Should every individual need to open an income tax file?
As per the provisions of the Inland Revenue Act No. 24 of 2017, every person who has a taxable income shall file a return of income.
However, a resident individual who only has income from employment that is subject to PAYE will not be required to file a return for that year of assessment (section 94(1)(a)(ii).
Example 1
An individual has following income for year of assessment 2018/19.
Income from a Business | Rs. 300,000 |
Interest income from a fixed deposit (which was subjected to WHT) | Rs.200,000 |
Employment income (Primary Employment) | Rs.1,000,000 |
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Accordingly, the taxable income of such individual shall be computed as follows. |
|
Assessable Income from business | Rs.300,000 |
Assessable Income from employment | Rs.1,000,000 |
Assessable Income from Investment (WHT deducted on Interest is a final tax) | Nil |
Assessable income | Rs.1,300,000 |
Less: Tax Reliefs |
|
Under item 2(a) of the fifth schedule | Rs.(500,000) |
Under item 2(b) of the fifth schedule (Employment Income) | Rs.(700,000) |
Taxable Income | Rs.100,000 |
He has to pay tax on Rs.100,000 and submit a return of income for Y/A 2018/19.
Example 2
An individual has following income for year of assessment 2018/19.
Income from a Business | Rs.200,000 |
Interest income from a fixed deposit (which was subjected to WHT) | Rs.200,000 |
Employment income (Primary Employment) | Rs.800,000 |
Accordingly, the taxable income of such individual shall be computed as follows. |
|
Assessable Income from business | Rs.200,000 |
Assessable Income from employment | Rs.800,000 |
Assessable Income from Investment (WHT deducted on Interest is a final tax) | Nil |
Assessable income | Rs.1,000,000 |
Less: Tax Reliefs |
|
Under item 2(a) of the fifth schedule | Rs.(500,000) |
Under item 2(b) of the fifth schedule (Employment Income) | Rs.(700,000) |
Taxable Income | NIL |
He does not have a taxable income and submision of a return of income is not required.
Accordingly, it is clear that, all the individuals are not required to file the income tax return. i.e if particular individual has no taxable income or his taxable income comprised only the employment income which is subjected to PAYE , such individual is not required to file the income tax return.
