Financial Risk Manager

Ways of Financial and Risk Management

Taxation of Bonus Paid to Corporate Employees
Thursday, November 5, 2009

A proviso has been inserted in Clause (a)of sub section 2 of section 20 whereby any bonus paid or payable to corporate employees receiving salary income of Rs.One million or more (exculding bonus) shall be chargeable to tax at the rate of 30%. This is a one time levy and payable for the tax year 2010 only, so as to support the Internally Displaced People (IDP)for their rehabilitation.

Example # 1

Salary Income other than bonus = 1,000,000
Bonus amount = 300,000
Tax @ 9% at salary other than bonus = 90,000 (A)
Tax @ 30% at bonus = 90,000 (B)
Total Tax = 180,000 (A)+ (B)

Example # 2

Salary Income other than bonus = 900,000
Bonus amount = 100,000
Total Salary = 1,000,000
Tax @ 9% at salary other than bonus = 90,000 (A)
No Tax @30% at bonus as salary excluding bonus is less than one million (B)
Total Tax = 90,000 (A)+ (B)

Labels: Taxation

posted @ 1:32 PM,

5 Comments:

At November 8, 2009 at 2:58 PM, Anonymous said...: That absurd levy may be deferred if the assessee obtains a stay order on his/her bonus amount as the matter is pending adjudication. The company however, shall still have to deduct the amount of tax on the bonus as illustrated above and in case the matter is decided by the competent court in favour of the assessee, he/she shall get the tax amount from the company. Otherwise the company shall have to deposit this amount in the government treasury if the appeal if decided against the employee.
At November 9, 2009 at 2:09 PM, Zahid Inam said...: Normal tax (@9% in this example) be levied on bonus amount or not. It seems that bonus will be included in taxable income in second case, but not in the first case.
At November 9, 2009 at 3:05 PM, Humayune Fida Hussain, FCMA, FPA said...: The case is under Honourable Lahore High Court decission pending filled by so many employees of ABL and others. we hope that we will winnthe case and nothing need to be deposited in TAX year 2010.

Thanks
Humayune FIda Hussain
At November 10, 2009 at 10:32 AM, Anonymous said...: Very interesting and very informative discussion....
At November 10, 2009 at 3:39 PM, Anonymous said...: The same case is also under Honorable Sindh High court, kindly refer dawn news paper of 12 September 2009 for detail : SHC STOPS DEPOSITING IDP TAX ON TREASURY.