Karachi, July 27, 2023 – In a bid to promote progressivity and uniformity in the taxation system, the Federal Board of Revenue (FBR) has introduced additional income slabs for the Super Tax, as outlined in Circular No. 2 of Income Tax dated July 26, 2023.
These changes come as part of the amendments made to the Income Tax Ordinance, 2001, through the Finance Act, 2023.
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The Super Tax was initially introduced through the Finance Act, 2022, with graduated tax rates ranging from 1% to 4% on income slabs starting from Rs. 150 million to Rs. 300 million and above. Certain specified business sectors were subjected to a higher Super Tax rate of 10% if their income exceeded Rs. 300 million.
To expand the scope of Super Tax and create a more equitable system, the FBR has implemented new income slabs for Tax Year 2023 and beyond. These income slabs are as follows:
1. Rs. 150 million to Rs. 300 million: Existing tax rates of 1% to 4%.
2. Rs. 350 million to Rs. 400 million: Super Tax rate of 6%.
3. Rs. 400 million to Rs. 500 million: Super Tax rate of 8%.
4. Rs. 500 million and above: Super Tax rate of 10%.
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These revised Super Tax rates will be applicable to all individuals and businesses across the board.
However, for Tax Year 2023, banking companies will be subject to a flat Super Tax rate of 10% if their income, as defined under section 4C of the Ordinance, exceeds Rs. 300 million. This provision aims to ensure that large financial institutions contribute proportionally to the country’s revenue.
Another issue that required clarification was the payment of Super Tax. There was uncertainty whether Super Tax payable under section 4C of the Ordinance should be paid as a lump sum amount at the time of filing the income tax return or along with monthly or quarterly installments of advance tax as per section 147 of the Ordinance.
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To address this ambiguity and provide clarity, the Finance Act, 2023, has introduced a new sub-section (5A) in section 4C of the Ordinance. As per this amendment, individuals and businesses liable for Super Tax under section 4C will now be required to pay their Super Tax liability along with their monthly or quarterly installments of advance tax, as applicable under section 147 of the Ordinance.
These changes are expected to make the taxation system more transparent and equitable while ensuring that high-earning individuals and businesses contribute their fair share to the national revenue. Taxpayers are advised to consult with tax experts or the FBR for a better understanding of their tax obligations under the revised Super Tax regime.
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