ISLAMABAD, June 8: People drawing high salaries, both in public and private sectors, will benefit much more than low- salary employees from the income tax relief proposed in the budget for 2006-07.
According to official statistics, the relief measure will make little difference to low-salary taxpayers.
An impact analysis shows that a stenographer in BPS-15, whose annual gross income (basic plus allowances) comes to Rs 202,809 after the 15 per cent raise, will now pay Rs 1,222 less per annum under the head of income tax. On the other hand, the income tax liability of a grade-20 officer drawing a gross salary of Rs 735,798 will get a benefit of Rs 23,499 per annum.
The more the gross income of an employee the more tax relief he gets under the new system. An employee with the annual gross salary of Rs 1.5 million will have to pay Rs 41,000 less than what he paid during the current fiscal year. Besides, the 15 per cent raise in basis salary will also give much more to high- salaried employees.
With the addition of 15 per cent of the basic pay, the annual salary of a stenographer in grade-15 will increase by Rs 13,941, whereas the annual drawing of an officer in grade-20 will go up by Rs 58,041.
Another aspect of the issue is that the increase in the basic will also increase the tax liability; hence low-grade employees will not see any tangible raise in their net take-home salary.
When contacted, Chairman of the Central Board of Revenue (CBR) M. Abdullah Yousuf defended the new scheme and said the government wanted to simplify tax laws for which rationalisation of the evaluation and taxation method was necessary. He said the proposed system would help employers and make monitoring easier for the department.
“We worked very hard on the new system over the past year. Our aim is to facilitate taxpayers and to bring more of them in the tax net,” he added.
The architect of the new system, CBR’s member facilitation Habib Fakhruddin, said that salaried taxpayers had nothing to celebrate because the new rates had been proposed only to make it easier to compute the tax liability.
Some salaried taxpayers might get a relief of one per cent, he said, adding that the new system would not result in an increase in tax liability of any taxpayer.
Another major discrepancy in the proposed system, as pointed out by some analysts, relates to house rent of government employees.
Employees with official accommodation will pay tax at the same rate as those who pay high rents for the houses they live in.
