ISLAMABAD: Federal Board of Revenue (FBR) has granted exemption of Rs1.11 billion on payment of gratuities to government employees or gratuity fund during tax year 2020.
The exemption has been granted under clause 13 of Part 1 of Second Schedule of Income Tax Ordinance, 2001 and it has no sunset clause.
The FBR said that any income representing any payment received by way of gratuity by employees of government, or from any gratuity fund approved by the commissioner in accordance with the rules in Part III of the Sixth Schedule of the Income Tax Ordinance, 2001.
The FBR obtained the data to calculate the exemption from Accountants Generals and gratuity funds registered with the FBR.
It said that the clause has two components, gratuity payments received by government employees and private sector employees.
In the component 1, there are a total of 451 gratuity fund registered with the FBR. A random sample of 31 cases was selected and their audited accounts were inspected.
“Average payments made by gratuity funds, after normalizing the sample result, is multiplied with 451, and tax expenditure is calculated at the rate of 10 percent. Tax expenditure for this component is Rs758,486,929.”
The other component, total gratuity payments in government (civil & military); Rs3,535,201,218. Tax expenditure is calculated at 10 percent.
