CAF-2 · Chapter 5 · Question 6 of 10
Mr. Tariq's employer agreed to bear the tax chargeable on his salary. According to Section 12(3) of the Income Tax Ordinance, 2001, how should this be treated?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) B) The tax borne by the employer is treated as an additional benefit and the salary must be grossed up.
Explanation
Where an employer agrees to pay the tax chargeable on an employee's salary, the amount paid is treated as an additional benefit, and the salary income must be grossed up by the amount of tax payable by the employer.
More Salary MCQs
- Q8An employee received a substantial Golden Handshake payment upon termination of employment. Under Section 12(6), the employee has the…
- Q9Mr. Ali receives a basic salary of Rs. 2,000,000 per annum and a medical allowance of Rs. 250,000 per annum. His employer does NOT provide…
- Q10In the case of a Recognized Provident Fund, what is the exemption limit for the employer's contribution to the fund?
- Q1Under the Income Tax Ordinance, 2001, what is the basis of chargeability for income under the head "Salary"?
- Q2An employee incurred expenses on travelling for the employer's business and was paid a specific allowance solely to cover those official…