Finance: The government’s tax revision proposal confirms that rumours of a vehicle tax revision are untrue.
But the basic exemption limit of the Personal Income Tax (PIT) is being proposed to be revised from Nu 100,000 to Nu 200,000, as pledged by the government.
The education expense limit for the PIT is also proposed to be revised from Nu 50,000 to Nu 150,000 a child per annum.
The existing allowable deduction for education expense is Nu 50,000 or the actual cost, whichever is lower. Should Parliament approve the proposal, the same clause would apply on the Nu 150,000 allowable deduction.
A finance ministry official said the basic exemption limit of PIT was never revised since the PIT was introduced in 2002.
The basic exemption limit, the official said, is to cover the minimum cost of living. “It is important for the people to meet the rising cost,” the official added. “So is the cost of education increasing.”
So inflation has to be taken into account. Since 2002 until last year, average inflation was around 5.4 percent. If the year-on-year inflation is taken into account, the basic exemption limit should have reached Nu 237,084.
In most countries, the basic exemption limit is revised annually, adjusting for annual inflation.
However, if the net taxable income exceeds Nu 200,000 but does not exceed Nu 250,000, a tax of 10 percent is levied on the amount by which the net taxable income exceeds Nu 200,000.
Similarly, for net taxable income between Nu 250,000 and 500,000, the tax rate would be Nu 5,000 plus 15 percent of the amount by which taxable income exceeds Nu 250,000.
For net taxable income between Nu 50,000 and Nu 1 million (M), a tax of Nu 42,500 plus 20 percent rate would be levied.
For income exceeding Nu 1M, the proposed tax is Nu 142,500 plus 25 percent in a similar manner.
Royalty and mineral rent
Royalty and mineral rent, which currently is levied a fixed amount based on variety is now being proposed for ad valorem rate on the floor price.
For instance, the existing royalty for export of coal is Nu 100 per metric tonne (MT) and the mineral rent is Nu 10/MT. The royalty is proposed to be revised to 7 percent of the floor price established at exit point or the invoiced value, whichever is higher. The Department of Geology and Mines will fix the minimum floor.
As for the mineral rent, the proposed rate is 10 percent of the projected export royalty or domestic royalty whichever is higher. This is applied to all minerals irrespective of their diversity.
However, the revision will apply only for the exports. The existing royalty and rent is retained for domestic purposes.
Sales tax and customs duty
To encourage reading habits and make books affordable to all, no customs duty and sales tax will be levied on books.
Currently, books imported from countries other than India are levied with a 20 percent customs duty and five percent sales tax. Only sales tax was applicable for books imported from India.
Similar exemptions would also be applied on laboratory and diagnostic reagents, on which a customs duty of 10 percent applies currently.
The official said since these reagents are used for social causes, exemption is necessary.
These revisions will be done by amending the tax schedule on the Bhutan Trade classification.