ITO Section 149

Salary. 

(1) Every  [person responsible for] paying salary to an employee shall, at the time of payment, deduct tax from the amount paid at the employee’s average rate of tax computed at the rates specified in Division I of Part I of the First Schedule on the estimated income of the employee chargeable under the head “Salary” for the tax year in which the payment is made  [including tax under section 4AB] after making 8 [adjustment of tax withheld from employee under other heads and tax credit admissible under section 61  [and 63] during the tax year after obtaining documentary evidence], as may be necessary, for [:]

[(i) tax withheld from the employee under this Ordinance during the tax year;

(ii) any excess deduction or deficiency arising out of any previous deduction; or

(iii) failure to make deduction during the year;]

[(1A) Notwithstanding the provisions of sub-section (1), any person responsible for paying pension to a former employee who is below the age of seventy years and deriving pension income during a tax year in which the payment exceeds rupees ten million, shall at the time of payment, deduct tax from the amount which is over and above rupees ten million at the rate provided in Division I of Part I of the First Schedule of the Ordinance, along with tax deducted under section 4AB after making adjustment of tax withheld from former employee under other heads and tax credit admissible under sections 61 and 63 of the Ordinance during the tax year after obtaining documentary evidence, as may be necessary, for –

• (i) tax withheld from the former employee under this Ordinance during the tax year; or
• (ii) any excess deduction or deficiency arising out of any previous deduction; or
• (iii) failure to make deduction during the year.]

(2) The average rate of tax of an employee for a tax year for the purposes of sub-section (1) shall be computed in accordance with the following formula, namely:–

A/B

where –

• A is the tax that would be payable if the amount referred to in component B of the formula were the employee’s taxable income for that year; and
• B is the employee’s estimated income under the head “Salary” for that year  [plus tax chargeable under section 4AB].

[(3) Notwithstanding anything contained in sub-sections (1) and (2), every person responsible for making payment for directorship fee or fee for attending board meeting or such fee by whatever name called, shall at the time of payment, deduct tax at the rate of twenty percent of the gross amount payable.

(4) Tax deductible under sub-section (3) shall be adjustable.]