No tax exemption on cash crop income says FM

During the National Assembly’s question hour on May 16, finance minister Namgay Dorji said the government would not be able to exempt cash crop income from tax because it would create two rules and disrupt governance.

He was responding to a query raised by Samtse’s Dophuchen Tading MP, Tek Bahadur Subba, who said that many taxpayers benefitted when the government revised the 2001 Income Tax Act last year and increased the personal income tax exemption slab from Nu 100,000 to Nu 200,000. “If government could exempt income tax from cash crop, it will help promote sustainable rural livelihood,” Bahadur Subba said.

Lyonpo Namgay Dorji said income tax is an annual charge levied on both earned income and unearned income like dividend, interest and rent. “It is not this government who imposed the tax and people have been paying income tax since 2001 according to the Income Tax Act of the Kingdom of Bhutan 2001,” the minister said. “The Act states income from cash crop means income from apple, orange and cardamom and that the government may include other cash crops from time to time.”

The minister said that 30 percent of cash crop income is allowed as a deduction to meet cost incurred to secure the income. For example, if a person sold Nu 300,000 worth of cash crop, after a 30 percent deduction income would be Nu 200,000, which is not liable to tax. But any income beyond Nu 200,000 is taxable.

The minister said that Under Part III, Chapter 3 of the Act, there are six income groups liable to tax like income from salary, income from real property, income from dividend, income from interest, income from cash crop and income from other sources.

The government waived off tax on interest earned from fixed deposits, which is good for both individual depositors and banks, the minister said.

According to the minister, 176 people were imposed income tax from cash crop of Nu 8.8 million in 2008. In 2010, the number decreased to 158 people and Nu. 9.6 million was collected as tax on cash crop income.

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