Question and Answer: Employment Income

QA

Q: What is Employment Income?

A: Employment, in the ordinary sense, is a contractual relationship involving two partners, one called the employer and the other one the employee.  The employer hires the employee and provides the work as well as tools with which the work is to be done, thereby playing the role of a master.

Section 3 (3) (d) of Personal Income Tax Act (PITA) also defines Employment as “any service rendered by any person in return for any gains or profits”.  This includes profession, occupation, trade business or engagement.  If it can be determined that an individual is rendering a service or doing any work in return for monetary award, whether paid daily, weekly, monthly or yearly, it can be said that such a person is in employment.

An employment income usually consists of the following:

  1. Salaries and Wages
  2. Allowances (i.e. Housing, Transport and Leave)
  3. Pension and Gratuities (Not Taxable)
  4. Bonus and Commissions
  5. Benefits in Kind or Perquisites of office

An employment income does not include

  1. Re-imbursement of expenses from which the employee is not expected to make profit.
  2. Medical Expenses.
  3. Lunch allowances by way of lunch vouchers