News
Thursday, May 27, 2010
Salaried class to pay more income tax
* Income tax rates to be enhanced for those with salaries over and above Rs 300,000
* Exemption limit for salaried class to be raised from Rs 200,000 to Rs 300,000By Sajid Chaudhry
ISLAMABAD: The federal government is planning to raise the income tax exemption limit for salaried people from Rs 200,000 to Rs 300,000 in the budget 2010-11, official sources told Daily Times on Wednesday.
However, a hike has been proposed in income tax rate for those drawing salaries over and above Rs 300,000, so that the government’s revenue remains secure.
The enhanced income tax rates will be notified in the budget 2010-11.
The income tax exemption limit for senior citizens and women will also be reviewed keeping in view the double-digit inflation and devaluation of the Pakistani rupee, official sources added.
In this regard, the Federal Bureau of Revenue (FBR) has drafted a budget proposal to provide relief to salaried individuals, starting from the next fiscal year. The FBR has also proposed to reduce the number of salary slabs to further facilitate the people.
One of the proposals is to raise the basic exemption threshold for salaried individuals. In this regard, the FBR has raised the basic exemption threshold after carrying out various internal deliberations to improve the slab structure for the salaried people. In the last budget, the basic limit of exemption from income tax for salaried people was enhanced from Rs 180,000 to Rs 200,000.
The Revenue Advisory Council and the FBR have finalised the new slabs and their structure is being reviewed to provide tax relief to taxpayers falling under lower-tax slabs.
Resultantly, tax on lower income groups will reduce.
If the government approves the proposal, the FBR will issue a new procedure for computation of income tax through the Finance Bill 2010.
The lower slabs may be spread out to reduce tax rate for lower income groups, however, salaried people drawing higher salaries may be taxed at high rates.
The revised tax slab-structure will specify taxable income and the rate of tax, with a particular focus on tax relief to people falling under lower tax slabs. Presently, the computation of income tax of salaried people is governed by Sections 12, 13 and 14 of Income Tax Ordinance 2001, read with rules 3 to 7 of the Income Tax Rules 2002.
Where salary income constitutes more than 50 percent of the total income of a taxpayer, the total income shall be charged to tax at rates provided in the tax structure.
All perquisites, allowances or benefits, (except those covered under Part-1 of the Second Schedule to the Ordinance), are to be included in the salary income.
Courtesy www.dailytimes.com.pk