FBR notifies statutory tax rates for salaried persons

FBR notifies statutory tax rates for salaried persons

The Federal Board of Revenue (FBR) has notified the statutory rates of income tax for salaried persons during Tax Year 2023.

In order to implement the rate of tax for salaried persons, the FBR issued Income Tax Ordinance, 2001 updated up to June 30, 2022. The following table is enacted for the taxation of salaried taxpayers for the Tax Year 2023:

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Taxable IncomeRate of Tax
Up to Rs600,0000%
Rs600,001 –1,200,0002.5% of amount exceeding Rs600,000
Rs1,200,001 –2,400,000Rs15,000 + 12.5% of amount exceeding Rs1,200,000
Rs2,400,001 –3,600,000Rs165,000 + 20% of amount exceeding Rs2,400,000
Rs3,600,001 –6,000,000Rs405,000 + 25% of amount exceeding Rs3,600,000
Rs6,000,001 –12,000,000Rs1,005,000 + 32.5% of amount exceeding Rs6,000,000
Amount exceeding Rs12,000,000Rs2,955,000 + 35% of amount exceeding Rs12,000,000

The rate of tax in the table above are applicable where the income of an individual chargeable under the head ‘salary’ exceeds seventy-five per cent of his/her taxable income.

It is pertinent to mention that Finance Minister Dr. Miftah Ismail on floor of the House while presenting the federal budget 2022/2023 announced massive relief for salaried persons.

According to the budget speech of the finance minister, the basic threshold of taxable salary is proposed to be enhanced to Rs1.2 million from the Rs600,000 for salaried individuals.

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“This would pass tens of billions of rupees benefit to salaried people. This will generate a positive economic cycle whereby this money would get transferred to the businesses as the disposable income of salaried people increases therefore ultimately, the government will benefit through the thriving of the business, the creation of more jobs, and tax revenues in the future,” according to the budget speech.

However, the government withdrew the proposal and revived the exempt income to Rs600,000 while approving the Finance Act, 2022 from the National Assembly.

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Haider Ali Patel, former president of Karachi Tax Bar Association (KTBA) in a recent presentation on the Finance Act, 2022 stated that the revised rates in respect of salaried taxpayers had been enacted with the change in maximum rate of tax from 32.5 per cent to 35 per cent.

He stated that the enacted tax rates have taken away the proposed tax relief sought to be provided to the individuals belonging to lower salaried class.

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“On the other hand, the tax incidence has been increased considerably for the individuals belonging to higher salary brackets,” he added.

Patel presented the following table provides the increase / decrease in the tax incidence of salaries taxpayers from tax liability of the tax year 2022 to tax year 2023 and also the tax liability calculated as per the proposed Finance Bill, 2023:salary tax difference