In this article, we will discuss the key highlights and implications of the 2022 budget, including changes to tax deductible allowances, the impact on different sectors of the economy, and how individuals and businesses can best prepare for the changes.
Section 1: Basic Threshold Increases
One of the more positive aspects of the 2022 budget is the increase in basic thresholds for salaried individuals and businesses. The threshold for salaried individuals has been raised to 1.2 million rupees, while the threshold for businesses and Association of Persons (AOPs) has been raised to 0.6 million rupees.
This means that individuals and businesses earning below these thresholds will not be liable to pay income tax. This is a welcome relief for many, especially given the current economic conditions and the impact of the COVID-19 pandemic on the economy.
Section 2: Changes to Tax Deductible Allowances
While there are some positive aspects of the 2022 budget, there are also some changes that will have a negative impact on certain sectors of the economy. One such change is the abolition of certain tax deductible allowances.
These include profit on debt, tax credit on investment in shares or health insurance premium, and pension fund. These allowances were previously available to taxpayers, but will no longer be applicable under the new budget.
This will have an impact on individuals and businesses that previously relied on these allowances to reduce their tax liability. It may also discourage investment in certain sectors, such as the stock market, which could have a negative impact on the overall economy.
Section 3: Impact on Different Sectors of the Economy
The 2022 budget will have different implications for different sectors of the economy. For example, the increase in basic thresholds will benefit lower income individuals and small businesses, while the abolition of certain tax deductible allowances will have a negative impact on those who previously relied on them.
The budget also includes changes to the taxation of the real estate sector, which is expected to generate additional revenue for the government. However, it may also discourage investment in the sector, which could have a negative impact on the construction industry and related businesses.
Section 4: Preparing for the Changes
Individuals and businesses will need to prepare for the changes brought about by the 2022 budget. This includes understanding the new thresholds and how they apply to different income levels, as well as considering alternative investment options in light of the abolition of certain tax deductible allowances.
It is also important to consult with a tax expert or accountant to ensure compliance with the new regulations and to take advantage of any available tax incentives.
Conclusion
Pakistan’s 2022 budget brings both positive and negative changes for individuals and businesses across the country. While the increase in basic thresholds is a welcome relief for many, the abolition of certain tax deductible allowances and changes to the taxation of the real estate sector will have a negative impact on certain sectors of the economy.
It is important for individuals and businesses to understand the implications of these changes and to take steps to prepare for them, including consulting with a tax expert or accountant. By doing so, they can ensure compliance with the new regulations and minimize the impact of the changes on their financial well-being.
