The Federal Board of Revenue (FBR) can amend the Second Schedule of the Income Tax Ordinance 2001 to grant tax relief to the salaried persons, whose income tax liability has been increased from new fiscal (2012-13) as compared to their monthly tax payments during previous fiscal.
Sources told Business Recorder here on Tuesday that the FBR had made substantial reduction in tax liability of lower- and middle- income salaried taxpayers. The tax relief has been provided to the lower- and middle-income categories of salaried individuals in their take-home salary in August 2012 pertaining to the period of July 2012.
The maximum tax relief has been provided in the first three slabs of the amended Finance Bill. However, less tax relief has been given to persons covered under the highest tax slabs. The persons earning taxable income of Rs 2,500,000 and above have been subjected to the flat tax rate of 20 percent. The salaried persons covered under the highest tax slabs are already earning huge income and they have been given minimum relief under the revised tax slabs for the salaried class.
However, if the incidence of tax has increased for certain categories of salaried individuals, the tax liability of such salaried persons can be reduced through amendment in the Second Schedule of the Income Tax Ordinance 2001. This depends on the policy directives of the Ministry of Finance for amendment in the Income Tax Ordinance for providing tax relief to the salaried persons falling in the highest tax slabs.
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, maximum tax relief has not been provided in the last three slabs to the salaried class.
The basic exemption limit for tax year 2012 was Rs 350,000, however, this limit has been enhanced to Rs 400,000 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 six, which shall be applicable for Tax Year 2013. For withholding purposes, those shall apply to salary paid on or after 1st day of July 2012, FBR added.