Pakistan considers increasing tax exempt income threshold for salaried persons

In response to the high levels of inflation faced by Pakistani citizens, the government is considering increasing the tax exempt income threshold for salaried individuals in the upcoming fiscal year.

According to sources in the Federal Board of Revenue (FBR), the government is currently exploring options for increasing the minimum income threshold at which individuals are required to pay income tax.

While no official decision has been made yet, some officials have suggested that the new threshold could be set between Rs800,000 to Rs1.2 million.

If implemented, this increase would provide much-needed relief to salaried individuals who are currently struggling to make ends meet due to the rising cost of living in Pakistan. The move is particularly significant given that the country’s Consumer Price Index (CPI) inflation rate recently increased to 35.4% on a year-on-year basis in March 2023, up from 31.5% in the previous month and 12.7% in March 2022.

Currently, salaried individuals in Pakistan are subject to a tax rate that ranges from 0% to 35%, depending on their income level. However, the threshold income for being chargeable to tax is currently above Rs600,000. This means that many salaried individuals who earn below this threshold are still required to pay income tax, which can be a significant burden on their finances.

If the government does decide to increase the tax exempt income threshold, it would provide much-needed relief to salaried individuals across the country. It would also help to stimulate economic growth by putting more money into the hands of consumers, which in turn would increase demand for goods and services.

However, it is worth noting that any changes to the tax system will need to be carefully considered to ensure that they do not have a negative impact on government revenue. The government will need to strike a balance between providing relief to citizens and maintaining its ability to fund public services and infrastructure projects.

In conclusion, the potential increase in the tax exempt income threshold for salaried individuals in Pakistan is a positive development that could provide significant relief to those who are currently struggling to make ends meet. It is important for the government to carefully consider the potential impact of any changes to the tax system and to ensure that they are implemented in a way that supports economic growth while also maintaining government revenue.