ISLAMABAD, March 4: The government is considering withdrawing tax exemptions being enjoyed by the salaried class on its perks and privileges, from July 1, 2002.
This would ultimately increase the average tax liability of every employee by 25 per cent to 205pc, sources told Dawn on Monday.
The changes have been proposed in the Income Tax Law, 2001. The changes will be made part of the law through the finance ordinance 2002-03.
The proposal is likely to be discussed by the tax authorities and Finance Ministry officials in the second week of this month.
The new law will drastically minimize the positive impact of the raise that had been recently granted to the government employees, besides affecting the salaries of the private sector employees.
Under the new law all exemptions of the second schedule will be taxed on normal rates, sources said, adding that the government may also withdraw the tax rebate paid to civil and military employees.
Sources said that every thing received as salary would be taxed, that is basic salary, housing, company cars, interest differential/subsidy on staff loans, medical benefits, children education, retirement benefits, etc.
According to the Income tax Ordinance 2001 Review and Analysis of Impact on Salaried Class report, a copy of which has been obtained by Dawn, the new law will hit the employees of BPS-15, BPS-17 and BPS-19 the most.
Under the Income Tax Law of 1979, an employee of BPS-15 was given blanket exemption on perquisites from the income tax, and its annual take home salary was Rs76,644. But under the new law the employee would have to pay Rs1,248 as income tax on the same salary.
Likewise, an employee in BPS-17 will pay annually Rs9,633 as income tax under the new law against Rs3,157 he is paying now, an increase of 205pc.
The officers in BPS-20 to BPS-22 will be paying only 25pc additional income tax under the new law.
The employees of banks and other financial institutions, who are provided with car, house, and three basic loans, will have to suffer a tax increase of 100pc to 200pc. According to the report, the tax liability of an executive vice-president will be increased by 159pc.
Under the proposed law, an employee of the private sector, who is getting Rs6,000 a month, will have to pay Rs650 as income tax on its total annual salary of Rs72,000.
