term TD1 is an abbreviation for Tax Declaration Form 1, under
the tax rules of Trinidad and Tobago. Tax laws require that
all employees submit an approved TD1 to their employers.
Only the Board of Inland Revenue can approve a TD1, and it
serves to vet the claims of the taxpayer for tax deductions.
The onus is on the employer to secure from the employee such
an approved declaration.
There has been more than a little confusion about the removal
of certain claims for income year 2006, and what can still
be claimed on an approved TD1. We will look at some of these
n In terms of individuals who are resident: pension and annuity
contributions up to TT$12,000 are still a valid claim for
2006 income deductions. Claims for National Insurances (NIS)
contributions are also lumped into that $12,000 figure.
n The total amount of contribution that can be claimed from
a retiree, who no longer pays NIS, is $12,000. For people
who are still paying NIS, the NIS percentage is subtracted
from the $12,000 maximum.
n Many retirees fail to recognise that their pension cheques
constitute emolument income, and they can still claim a tax
shelter of $12,000 for 2006, and thus reduce the amount of
taxes being deducted from their pension.
n If the gross amount of pension is less than $60,000, then
the individual will not be paying any taxes.
n Retirees who still pay taxes, the tax benefit of contributing
$1,000 per month into a new annuity, that will mature at age
70, or say, five years down the road, is compounded by the
relatively high rates of investment returns that can potentially
be earned from available annuity plans.
Based on experience, it is safe to say that retirees who consume
their entire pension cheques each month will need recourse
to a second source of income within five years of the start
This is easy to see, if one examines the price of the basket
of food, from both the market and the grocery, two years ago,
against todays prices.
Lump sums set aside, whether gratuity or savings, are generally
consumed on big ticket items, and are seldom converted into
a stream of income to supplement the pension cheque.
If you are unable to save from the pension cheque, you will
need to convert the lump sums into structured pension plans.
Nowadays, the average number of years spent in retirement
is 2025, and thats a long time to live off the
same pension cheque.
The other claim that remains available is for alimony, up
to 100 per cent of payments.
In order to claim alimony payments you will need to take the
court order as well as evidence of payments to the BIR officer.
In terms of annuity contributions you will have to take the
approved policy pageit is usually safer to take the
whole policy contract as well as an official statement of
contributions made in the past year. This statement is requested
as evidence that the annuity plan is not dormant, and prevents
the taxpayer from exploiting the tax benefit.
In terms of pension plan contributions, the pay slip tends
to be sufficient evidence of contributions.
Of course, all individuals now have a single tax rate of 25
per cent on chargeable income. Chargeable income is calculated
by subtracting the personal allowance, annuity / pension /
NIS, and alimony from gross income.
To file Tax Returns you will need the TD4 Certificate. This
declaration form is issued by the employer and is due on February
Continued next week