The government has proposed to increase the Personal Income Tax (PIT) ceiling from Nu 200,000 to Nu 3000,000.
Finance Minister Namgay Tshering presented the bill at the National Assembly to amend Income Tax Act 2001 and revised Taxes and levies Act 2016 on Thursday.
Lyonpo said that the objective of amending the bill was to narrow the income gap of the people. He said that with the major taxation reforms will benefit the low income group.
The government proposed to increase PIT slab from Nu 200,000 to Nu 300,000 presenting the Income Tax amendment bill 2020. Current PIT ceiling is Nu 200,000.
This means people who earn monthly salary income of more than Nu 25,000 has to pay the income tax.
Incomes of Nu 300,000 to Nu 400,000 will have to pay 10% tax of the amount. Income for Nu 400,000 to 650,000 will have to pay Nu 10,000 plus 15% of the amount.
The highest slab is if income exceeds Nu 1.5mn the tax rate will be Nu 242,499 plus 30% of the amount by which the total net taxable income exceeds Nu 1.5mn
Lyonpo said that they want to amend the bill because with the new pay revision, it is unfair to keep tax slab unchanged.
The government has also proposed to exempt tax on pension income and income from cash crops.
The allowable deductions for education expenses for students will be actual cost of the education expenses or Nu 250, 000, whichever is lower as prescribed in the rules.
The allowable deductions for education expenses will be Nu 20,000 per child in the absence of supporting documents.
It is also proposed that one time income tax of 20% on all lottery winning prizes will be charged equal to or more than Nu 5,000.
PIT rate for the highest income bracket is increased from 25% to 30% along with 10% surcharge on PIT equal to or more than Nu 1mn. Surcharge means additional tax levied on tax payable or tax paid for an income year.
The proposed amendment is going to benefit 21,071 tax payers, 377 private companies, 12,571 business entities and 122 pensioners beside farmers engaged in growing cash crops.
The government proposed to revised corporate income tax (CIT) from 30% to 25% for companies other than state enterprises.
The Good Governance Committee will look into the provisions of the bill and present it to the parliament on February 7.
Dechen Dolkar from Thimphu