Income tax exemption on medical allowance to be restored

ISLAMABAD: Finance Minister Shaukat Tarin has decided that the income tax exemption on medical allowance for employees will be restored and he will make an announcement to this effect in his windup speech to the National Assembly today (Friday).

The government will throw light on the alternative plans to fetch Rs 120 billion in the budget as the Point of Sale (POS) for branded retailers and broadening of tax base would be focused to generate additional revenues. Tarin rejected some proposals to increase the tax rate on beverages and cigarettes.

The government is going to propose omitting clause (139), Part-I of the Second Schedule (Exemption) of the Income Tax Ordinance 2001. Under this clause, exemption is available to any medical allowance received by an employee not exceeding 10 percent of the basic salary of the employee for reimbursement of actual expenses with proof. The only benefit of medical reimbursement or free medical facility left with the salaried class is being withdrawn by the government. The government had proposed income tax on their expenditures on medical treatment, various allowances and their savings in provident and pension funds. The government has also decided to slash tax on flavoured milk and other food commodities in the windup speech of the minister.