Is the revision timely?
As per the Income Tax Act of the Kingdom of Bhutan 2001, all Bhutanese individuals having an annually income of exceeding Nu.100, 000 are liable for Personal Income Tax (PIT).
Those earning an income between Nu.100, 001-250, 000 are charged with 10 percent tax and the slab keeps increasing as the income amount increases.
Finance Minister said that the present tax slab was agreed upon in 2001 and that it has been almost 14 years since it was last revised.
He said given the economic condition and international rules and regulation, it is time to look into it and the tax slabs in our neighboring country of India gets revised every financial year .
The minister also proposed to exempt taxes on import of machinery for manufacturing medicinal herbs and books. The decision will be made after a thorough discussion by the committee in coming weeks.
The basic exemption limit of the Personal Income Tax (PIT) is being proposed to be revised from Nu 100,000 to Nu 200, 000, as pledged by the government during the election period 2013.
The education expense limited for the PIT is also proposed to be revised from Nu.50, 000 to Nu.150, 000 a child per annum. The existing allowable deduction for education expense is Nu.50, 000 or the actual cost, whichever is lower. As the Parliament approve the proposal, the same clause would apply on the Nu.150, 000 allowable deductions.
In most countries, the basic exemption limit is revised annually, adjusting for annual inflation.
However, if the next taxable income exceeds Nu.200, 000 but does not exceed Nu. 250,000, a tax of 10 percent is levied on the amount by which the net taxable income exceeds Nu.200, 000.
Similarly, for the net taxable income between Nu.250, 000 and Nu.500, 000, the tax rate would be Nu.5, 000 plus 15 percent of the amount by which taxable income exceeds Nu.250, 000. For net taxable, income between Nu.50, 000 and Nu.1m, a tax of Nu.42, 500 plus 20 percent rate would be levied. For income exceeding Nu.1m, the proposed tax is Nu.142, 200 plus 25 percent in a similar manner.
However, with the tax slab, the government will cost Nu.484m annually and a total of 31,692 people who are earning more than Nu.100, 000 but less than earning Nu.200, 000 will become PIT tax free.
As committed by the government the revision of the personal income tax seems to provide a relief to nearly 32.000 tax payers hard earned income and will shorten the gap between the have and have-nots in our society. As such the revision is timely and most appropriate as the government has about two years to go for polls in 2018.