Revised tax process better option for tax-paying employees
The government has given a better option for tax-paying employees by introducing the Advance Personal Income Tax (APIT) following the scrapping of Pay-As You-Earn (PAYE) tax and other withholding taxes (WHT).
It will ease the hassle of filling tax returns, a time consuming procedure of the Inland Revenue Department (IRD).
This revised version of taxation has been proposed by the Finance Ministry on January 31, 2020 and March 5, 2020, making amendments to the Inland Revenue Act, No. 24 of 2017 (IRA), the IRD announced.
In a public notice the IRD divulged that these tax revisions were imposed with retrospective effect from January 1, 2020 pending formal amendments being made to the Act.
The tax-free threshold for all public and private sector employees increased to Rs. 250,000 from Rs. 100,000 per month. Anything above that will be taxed at progressive rates of 6 and 12 per cent for every tax slab of Rs. 250,000 and the balance at 18 per cent).
This new tax version has provided tax-paying employees an option to decide on self-assessment income tax payment or request the employer to deduct the APIT from his salary, Senior Partner of Gajma & Co. N.R. Gajendran told the Business Times.
Accordingly, the APIT deduction from the salary monthly or to levy the relevant tax rate from the payee quarterly under the self- assessment scheme is allowed in accordance with an IRD directive, he said.
He said that this will be a relief for tax payers as they have the option to request the employer to deduct the tax from their salary.
Though PAYE was abolished, it had been continued administratively up to now when APIT was introduced, a senior government official fully conversant with the procedure told the Business Times.
However the enactment of these tax amendments in parliament is still pending making the matters more complicated for taxpayers and there will be confusion when recovering tax dues, Mr. Gajendran pointed out.
The amendment bill should be presented in parliament before 30 days of the cabinet approval and after 14 days from its publication in the gazette in terms of Article 78 of the Constitution.
The changes proposed in the amendments include the removal of the requirement for deduction of Withholding Tax (WHT) (including PAYE) on any payment which is due and payable to resident persons by any withholding agents (WHA).