KARACHI: One of the major tax relief granted by the government through Finance Act, 2012 is substantial reduction in tax liability of lower- and middle- income salaried taxpayers, automatically adding a handsome amount of salary portion in their take-home salaries.
When contacted a prominent Lahore-based tax expert Waheed Shahzad Butt told Business Recorder here on Sunday that this was a very positive move by the FBR to share the burden of most documented and tax compliant category of taxpayers because the salaried class is taxed on gross receipts of salary and almost each and every head falls under the category of salary is taxable under the law. As the tax of the salaried persons has been deducted at source and they are regular taxpayers on monthly basis.
The government has provided this major relief to them. As a result of new salary slabs, handsome chunk of salary portion has automatically been added in the take home salaries of the lower and medium class salaried persons. This means there is some increase in the monthly pay of salaried persons belonging to lower- and middle-income categories of salaried individuals in their take-home salary in August 2012 pertaining to the period of July 2012.
The tax expert elaborated that a salaried taxpayer means a person whose salary constitutes more than 50 percent of the total income. All perquisites, allowances or benefits subject to exclusion under Part-I of the Second Schedule to the Income Tax Ordinance 2001, are to be included in the taxable salary.
The basic exemption limit for tax year 2012 was Rs350,000, however, this limit has been enhanced to Rs400,000 with effect from July 2012 ie, period relevant to Tax Year 2013. The tax slabs have also been revised, the existing tax rate slabs have been reduced from 17 to 6. These slabs shall be applicable for tax year 2013. For withholding purposes, these shall apply to salary paid on or after 1st day of July 2012.
They also pointed out by the tax expert though government has provided quite a handsome relief to salaried taxpayers and the tax benefit is to be gradually decreased with the increase in salary under the new slab structure for the salaried class as per Finance Act 2012. However, apparently there is some inadvertent omission in the last three slabs where the fixed component does not tally with the maximum tax factor of the previous slab.