However, they cannot be treated as deductible income
Finance Minister Namgay Tshering has clarified that interest waivers provided to people as part of the monetary measure to tackle the Covid-19 situation will not be taxed.
Speaking at the meet the press session yesterday, the finance minister said that there have been queries mainly from house owners on the issue.
“The interest waivers can’t be treated as deductible expenses while filing tax returns by individuals,” he said.
“The interest waivers were granted as the Druk Gyalpo’s kidu. Interest was waived for all individuals and business entities.”
Lyonpo Namgay Tshering said that the Covid-19 has affected the government’s revenue. “We couldn’t realise the domestic revenue as expected last year. It has gone down by 15 percent from the previous fiscal year.”
According to the Income Tax Rules 2017, interest on loans shall be allowed as deductions subject to certain conditions.
For instance, interests on a loan are deductible if it is taken from a recognised financial institution and within the maximum limit of debt equity ratio of 3:1. The rules also state that interest on loans are deductible if the loan is taken in the name of the companies or business and for the purpose of the said business.
The interest waivers for the period of nine months (100 percent waiver from July to September and 50 percent waiver from October 2020 to March 2021) is estimated at Nu 7.5 billion (B). The fund will be fully granted from the National Resilience Fund.
The Department of Revenue and Customs (DRC) extended the deadline for payment of Personal Income Tax (PIT) from February 28 to March 31 in view of the Covid-19 situation.
The DRC has also extended the deadline for payment of Business Income Tax (BIT) and Corporate Income Tax (CIT) to April 30.
The DRC states that taxpayers have faced challenges in the submission of tax returns.
The benefits of interest waivers also trickled down to many tenants as many landlords waived house rents, either partially or fully during the difficult time.
Some tenants said that the rent waiver was helpful, as their salary was reduced due to the pandemic.