Karachi, June 28, 2023: The Finance Act, 2023 has introduced a significant amendment to increase the threshold of cash salary payment to Rs32,000.
This amendment, effective from July 1, 2023, allows employers to disburse salaries in cash up to the specified amount. The Federal Board of Revenue (FBR) has approved this increase in the threshold and considers it as admissible expenses for tax purposes.
Previously, salary payments exceeding Rs25,000 per month were not allowed as admissible deductions when computing income from business. However, with the recent amendment, this limit has been raised to Rs32,000 per month. This adjustment provides businesses with greater flexibility in disbursing cash salaries to their employees.
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Experts at PwC A. F. Ferguson Chartered Accountants have acknowledged the importance of this amendment in recognizing the evolving needs of businesses and employees. By increasing the threshold for cash salary payments, the government aims to facilitate smoother operations for employers and ensure greater convenience for employees receiving their salaries in cash.
It is worth noting that while the threshold has been increased, it is important for employers to adhere to other regulatory requirements related to salary payments, such as income tax deductions and reporting obligations. Employers should continue to fulfill their tax obligations and maintain accurate records of salary payments, regardless of the mode of payment.
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This amendment in the Finance Act, 2023 reflects the government’s efforts to streamline taxation policies and create a business-friendly environment. By providing businesses with greater flexibility in cash salary payments, the aim is to support economic growth and enhance the ease of doing business in the country.
Employers and businesses are advised to familiarize themselves with the revised threshold and ensure compliance with relevant tax regulations. It is crucial to stay updated with any further guidelines or clarifications issued by the authorities regarding the implementation of this amendment.
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The enhancement of the cash salary payment threshold to Rs32,000 per month will come into effect on July 1, 2023. Employers are encouraged to review their salary payment processes and make necessary adjustments to accommodate this new threshold while adhering to all applicable tax requirements.
