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Wednesday Nov 13, 2024
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State Minister of Finance Ranjith Siyambalapitiya
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Under mounting pressure, the Government yesterday announced revision to the circular on personal income tax relaxing certain incentives provided for an employee whose monthly income exceeds Rs. 100,000.
As per the revised circular issued by the Inland Revenue Department to exempt non-cash benefits of employees primarily include; company shares, residence, transport and communication facilities provided to an employee. The calculation of an employee’s gains and profits for any month commences on 1 January 2023.
The move came following the Treasury’s Financial Policy Department Director General Dr. Kapila Senanayake’s meeting with trade union leaders and representatives of civil organisations on Tuesday amidst countrywide protests against the new tax regime.
The amounts to be included as benefits to be received or derived by such employee from the employment are specified by the Commissioner General of Inland Revenue (CGIR) in terms of the provisions of the Inland Revenue Act No. 24 of 2017.
The circular to this effect has been issued under the guidance of President Ranil Wickremesinghe who is also the Finance Minister.
The previous circular No. SEC/2022/E/05 issued on 22 December 2022 has been annulled.
Tuesday’s meeting held on the instructions of President’s Secretary Saman Ekanayake, was Chaired by President’s Trade Union Director General Saman Ratnapriya and Dr. Senanayake.
According to a statement from the President’s Media Division on Tuesday, Ratnapriya told the meeting that the new tax policy that is assessed at the time of earning has created difficulties for Government and semi-Government employees, and as a result of the issues they have experienced, they have responded professionally.
Separately, State Minister of Finance Ranjith Siyambalapitiya yesterday confirmed that the Department of Inland Revenue has issued a circular to exempt non-cash benefits of employees’ income from the Pay-As-You-Earn (PAYE) Tax.
“These changes will bring significant relief to the concerned parties,” he added.
For housing, the benefit, which was currently considered as Rs. 20,000 or 12.5% of the total salary for people earning less than Rs. 200,000 and Rs. 40,000 or 12.5% of the salary for people earning over Rs. 200,000, has been revised to 12.5% of the basic salary. The circular has removed the benefit of Rs. 5,000 or 2.5% of the salary for furniture.
As per the revision, the benefit has been changed to Rs. 20,000 for the vehicle, Rs. 10,000 for the driver and Rs. 20,000 for fuel, which was Rs. 50,000 and Rs. 75,000 based on engine capacity below 1800 cc and above 1800 cc respectively.
The fuel allowance was 100% taxable and it has been reduced to 25%.
In addition, the benefit which was considered to be Rs. 25 per km unlimited for the private use of vehicles provided for field duties has been revised to Rs. 25 per km or Rs. 20,000 with the driver and Rs. 30,000 with the driver, whichever is the lesser.
The new amendment treats only 25% of the 100% taxable phone allowance as a benefit.
For concessional loan interests, interest benefit on loans given by employers on subsidised interest is not considered for tax.
