other payments. An employee's basic salary is calculated based on their pay scale and annual increment date. Employees and employers contribute to provident funds for retirement, with statutory provident funds controlled by the government and recognized provident funds approved by tax authorities. Employers must deduct tax from salaries paid at average tax rates based on the employee's estimated annual income and issue certificates of tax deduction.

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    Income From Salary (Chapter 6)

    Uploaded by

    Fahim Shahriar Mozumder
    141 views4 pages
    Salary is a regular payment from an employer to an employee for services provided and includes basic pay, allowances, bonuses, and other payments. An employee's basic salary is calculated based on their pay scale and annual increment date. Employees and employers contribute to provident funds for retirement, with statutory provident funds controlled by the government and recognized provident funds approved by tax authorities. Employers must deduct tax from salaries paid at average tax rates based on the employee's estimated annual income and issue certificates of tax deduction.

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    Income from Salary(Chapter 6)

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    Salary is a regular payment from an employer to an employee for services provided and includes basic pay, allowances, bonuses, and other payments. An employee's basic salary is calculated based on their pay scale and annual increment date. Employees and employers contribute to provident funds for retirement, with statutory provident funds controlled by the government and recognized provident funds approved by tax authorities. Employers must deduct tax from salaries paid at average tax rates based on the employee's estimated annual income and issue certificates of tax deduction.

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    141 views4 pages

    Income From Salary (Chapter 6)

    Uploaded by

    Fahim Shahriar Mozumder
    Salary is a regular payment from an employer to an employee for services provided and includes basic pay, allowances, bonuses, and other payments. An employee's basic salary is calculated based on their pay scale and annual increment date. Employees and employers contribute to provident funds for retirement, with statutory provident funds controlled by the government and recognized provident funds approved by tax authorities. Employers must deduct tax from salaries paid at average tax rates based on the employee's estimated annual income and issue certificates of tax deduction.

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    Income from Salary (Chapter 6)

     Definition of Salary
    Salary is a regular payment from an employer to an employee for
    services provided.
    According to section 2(58) of the ITO, 1984, Salary includes:
     any pay or wages;
     any annuity, pension or gratuity;
     any fees, commission, allowances, perquisites or profits in lieu of, or in
    addition to salary or wages;
     any advance of salary;
     any leave encashment.

     Explanation Salaries
    1. Basic Salary
    Explanation 1:
    If the basic salary of Mr. X is Tk. 10,000 per month then the Total annual basic
    salary will be,
     (10000 x 12) = 1,20,000
    Explanation 2:
    If Mr. X has withdrawn monthly salary of tk. 7000 on July 2016 in the scale of
    tk. 6000-200-10000 and his date of yearly salary increment falls on March 1;
    his basic salary for the income year 2016-17 will be computed as following:
     From 01.07.2016 to 28.02.2017 (for 8 month) is 7000 = 56000
     From 01.03.2017 to 30.06.2017 (for 4 month) is [(7000 + 200) x 4] = 28800
    Total basic salary = (56000 + 28800) = 84800
    Explanation 3:
    If Mr. X has withdrawn monthly salary of tk. 7000 on June 2017 in the scale of
    tk. 6000-200-10000 and his date of yearly salary increment falls on March 1;
    his basic salary for the income year 2016-17 will be computed as following:
     From 01.07.2016 to 28.02.2017 (for 8 months) 6800 = (6800 x 8) = 54400
     From 01.03.2017 to 30.06.2017 (for 4 month) 7000 = (7000 x 4) = 28000
    Total basic salary = (54400 + 28000) = 82400
    Explanation 4:
    If Mr. X has withdrawn monthly salary of tk. 7000 on July 2016 in the scale of
    tk. 6000-200-10000 and his date of yearly salary increment falls on March 26;
    his basic salary for the income year 2016-17 will be computed as following:
     From 01.07.2016 to 28.02.2017 (for 8 months) 7000 = (7000 x 8) = 56,000
     For March [(7000 x 25/31) + (7000 x 6/31)] = (5645.16 + 1393.55) = 7039
     From 01.04.2017 to 30.06.2017 (for 3 month) 7200 = (7200 x 3) = 21,600
    Total basic salary = (56000+7039+21600) = 84,639
     Provident fund
    Employees and employers contribute to a provident fund to protect
    their retirement funds. Employees get their provident fund balances upon
    retirement or termination. The nominee gets the money if the employee dies.
    Provident funds are social security for post-employment emergencies.
    There are three types of provident fund:
    1. Statutory or Government provident fund:
    Most of the government employees of our country are pensionable.
    Government employees who are permanently transferred to pensionable jobs
    contribute to general provident fund.
    Provident fund is controlled and maintained by the government for
    government employees. However, government employees who have no
    benefits from pension contribute to Contributory Provident Fund.
    2. Recognized Provident fund:
    Recognized Provident fund is constituted under the conditions
    mentioned in Part B, first schedule in the Income Tax Ordinance, 1984 and
    approved by the commissioner of taxes.
    These funds are available in non-government organizations where both
    employees and employer contribute the same amount.
    3. Unrecognized Provident Fund:
    This fund is not constituted under Part B, first schedule in the Income
    Tax Ordinance, 1984 or under any other applicable acts or laws and is not
    approved by the commissioner of taxes.
    In this case, the employer's contribution and interest thereon is not
    included in the total income of the employee.
    Contribution to Provident Funds:

    Nature of PF Contribution To be included To be considered


    in total income as investment
    allowance
    Recognized (RPF) Employer’s  
    Employee’s  
    Unrecognized (URPF) Employer’s  
    Employee’s  
    Statutory/ Govt. (SPF) Employee’s  
    Employer do not contribute here
     Tax deducted at source from salary**
    Under section 50(1) of the ITO, 1984,
    Any person who is responsible for paying salary shall deduct income tax on the
    amount payable at the average rate.
    The tax shall be calculated on the basis of the rates of tax in force for the
    financial year in which the payment is made on the estimated income of the
    assesse under this head.
    At the time of making deductions under subsection (1), the amount to be
    deducted may be increased or decreased for the purpose of adjusting any
    excess or deficiency arising out of any previous deductions or failure to make
    deductions (Sec - 50(2)].
    For the purposes of deductions under subsection (1) in respect of salary
    payable in a foreign currency, the value in taka of such salary shall be
    calculated at such rate as the Board may prescribe.
    The tax so deducted shall be adjusted against the tax liability at the time of
    regular assessment.
    Where the employer fails in his duty to deduct tax at source, he will be
    considered as "Tax Defaulter" shall be responsible for payment of additional
    2% surcharge per month on the tax amount.
    Every person who has deducted or collected any tax at source from salary (not
    being salaries paid by the government) shall furnish, to the person from whom
    such deduction or collection has been made, a certificate of tax deduction
    under section 58 shall be issued in accordance to rule 18 specifying relevant
    information in this regard.

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