ISLAMABAD, May 7: The government is considering a relief package for the salaried class raising the income tax exemption limit and reducing the number of income tax slabs. Sources told Dawn on Saturday that the budget makers were actively working on the proposals to determine the actual revenue impact of all the relief packages to be announced in the upcoming budget for the year 2005-06.

The finance ministry has initially proposed to raise the income tax exemption limit from the current Rs100,000 to Rs115,000 to give some relief to taxpayers particularly to the salaried class owing to the inflation. The sources said that in case the exemption limit was raised up to Rs115,000, it would provide a relief to around 221,000 people.

The government in the budget of 2004-05 had raised the income tax exemption limit for individuals, Hindu Undivided Family (HUF) and Associations of Persons (AOPs) to Rs100,000 from Rs80,000, which would be effective from July 1, 2005.

It was also proposed to reduce the income tax rate for individuals, HUF and AOPs to 30 per cent from the current 35 per cent, which was the highest in the region. The government was also considering the proposal of reducing the number of slabs from the current seven to five slabs with the minimum of income tax rate of five per cent and maximum 30 per cent.

Another proposal was also under consideration to reduce the number of slabs from seven to three with the minimum of 10 per cent and maximum of 30 per cent in the upcoming budget. The third slab will be at 20 per cent. Initially, the sources said, the tax authorities had worked out revenue impact of the package in the range of Rs4 to Rs6 billion per annum to the national kitty.

The sources said that the Central Board of Revenue (CBR) was opposing the move of the finance ministry for making any further increase in the exemption limit, which would result in revenue loss.

In the budget of 2001-02, the income tax exemption limit was raised from Rs40,000 to Rs60,000 and in the year 2002-03, the limit was raised to Rs80,000 in order to reduce the burden on the low income category of people. In the budget for the year 2002-03, the government had reduced the slabs to seven with minimum 7.5 per cent and maximum of 35 per cent.