ISLAMABAD  -  The Federal Board of Revenue (FBR) has recommended the government to reduce the minimum threshold of annual income tax slab down from Rs1.2 million in the upcoming mini budget to generate additional revenue.

“Increasing the minimum threshold of annual income tax to Rs1.2 million from Rs400,000 has caused a shortfall of Rs25 billion in tax collection during six months of the current fiscal year,” said an official of the FBR. He further said that FBR has recommended the government to revise the minimum threshold of annual income tax slab down from Rs1.2 million to Rs800, 000.

The downward revision in minimum threshold of annual income tax slab is one of the reasons behind massive shortfall in tax collection during first six months (July to December) of the ongoing fiscal year. The FBR had faced tax collection shortfall of Rs158 billion during first six months of the ongoing fiscal year. The FBR had collected Rs1894 billion during six months as against the target of Rs2052 billion.

The government had decided to present the mini budget in National Assembly on January 23 to bridge the tax collection shortfall. This would be the second mini budget of PTI led government in its five months tenure. The government is planning to take some additional tax measures of around Rs150 billion in the upcoming mini budget.

It is worth mentioning here that the previous government had granted exemption of income ceiling up to Rs1.2 million from Rs400,000 per annum.

For an annual salary not exceeding Rs 0.4 million, no tax will be applied, while for those with annual salary between Rs 400,000-Rs 800,000, will have to pay Rs 1,000 in tax. Meanwhile, for those with annual earning in Rs 800,000-Rs 1,20,0000 annual salary, will have to pay Rs 2,000 in tax. Whereas, for those earning Rs1.2 million to 2.4 million rupees, five per cent additional tax will be applied, as per the new amendment.

For those earning Rs 2.4 million to 4.8 million rupees annually will be taxed Rs 60,000 in addition to 10pc additional tax. Furthermore, those earning more than Rs 4.8 million a year, a fixed tax of Rs 300,000 is payable in addition to 15pc of the salary amount above this limit.