Income tax revision to benefit low income earners

by Lalin Fernandopulle

The income tax exemption up to Rs. 300,000 in the 2007 Budget will be an immense benefit to lower and middle income earners, pensioners and senior citizens in the country, Commissioner General, Inland Revenue Department, A. Wijepala said.

Wijepala said all banks and financial institutions have been instructed to implement the revised tax rates from April 1, 2007.

According to the revised tax schedule on bank interest there will be no tax imposed on interest less than Rs. 300,000 but if it is above that limit but less than Rs. 600,000 a 5 percent tax will imposed.

A 10 percent tax will be imposed on interest exceeding Rs. 600,000.

He said prior to the Budget deposit holders had to pay a 10 percent tax on their interest if it exceeded Rs. 100,000 per annum.

The 2007 Budget has given them the Rs. 300,000 tax free allowance where they will be taxed only if their interest exceeds Rs. 300,000 per annum.

Wijepala said the tax exemption up to Rs. 500,000 on retirement benefits proposed in the Budget is a big incentive to employees who have served for 20 years and more. They will be taxed only if their retirement benefits exceed Rs. 500,000.

The VAT exemption on electricity, jewellery industry and the construction sector will be a boost to industrial growth in the country.

Wijepala said his department will achieve the Rs. 260 billion tax revenue target this year after 20 years and would go for the Rs. 307 billion target next year.

With regard to defaulters, he said, they will not be questioned on their previous bank accounts and assets but will have to pay a reasonable amount for the current year.

Only 2 percent of the population in the country pay taxes whereas it should be 5 percent.

Of the nearly 100,000 people liable to pay tax in the Colombo metropolitan only 40,000 are in the net.

The Inland Revenue Department will net the 60,000 avoiding taxes by next year, he said.

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