On 8th May, 2017, the Governor General assented to Act No. 1 of 2017, the Income Tax (Amendment) Act, 2017. The Act came into force on 12th May, 2017, when it was published in the Government Gazette. The Act has retroactive effect from 1st January, 2017.
The main purpose of the Act is to include a new paragraph (ff) to section 25 of the Income Tax Act (“the Principal Act”). Section 25 of the Principal Act allows for the exemption of income listed out in the section from being chargeable to income tax.
The new paragraph (ff) exempts from being assessed in the income of a person any (i) pension income payable to a member of an approved pension fund in accordance with section 48 of the Principal Act; (ii) income accrued to a person because of his years of employment by way of pension; and (iii) income accrued to a person because of his employment by way of a lump sum.
The amendment makes good the promise by the Government, as contained in the budget speech of the Honourable Minister of Finance and Prime Minister, to exempt pension income and income accruing to employees from years of service from being chargeable to income tax.
Section 48 of the Principal Act sets out the requirements that pension fund rules must meet if they are to qualify for registration as an approved pension fund under the Principal Act.