Pakistan announces massive tax reduction for salaried persons

Pakistan announces massive tax reduction for salaried persons

KARACHI: Pakistan has announced massive tax reduction for salaried persons in the budget 2022/2023. The country announced federal budget 2022/2023 on June 10, 2022 and announced massive reduction in tax on the income of salaried person, which may be applicable from July 01, 2022.

Through Finance Bill, 2022 the tax slabs have been reduced to seven from 12. Besides, bringing down the number of slabs, the country also provided massive tax relief in payment of tax.

READ MORE: Pakistan reduces salary tax slabs to 7 in budget 2022/23

According to PwC A F Ferguson & Co. the persons falling in various tax slabs will save tax amount in tax year 2022-2023.

Following is the comparison in proposed salary taxes and existing taxes calculated by PwC A F Ferguson&Co.

READ MORE: Massive cut in subsidies to curtail current expenditures

Amount in Rupees

Annual taxable incomeExisting taxProposed tax(Saving) / Excess tax
600,000 – – Nil
1,200,00030,000100(29,900)
2,400,000180,00084,000(96,000)
3,600,000390,000234,000(156,000)
6,000,000895,000654,000(241,000)
12,000,0002,345,0002,004,000(341,000)
18,000,0004,845,0003,954,000(891,000)
24,000,0005,645,0005,904,000259,000

The finance bill proposed following income slabs and rate of tax for salaried persons for tax year 2022/2023:

READ MORE: Petroleum levy to generate Rs750 billion

S#Taxable IncomeRate of Tax
(1)(2)(3)
1.Where taxable income does not exceed Rs. 600,0000
2.Where taxable income exceeds Rs. 600,000 but does not exceed Rs. 1,200,000Rs. 100
3.Where taxable income exceeds Rs. 1,200,000 but does not exceed Rs. 2,400,0007% of the amount exceeding Rs. 1,200,000
4.Where taxable income exceeds Rs. 2,400,000 but does not exceed Rs. 3,600,000Rs. 84,000 + 12.5% of the amount exceeding Rs. 2,400,000
5.Where taxable income exceeds Rs. 3,600,000 but does not exceed Rs. 6,000,000Rs. 234,000 + 17.5% of the amount exceeding Rs. 3,600,000
6.Where taxable income exceeds Rs. 6,000,000 but does not exceed Rs. 12,000,000Rs. 654,000 + 22.5% of the amount exceeding Rs. 6,000,000
7.Where taxable income exceeds Rs. 12,000,000Rs. 2,004,000 + 32.5% of the amount exceeding Rs. 12,000,000.”

The existing income slabs and rate of tax for salaried persons:

READ MORE: FBR assigned tax collection target of Rs7 trillion in 2022/2023

1. Where taxable income does not exceed: Rs. 600,000 0%

2. Where taxable income exceeds Rs. 600,000 but does not exceed Rs. 1,200,000: 5% of the amount exceeding Rs. 600,000

3. Where taxable income exceeds Rs. 1,200,000 but does not exceed Rs. 1,800,000: Rs. 30,000 plus 10% of the amount exceeding Rs. 1,200,000

4. Where taxable income exceeds Rs. 1,800,000 but does not exceed Rs. 2,500,000: Rs. 90,000 plus 15% of the amount exceeding Rs. 1,800,000

5. Where taxable income exceeds Rs.2,500,000 but does not exceed Rs. 3,500,000: Rs. 195,000 plus 17.5% of the amount exceeding Rs. 2,500,000

6. Where taxable income exceeds Rs. 3,500,000 but does not exceed Rs. 5,000,000: Rs. 370,000 plus 20% of the amount exceeding Rs. 3,500,000

7. Where taxable income exceeds Rs. 5,000,000 but does not exceeds Rs. 8,000,000: Rs. 670,000 plus 22.5% of the amount exceeding Rs. 5,000,000

8. Where taxable income exceeds Rs. 8,000,000 but does not exceeds Rs. 12,000,000: Rs. 1,345,000 plus 25% of the amount exceeding Rs. 8,000,000

9. Where taxable income exceeds Rs. 12,000,000 but does not exceeds Rs. 30,000,000: Rs. 2,345,000 plus 27.5% of the amount exceeding Rs. 12,000,000

10. Where taxable income exceeds Rs. 30,000,000 but does not exceeds Rs. 50,000,000: Rs. 7,295,000 plus 30% of the amount exceeding Rs. 30,000,000

11. Where taxable income exceeds Rs. 50,000,000 but does not exceeds Rs. 75,000,000: Rs. 13,295,000 plus 32.5% of the amount exceeding Rs. 50,000,000

12. Where taxable income exceeds Rs. 75,000,000 Rs. 21,420,000 plus 35% of the amount exceeding Rs. 75,000,000]

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