The federal govt is likely to increase the tax rate from existing 35 % to 40 percent in the budget 2011-12 on income earned by banks making investment in government securities, official sources informed here on Wednesday.
Similarly, reduction in customs duty by 10 % to 20 % on import of new cars and motorcycles is also expected in the budget 2011-12. Import of auto parts localisation of which have been achieved in the country would attract higher customs duty, official sources added. Customs duty on import of old and used cars, buses, tractors, trucks and vans is also under active consideration keeping in view the proposal submitted by the Ministry of Commerce.
Currently only the banks are in the market to make major investment in the government securities in the absence of other major players and making huge profits and the government is considering taxing their income with higher tax rate in the budget, official sources informed.
It has also been learnt that all holders of commercial and industrial electricity and gas connections will be obliged to file tax returns just like motor vehicle owners of 1000cc engine capacity. This condition would be applicable on those industrial and commercial connection holders who would be paying a bill of at least Rs one million or above per year.
This would not only help document their business activity, but also realise actual tax from them, when they would be filing their income tax returns and would be submitting their total income and expenditures details, the sources explained.
The partial income tax exemption allowed to the researchers and teachers in the former prime minister Shaukt Aziz’s government is also likely to be withdrawn in the budget as the authorities strongly feel that now the level of income has gone up and they should face similar tax treatment like other taxpayers.
Sources informed that the government would introduce three rates of general sales tax ranging between 0 percent, 5 percent and 17 percent and now the tax authorities are finalising the classification of goods to be placed in these three rates and it is expected that some food items and non-essential medicines would be placed in the head of 5.0 percent general sales tax.
Four out of six sectors currently in final tax regime (FTR) will move from presumptive tax regime to declaration tax regime whereby tax returns will be required to be filed from tax year FY11. Interest or profit earned by individuals on savings and various other debt instruments will remain and small businesses will remain within the final tax regime.
Exporters, commercial importers, contractors and property income will move from FTR to declaration tax regime. However, all of them will remain under the ambit of 1.0 percent minimum tax regime. Exporters, however, will continue to enjoy 100 percent rebate of tax in the first year - with 20 percent reduction in the rebate every year. From year six the rebate amount will be zero and exporters will be required to pay normal tax.
The exemption limit for income tax may be raised from Rs 300,000 to Rs 350,000 on account of inflation. However, no change in the present tax table is contemplated. The carryover tax period of minimum tax chargeable at one percent of gross annual turnover in loss cases could be extended from three to five years.