Is a visiting or part-time consultant at a hospital an employee or an independent professional for tax?

A visiting consultant is taxed either as the hospital’s employee or as an independent professional, and the Income Tax Ordinance, 2001 treats the two very differently. The Ordinance does not settle the question for visiting doctors as a class. It gives definitions, and the answer comes from applying them to the actual arrangement.

What does the law say?

Section 2: employee, employer, employment. Section 2 defines an “employee” as “any individual engaged in employment” and an “employer” as “any person who engages and remunerates an employee”. “Employment” is defined inclusively. It includes a directorship or other management office in a company, “a position entitling the holder to a fixed or ascertainable remuneration”, and holding or acting in any public office.

Section 12: salary. Any amount received by an employee from any employment is salary, including pay, wages, commission, fees and allowances. Fees count as salary here only when received by an employee from employment.

Section 153: services “otherwise than as an employee”. Section 153 requires a prescribed person paying for services to deduct tax. In section 153(7), “services” includes “the services of accountants, architects, dentists, doctors, engineers, interior decorators and lawyers, otherwise than as an employee”. A doctor’s services fall inside section 153 only when they are not given as an employee.

Section 149: deduction from salary. If the consultant is an employee, the payer deducts tax from salary at the employee’s average rate under Division I of Part I of the First Schedule, based on estimated salary for the year.

How does it work in practice?

The two routes lead to different results:

Point	Employee of the hospital	Independent professional
Head of income	Salary (section 12)	Income from Business
Deduction by hospital	Section 149, average rate on estimated salary	Section 153(1)(b), 15% of gross fees in tax year 2027
Expenses	No deduction against salary for practice costs	Allowable practice expenses reduce business income
Persons not on the active taxpayers’ list	Tenth Schedule rule 10(a) excludes section 149 deductions from the higher-rate rules	Tenth Schedule higher-rate rules are not excluded for section 153

The label on the contract does not appear in the definitions. What the definitions do point to is whether there is a position with fixed or ascertainable remuneration, and whether the hospital engages and remunerates the doctor as its employee. Beyond that, the Ordinance is silent. It does not mention hours, exclusivity, supervision or who supplies equipment. Those facts may matter in a dispute, but they come from outside this corpus, and this page does not suggest which way they point.

Section 153 also applies only to payments by prescribed persons, a list in section 153(7) that includes companies, associations of persons constituted by or under law, non-profit organisations and individuals with turnover of one hundred million rupees or more in any of the preceding tax years. Section 153(1)(b) also excludes services where payment is less than thirty thousand rupees in aggregate during a financial year.

Worked example (illustrative figures)

Dr. Sana Javed, a consultant cardiologist, works with two private hospitals in Islamabad, both run by companies. The figures are invented.

Hospital 1: appointment letter. Her letter calls her a “visiting consultant” and fixes Rs. 250,000 a month for two sessions a week. On these facts the arrangement looks like a position with fixed remuneration under section 2. If the hospital treats it as employment, it deducts tax under section 149 on her estimated salary.

Hospital 2: per-procedure fees. She is paid Rs. 40,000 per procedure performed and has no appointment. In one month she performs 10 procedures.

1. Gross fees: 10 × Rs. 40,000 = Rs. 400,000.
2. Deduction under section 153(1)(b) at 15%: Rs. 400,000 × 15% = Rs. 60,000.
3. Net paid to her: Rs. 400,000 minus Rs. 60,000 = Rs. 340,000.

The Rs. 400,000 is business income in her return, not Rs. 340,000.

What if …?

What if the hospital deducts under section 153 but I think I am an employee, or the other way round? Sections 2, 12, 149 and 153 give the definitions but no procedure for settling this disagreement. The law does not say that the payer’s choice of section decides the question, and this page does not resolve it.

What if I am also a full-time employee elsewhere? Your salary from the other employer stays Salary. The 75% salary test in the First Schedule then decides which table taxes your combined income.

What if I am not on the active taxpayers’ list? The Tenth Schedule raises deduction rates for persons not on the list, but rule 10(a) excludes tax deducted under section 149. Section 153 deductions are not in that exclusion list.

Common mistakes

• Relying on the job title. “Visiting” or “honorary” in a letter does not appear in the definitions. The substance of the position does.
• Assuming all fees are business income. Under section 12, fees received by an employee from employment are salary.
• Recording only the net payment. When 15% is withheld, the gross fee is the income.
• Assuming every payer must deduct. Section 153 applies to prescribed persons only.

What to check in the official text

Read the definitions of employee, employer and employment in section 2, then sections 12, 149 and 153, including the definitions in section 153(7). The rate is in paragraph (2) of Division III, Part III of the First Schedule. Rule 1 and rule 10 of the Tenth Schedule set the position for persons not on the active taxpayers’ list. Court decisions on the employee test are outside this corpus and are not covered here.