- Probably a higher tax burden for those who have a drop in annual income.
- Switching needs an in -depth examination in changes in the right proposed.
- The FBR was necessary to treat the pension as a separate block.
Islamabad: a controversial proposal within the 2025-2026 financial bill to retirement income tax exceeding 10 million rupees per year at a rate of 5% has aroused generalized concerns and criticisms among retirees and tax experts.
Critics argue that the modifications proposed, if they were approved by the Parliament, could inadvertently lead to a higher tax burden for a wide range of retirees, including those with significantly lower annual income and make effectively the taxable switching, The news reported on Saturday.
The switching element needs an in -depth examination in the modifications proposed in the law, because each officer of the higher notes which obtains the maximum limit in advance will have to pay an increase in the amounts of the tax.
Dr. Muhammad Iqbal, former member of the Federal Bureau of Return (FBR), expressed strong reserves, saying: “FBR has made changes to the tax regime applicable to pensions to tax pension income exceeding 10 million rupees in one year, but ended up taxing the income from most pensions that shoot much less rolling of the annual pension at much higher rates”.
At the heart of the debate is the proposed omission of clause 12 of Part I of the second appendix to the income tax order.
Consequently, the retirement income, which has always been part of the salary income given the definition of the salary income provided for in article 12 of the order, and taxable at the rates applicable to salary income.
All that the FBR had to have was to treat the pension as a separate block instead of subject to rates applicable to salary income.
He tried to do so by offering to add a reserve at the end of Table II in division I of part I of the first calendar. This table provides the tax rates applicable to various income slabs, ranging from 1% (which was now proposed up to 1.5% in the office) to a maximum of 35%.
The 35% panel rate is applicable on annual salary income of 4.1 million rupees.
The reserve proposed to be inserted through the financial bill is read as “provided that the case of an individual deriving income only from the pension, the rent, the supplement of the pension or the rent and the switching of the former employer for the tax year, the rate of tax on this annuity or the pension income or the commutation of the pension will be indicated in the following table:”
The following table provides a flat rate of 5% on retirement income exceeding 10 million rupees per year. What the editors of this reserve did not know is that the word “only” used in the reserve made it inapplicable to all retirees who have a source of income other than a pension.
Now, almost all retirees have other sources of income, most often the interests or benefits of the amounts kept in the profit and loss accounts maintained in banks or savings plans.