ISLAMABAD, June 12: The government has proposed to increase the income tax exemption limit to Rs100,000, reduce the rates of withholding tax on three agriculture products, withdraw three income tax exemptions and allow tax exemption for technical education.

Through the Finance Bill 2004-05, the government has also proposed to extend exemption period for capital gains for another two years, rationalize withholding tax on four items and allow house rent exemption of Rs270,000 to high salaried class.

The government has raised the income tax exemption limit up to Rs100,000 from Rs80,000. It exempted the withholding tax on income from investment in Bahbood certificates.

It was proposed to exempt the income of vocational technical or polytechnic institutions set up between July 1, 2004 and June 30, 2008 from income tax for five years provided such institutions were recognized by a board of technical education.

The bill proposed to allow payment of advance tax on estimated liability as opposed to tax-turnover ratio, which is being done away with. It also proposed to allow the association of persons to pay advance tax on the basis of income assessed for the latest tax year and to bring them on a par with individuals for which the limit of assessed income for payment of advance tax was suggested to be fixed at Rs200,000.

The government has extended the exemptions to capital gains for another period of two years, up to June 30, 2007. Ghee and cooking oil units pay minimum tax at the rate of 3 per cent on import of edible oil, which is adjustable against final tax liability but if the final tax is less than 3pc the minimum tax liability remains 3pc. It was proposed to treat the same as final discharge of tax liability. It was also proposed that such units might pay minimum tax at the rate of 1pc on the locally produced oil.

To boost agriculture productivity, the government suggested that withholding tax on import of DAP and CBU condition tractors be reduced from 6pc to 2pc. In addition, it was proposed to reduce withholding tax from 6pc to 1pc on import of certain types of fertilizers.

The government increased the withholding tax limit on income arising from property to Rs300,000 from Rs200,000, which is collected at the rate of 5pc.

It was proposed to levy 5pc withholding tax in respect of payment to non-residents on account of such advertisements as final discharge of tax liability. Advance withholding tax on commission income of travel agents and insurance agents will be collected at the rate of 10pc and treated as final discharge of tax liability.

It was also proposed that withholding tax at the rate of 5pc on commission income of indenting commission agents, advertising agents and yarn agents will be collected as final discharge of tax liability.

The commercial importers are now allowed to import machinery without the payment of advance 6pc withholding tax. To help the newly established companies, it was proposed to allow carry-forward of unadjusted amount of minimum tax for a period of 5 years for adjustment against future tax liability.

It was further proposed to reduce the rates of additional tax for delayed payment of income tax and compensation for delayed payment of refunds to be reduced from 18pc to 12pc, and from 15pc to 6pc.

The government has levied the capital value tax on purchase of shares at the rate of 0.1pc of the value of shares transacted.