Should we pay tax?
Despite COVID-19 as we work from home, we are indeed pleasure updating you on your tax liability and compliance requirements to avoid your ambiguity on your tax liability. Even though every organization is in the standstill temporary to prevent spreading COVID-19, we have to keep you informed about these tax changes and its compliance requirements. These changes are effective from 1 January 2020 and subject to the formal amendment to the Inland Revenue Act No. 24 of 2017, to be passed in Parliament.
1. Should everyone pay tax?
No. If someone earns an annual income of Rs 3,000,0000/- per annum or above, yes that person should liable to pay tax.
2. Is it from one source of income or several?
No. if your aggregate income goes more than Rs 3,000,000/-, you are liable to pay your tax.
3. Is there a tax-free allowance?
Yes, up to Rs 3,000,000/- p.a is your tax-free income. Thereafter, your income is taxed at progressive rates.
4. I am an employee working for an organization, should I pay tax?
If that is the case, as PAYE (Pay As You Earn) tax system was abolished, thus, you are also now falling to a category similar to a self-employed person and accordingly your tax computation is prepared.
5. Should I register for tax?
Yes. It requires you to obtain a tax identification number (TIN) if your monthly employment income is more than Rs 250,000/- (Rs 3,000,000/- p.a)
6. What is employment income means?
Employment income means it is not only your salary. It includes bonus and other perks, etc.
7. Should I pay tax on other income other than salary?
Yes, your other income such as interest income, commission, etc. is falling into taxable income.
8. My employment income is less than Rs 250,000/- pm, but I have other income. Should I pay tax?
Yes, if your total income is more Rs 3,000,000/- per annum, you are liable to pay income tax.
9. Can I deduct my personal expenditure?
Yes, you can deduct up to Rs 1,200,000/- (but not all your expenses). Such as Insurance, housing loan interest, educational expenses, EPF/ETF, etc.
10. Should I pay tax annually?
Yes, it is. But Inland Revenue Department (IRD) collects your annual tax on a quarterly basis (in advance). This is called self-assessment tax payment.
11. What is self-assessment tax means?
It means you will have to estimate your annual income tax liability before the beginning of the year of assessment and afterwards, that estimated annual tax liability shall be paid in four quarters (Q1, Q2, Q3 and Q4).
12. What is the year of assessment means?
It is not the calendar year. It is twelve months falling between the 1st of April to next year on the 31st of March.
13. How do I know my tax liability?
It depends on your income. The tax liability is calculated based on progressive rates. Such as
|Tax-free allowance up to Rs 3,000,000||Nil|
|1st – Rs 3,000,000||6%|
|2nd – Rs 3,000,000||12%|
|On the balance||18%|
SCB Corporate and Corporate Doctors (Pvt) Ltd, a firm of Chartered Accountants specialized in business support services, especially for SMEs. Our service domain includes tax advisory, accounting, audit, business incorporation and business advisory. And we are a member 3e Accounting network in Singapore.
Our web: www.scbcorporate.com