KARACHI: The Pakistan Institute of Public Finance Accountants (PIPFA) has suggested to the policy-makers that basic tax exemption limit for salaried class be fixed at Rs200,000.
PIPFA in its pre-budget suggestions sent to the policy-makers said that currently income tax is charged when an individual’s income for a tax year exceeds the threshold of Rs100,000, but argued it should not be taxed at this level.
The Institute said “inflation is like a toothpaste, which once came out of the tube, would be difficult to put it back.”
Inflation is estimated at eight per cent for the current fiscal year, slightly lower than last year’s average rate of 9.3 per cent.
In view of extremely high cost of living and rising inflation rate, the Institute proposed, basic tax exemption limit for salaried persons may be re-fixed at Rs200,000.
The Institute also suggested that the eligible age to claim 50 per cent reduction in taxable liability should be reduced from 65 to 60 years.
Section 1-A of Part-3 of second schedule of Income Tax Ordinance, 2001 provides that where the taxable income, in a tax year of a taxpayer aged 65 years or more on the first day of that tax year, does not exceed Rs400,000, his tax liability on such income shall be reduced by 50 per cent.
According to the Institute, this threshold is on the lower side and the tax benefit does not help senior citizens so the limit may be increased to Rs600,000.
Regarding taxation of perquisites and allowances, it was suggested that under section 21-K any expenditure paid or payable by an employer on the provision of perquisites computed under section 13 of Income Tax Ordinance, and the amount of allowances exceeds 50 per cent of the employee’s salary for a tax year is not admissible deduction in computation of taxable income of companies. The Institute suggested that this clause may be deleted from Income Tax Ordinance.