Rs 100,000 IT exemption may be withdrawn
ISLAMABAD, May 21 2006: The Central Board of Revenue (CBR) is considering as an option withdrawal of basic threshold of income tax, exemption of Rs 100,000 for the non-corporate taxpayers, official sources informed the Daily Times on May 20.
The non-corporate sector comprises individual taxpayers, association of persons (AoPs) and registered firms, excluding the salaried class. The proposal is being considered at the CBR level and it is expected that the tax authorities may propose this for inclusion in the final budget proposals for the fiscal 2006-07 that will be submitted to the ministry of finance for consideration and approval, the sources added.
The proposal has been prepared to broaden the tax base and increase the income tax collection from these small and medium businesses across the country. The proposal has been prepared keeping in view the need for improving tax-to GDP ratio of the country that stands at the lowest in the region. The tax authorities after examining the tax -to-GDP ratio of different countries, including Turkey and Malaysia that having a good ratio, have prepared the proposal. At present income of the non-corporate sector up to Rs 100,000 is exempt and non-corporate taxpayers having income less than this threshold are not required to pay tax or file income tax return.
If the basic threshold of income tax exemption of Rs 100,000 for the non-corporate taxpayers is withdrawn in the budget, these taxpayers would be required to file income tax return and declared their income under the Universal Self-Assessment Scheme (USAS) from July 1, 2007. The income tax rates applicable to AoPs, registered firms and individual taxpayers at present are income up to Rs. 100,000 is exempt from income tax. The income of Rs 100.001 and up to Rs. 150,000 attracts an income tax rate of 7.5% of the amount exceeding Rs 100, 000. Taxpayers having an income of Rs 150,001 and up to Rs 300,000 are supposed to pay income tax of Rs 3,750 + 12.5% of amount exceeding Rs 150,000. The income of Rs 300,001 and up to Rs 400,000 is being taxed at the rate of Rs 22,500 + 20% of amount exceeding Rs 300,000.
The income of Rs 400,001 and up to Rs 700,000 is taxed at the rate of Rs 42,500 + 25% of amount exceeding Rs 400,000 and the income of over Rs 700,000 attracts the tax of Rs 117,500 + 35% of amount exceeding Rs 700,000. The CBR is examining different options not only to simplify the tax laws and procedures, but to enhance tax collection from different sectors of economy.
This exercise also includes simplification of all the rules and sections of law to facilitate the income taxpayers of different categories. The aim of the exercise is to enable the taxpayers to determine their income and tax payable by themselves and pay it without going into any difficulty. In this regard the CBR is also preparing a revised and simplified income tax return form for the all the categories of income taxpayers.
Source: Daily Times