PkRevenue.com – The Institute of Chartered Accountants of Pakistan (ICAP) has put forth a significant proposal for the upcoming budget of 2024-25, suggesting an increase in the income threshold for tax exemption on salaries.
The ICAP recommends raising this threshold from the current Rs 600,000 to Rs 1 million, a move aimed at providing substantial relief to salaried individuals amidst challenging economic conditions.
In its detailed budget proposals, ICAP highlighted the necessity for this adjustment, citing the present economic climate as a critical factor. The institute emphasized that the existing tax-free threshold of Rs 600,000 under Division 1 of Part I of the First Schedule of the Income Tax Ordinance, 2001, is outdated and fails to reflect the current cost of living and economic realities.
Currently, both salaried and non-salaried individuals are subject to a 0% tax rate on incomes up to Rs 600,000. ICAP’s recommendation seeks to differentiate between these groups, proposing a revised threshold of Rs 1 million for salaried individuals and Rs 750,000 for non-salaried individuals. This distinction aims to address the specific financial pressures faced by these segments more accurately.
“The proposed adjustment aims to provide relief to taxpayers by allowing a higher threshold of income to be taxed at a 0% rate, thus reducing the tax burden on low-income individuals and promoting fairness in taxation,” stated ICAP in their proposal. They further explained that this measure is crucial for ensuring that tax policies are responsive to the needs of taxpayers and reflective of the prevailing economic realities.
ICAP’s proposal underscores the importance of equity in taxation. By increasing the tax-free threshold, more individuals will benefit from having a larger portion of their income exempt from tax, thereby enhancing their financial well-being. This move is seen as essential for promoting social justice and supporting those with lower incomes, demonstrating the government’s commitment to fostering economic stability and fairness.
The institute articulated that this recommendation is not just about tax relief but also about aligning tax policies with the current economic context. “This measure is essential for ensuring that tax policies are responsive to the needs of taxpayers and reflective of prevailing economic realities,” ICAP asserted.
The proposed increase in the tax-free threshold is expected to alleviate the financial strain on low-income earners, providing them with much-needed relief. As the government deliberates on the budget for 2024-25, ICAP’s recommendation stands out as a potential step towards a more equitable and just tax system, ensuring that the financial burdens are shared more fairly across different income groups.
