Salaried, self-employed taxpayers to cough up Rs 225 billion

Islamabad:

The federal government increased the tax rate for both salaried and non-salaried taxpayers in the federal budget for the next fiscal year, imposing a cumulative burden of Rs75 billion on salaried and Rs150 billion on non-salaried individuals.

The budget proposed a maximum tax rate of 35% for employees and 45% for the self-employed. The minimum threshold of Rs 50,000 monthly income had been retained for both categories, while the number of tax slabs will also remain at 6.

Salaried persons in the first tax slab with income up to Rs 600,000 per annum or Rs 50,000 per month had been exempted from income tax. In the second tax slab, income tax for those earning between 600,000 and 1.2 million a year will be 5%.

This 5% tax, according to the Finance bill, will be charged on the amount after deducting Rs 600,000 from the total annual income. Therefore, in this category, the monthly income tax will increase from Rs 1,250 per month during the current financial year to Rs 2,500 per month in the next financial year.

Under the third slab, which covered people with an annual income of Rs 1.2 to 2.2 million, a flat tax of Rs 30,000 would be levied along with 15% income tax. The tax payment in this category will increase from the current Rs11,667 to Rs15,000 per month.

In the fourth tax slab, which covered people with an annual income of Rs 2.2 million to Rs 3.2 million, the flat tax would be Rs 180,000, apart from the 25% tax on the remaining amount after deducting Rs 2.2 million. Overall, the monthly tax on this slab will increase from Rs 28,770 to Rs 35,834.

In the fourth tax slab, which covered people with an annual income of Rs 3.2 million to Rs 4.1 million, the flat tax would be Rs 430,000, in addition to the 30% tax on the remaining amount after deducting Rs 3.2 million Rs. Overall, the monthly tax on this slab will increase from Rs 47,408 to Rs 53,333.

While for the sixth tax slab, the top bracket that includes people with annual salary income of more than Rs 4.1 million, the fixed tax of Rs 700,000 will be levied in addition to the 35% income tax on the remaining amount after deducting Rs 4.1 million from the total salary.

Under the Finance Bill, the number of tax slabs for self-employed individual taxpayers has been increased to six, while the tax exemption limit for this category had also been kept at incomes up to Rs 600,000.

In the next tax slab, the income tax of those earning Rs 600,000-1.2 million per annum had been increased to 15% on the amount over and above Rs 600,000. Under the third slab, annual income of Rs 1.2-1.6 million will be levied a flat tax of Rs 90,000 and 20% tax on incomes above Rs 1.2 million.

Similarly, a flat tax of Rs 170,000 and a 30% tax on an amount above Rs 1.6 million had been proposed for those earning between Rs 1.6 million and Rs 3.2 million per annum. And flat tax of Rs 650,000 and 40% tax on amount above Rs 3.2 million will be levied on those earning between Rs 3.2 million and Rs 5.6 million annually.

In the last sixth slab, which covered individual taxpayers earning more than Rs 5.6 million per annum, a flat tax of Rs 1.61 million will be levied. In addition, income tax at the rate of 45% will also be charged on the remaining amount after deducting Rs.5.6 million.