How To Understand The Threshold And Exemption Amount

The starting point and the exemption amount are two concepts related to tax deduction and exemption, which are a tax preference for taxpayers. But in practice, the two are often mixed, but in fact, they are not the same thing.

(1) threshold

The starting point is the starting point for taxing taxable objects, that is, the minimum amount of income to start taxation.

The main feature of the starting point is that when the tax object does not reach the starting point, it does not have to be taxed; when the tax object reaches the starting point, the tax object is taxed in full.

The application of the levy points in value-added tax and business tax is mainly based on value added tax and value-added tax.

(two) exemption amount

The exemption amount, also known as the "deduction of expenses", is the amount of tax exemption from the total amount of the taxable object, that is, the allowable deduction from the total income when the tax basis is determined.

The exemption requirement is to take care of the minimum needs of taxpayers' life, education and so on.

The main feature of the exemption is that when the tax object is lower than the exemption amount, no tax is imposed. When the tax target is higher than the exempted amount, the remaining part is taxed after deducting the exemption amount from the total amount of the tax target.

The exemption amount is more applied in the personal income tax, for example, the exemption amount from wages and salaries is 1600 yuan; the exemption amount from the remuneration for labor remuneration, royalties or royalties is 800 yuan or 20% of the income.

(three) comparison of threshold and exemption amount

Through the above analysis, we can see that the two have similarities and differences.

1. the similarities between them

(1) all two belong to the scope of tax deduction and exemption.

(2) generally, it is aimed at individuals.

(3) when the amount of the taxable object is less than the threshold and the exempted amount, neither of the two will be taxed.

(4) the two are for the purpose of Taxation, not for tax purposes, such as the duty exemption of one ticket in the Customs Tariff below 50 yuan, and the 50 yuan here is not exemption.

This is particularly important.

2. differences between them

(1) when the amount of the tax target is greater than the threshold and the exemption amount, the system of levying points should be taxed for all the taxable objects. The exemption quota system only assesss the taxable object more than the exemption amount.

(2) the differences between the two are different. The former takes care of the low-income group while the latter takes care of all taxpayers.

[case] assuming that there are 3 persons a, B and C, their monthly income is 999 yuan, 1000 yuan and 1001 yuan respectively.

Suppose that 1000 yuan is now the threshold for taxation and the tax rate is 10%.

So, the tax payment of these 3 persons without considering other factors should be:

A income is not taxable because it has not reached the threshold.

The income of B is just the starting point, and it should be taxed in full. The taxable amount is =1000 * 10%=100 (yuan).

The income of C has exceeded the threshold, and the tax should be paid in full. The taxable amount is =1001 * 10%=100.1 (yuan).

Assuming that other conditions remain unchanged, 1000 yuan is exempt from tax and the tax rate is still 10%.

At this time, the tax payment of the 3 party should be:

A's income is within the exemption amount without paying taxes.

The income of B is just part of the exemption and does not need to pay taxes.

If the income of C is more than the amount of exemption, it is necessary to pay taxes, but it should be part of the tax deductible part of the income. The tax payable is (1001-1000) x 10%=0.1 (yuan).

As can be seen from the above example, the same amount is stipulated as the starting point and the exemption amount. It seems that there is no difference in those who earn less than the stipulated amount, but the impact on taxpayers whose income exceeds the prescribed amount is quite different.