The Institute of Chartered Accountants of Pakistan (ICAP) has proposed a significant change for the upcoming 2024-25 budget: raising the tax exemption threshold for salaried individuals.
Current Tax Exemption Limit Considered Outdated
ICAP argues that the current tax-free income limit of Rs 600,000, as stipulated by the Income Tax Ordinance, 2001, is insufficient in today’s economic climate. The rising cost of living significantly impacts individuals within this income bracket.
Proposal for Differentiated Thresholds
ICAP recommends a revised tax exemption threshold of Rs 1 million for salaried individuals and Rs 750,000 for non-salaried individuals. This distinction acknowledges the different financial pressures faced by these groups.
Promoting Fairness and Social Justice
By raising the exemption threshold, ICAP aims to:
- Reduce the tax burden on low-income earners.
- Allow individuals to keep a larger portion of their income tax-free.
- Promote a more equitable and just tax system.
- Foster economic stability by supporting those with lower incomes.
Aligning Tax Policy with Economic Reality
ICAP emphasizes that this proposal goes beyond mere tax relief. It seeks to align tax policies with the current economic situation, ensuring the system is responsive to the needs of taxpayers.
Expected Benefits
The proposed increase is expected to:
- Provide much-needed financial relief to salaried individuals.
- Encourage a fairer distribution of the tax burden across different income brackets.
ICAP’s proposal presents a strong case for a more equitable and responsive tax system in Pakistan. By increasing the tax-free threshold, the government can alleviate the financial strain on low-income earners and promote social justice.
