Karachi, July 30, 2024 – Federal Board of Revenue (FBR) has issued formula for calculating surcharge on income above Rs 10 million through newly introduced Section 4AB of Income Tax Ordinance, 2001.
The FBR issued Circular No. 01 of 2024-25 of Income Tax explaining important amendments made in Income Tax Ordinance, 2001 through Finance Act, 2024.
The FBR said that through a newly inserted Section 4AB, a surcharge has been levied on chargeable tax of individuals and association of persons (AOPs), if their taxable income exceeds Rs 10 million.
The surcharge is levied at a rate of 10 percent of income tax charged under clause (1) and clause (2) of the Division 1 of Part 1 of the First Schedule of Income Tax Ordinance, 2001 for non-salaried as well as salaried person.
In order to ensure that tax on salary is deducted at an average rate by including the amount of surcharge, similar changes have been made in the formula of average rate of tax specified in sub-section (2) of Section 149.
The FBR provided an illustration to describe the computation of tax and tax deductible under Section 149 of the Ordinance.
Illustration:
Annual salary income: Rs 13,000,000
Tax on salary income for the year as provided
Under Division I of Part I of First Schedule: Rs 3,815,000
Surcharge at 10 percent on tax payable: Rs 381,500
Total annual tax liability: Rs 4,196,500
Average rate of tax = A/B
Where –
A is the tax that would be payable if the amount referred to in component B of the formula where the employee’s taxable income for that year plus tax chargeable under Section 4AB; and
B is the employee’s estimated income under the head salary for the year.
Hence in the above illustration –
A = 3,815,500 + 381,500 = 4,196,500
B = 13.000.000
Average rate of tax = 4,196,500/13,000,000 = 32.28%
Tax for the year = 4,196,491
Tax deductible per month = 349,708