Karachi, July 17, 2024 – The Federal Board of Revenue (FBR) has announced the new tax rates for business individuals and Association of Persons (AOPs) as per the amendments made through the Finance Act, 2024. These updated rates are effective from July 1, 2024, and are applicable for the tax year 2025.
According to the FBR, the revised tax rates apply to the income of every individual and AOP, excluding salaried individuals. This amendment aims to bring more clarity and fairness to the taxation process for non-salaried entities and to ensure equitable tax collection from diverse income groups.
The FBR said the tax structure is designed to be progressive, with higher income brackets being taxed at higher rates. The details are as follows:
• Taxable income up to Rs. 600,000 will not be taxed, maintaining a 0% rate.
• For income exceeding Rs. 600,000 but not surpassing Rs. 1,200,000, a 15% tax rate will be applied to the amount exceeding Rs. 600,000.
• Income between Rs. 1,200,001 and Rs. 1,600,000 will incur Rs. 90,000 plus 20% of the amount exceeding Rs. 1,200,000.
• Earnings from Rs. 1,600,001 to Rs. 3,200,000 will be taxed at Rs. 170,000 plus 30% of the amount exceeding Rs. 1,600,000.
• For income between Rs. 3,200,001 and Rs. 5,600,000, the tax rate is Rs. 650,000 plus 40% of the amount exceeding Rs. 3,200,000.
• Income above Rs. 5,600,000 will attract a tax of Rs. 1,610,000 plus 45% of the amount exceeding Rs. 5,600,000.
An additional provision has been made for AOPs that are professional firms prohibited from incorporating by any law or the rules of their regulating body. For these AOPs, the maximum tax rate, which is 45% for other entities, will be reduced to 40%.
The FBR emphasized that these changes are part of a broader strategy to enhance the transparency and efficiency of the tax system in Pakistan. The aim is to ensure that high-earning business individuals and AOPs contribute a fair share of taxes, thereby supporting the country’s fiscal stability and development goals.
Tax professionals have highlighted the importance of understanding these new rates and the impact they will have on tax planning for business individuals and AOPs. The FBR has provided detailed guidelines and resources on its website to assist taxpayers in navigating these changes effectively.
This move by the FBR is seen as a crucial step towards creating a more balanced and robust tax regime in Pakistan, fostering compliance and ensuring a fair distribution of the tax burden across different income groups.