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Message: <blockquote data-quote="Dr.Droopy" data-source="post: 27787042" data-attributes="member: 368200">2.1 Income TaxIncome Tax revenue, in nominal terms, declined significantly by 37.3 percent or Rs. 159.5 billion to Rs. 268.2 billion in 2020 from Rs. 427.7 billion in 2019 owing to the revision of tax rates, thresholds and slabs and the impact of the pandemic. This marked a decline in income tax revenue to GDP ratio to 1.8 percent in 2020 from 3.0 percent in 2019. Revenue from income tax increased by 12.6 percent to Rs. 302.1 billion in 2021 from Rs. 268.2 billion in 2020. However, income tax revenue to GDP ratio remains low at 1.8 percent in 2021.<ol> <li data-xf-list-type="ol">a) Personal Income Tax (PIT)</li> </ol>Under the tax reforms implemented, personal relief of Rs. 500,000 and employment relief of Rs. 700,000 (totalling to a relief of Rs. 1.2 million) was increased to Rs. 3 million effective from January 1, 2020. An expenditure relief up to a total sum of Rs. 1.2 million was introduced and expenses incurred during a year of assessment could be deducted as relief in arriving at the taxable income. Such expenses include health expenditure and educational expenditure incurred locally, interest paid on housing loans, contributions made to a pension scheme (other than under employer or on behalf of employer) and expenditure incurred for the purchase of equity or security (includes treasury securities, listed shares and listed financial instruments). In addition, tax slabs on taxable income were increased from Rs. 600,000 to Rs. 3 million and the maximum personal income tax rate was reduced from 24 percent to 18 percent.The high tax exemption threshold and the expenditure relief together with the low tax rates have impacted the revenue performance in 2020 and 2021. Hence, revising PIT rates progressively would raise PIT revenue considerably. In consideration of the above, the following proposals are made.<ol> <li data-xf-list-type="ol">Reduction of the personal relief from Rs. 3 million to Rs. 1.8 million effective from October 1, 2022.</li> <li data-xf-list-type="ol">Revision of Personal Income Tax Rates effective from October 1, 2022 as detailed in the table below:</li> </ol><table style='width: 100%'><tr><td>Taxable Income (Rs.)</td><td>Rate (%)</td></tr><tr><td>First 1.2 million</td><td>4</td></tr><tr><td>Next 1.2 million</td><td>8</td></tr><tr><td>Next 1.2 million</td><td>12</td></tr><tr><td>Next 1.2 million</td><td>16</td></tr><tr><td>Next 1.2 million</td><td>20</td></tr><tr><td>Next 1.2 million</td><td>24</td></tr><tr><td>Next 1.2 million</td><td>28</td></tr><tr><td>On the balance</td><td>32</td></tr></table>ඉවරයි නේද පුතා ලා ...........</blockquote>

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