Islamabad – The Federal Board of Revenue (FBR) has introduced a minimum tax for salary individuals with taxable income exceeding Rs800,000 but not exceeding Rs12,000 for Tax Year 2019.
The minimum tax amount that individuals in this income bracket are required to pay is Rs2,000.
According to the updated withholding tax card for Tax Year 2019, this minimum tax payment is mandatory, irrespective of whether the adjusted tax liability is higher or lower than the minimum tax amount for the given tax year. This measure is intended to ensure that individuals with taxable income above Rs800,000 contribute a minimum tax amount.
The FBR has revised and updated tax rates for salary individuals for Tax Year 2019, with amendments made through the Finance Supplementary Act, 2018 to Section 149 of the Income Tax Ordinance, 2001.
Employers are responsible for collecting or deducting the tax when paying salaries to their employees. The withholding tax rates for salary individuals are as follows:
1. Where the taxable income tax does not exceed Rs400,000: Zero percent
2. Where the taxable income exceeds Rs400,000 but does not exceed Rs800,000: Rs1,000
3. Where the taxable income exceeds Rs800,000 but does not exceed Rs1.2 million: Rs2,000
4. Where the taxable income exceeds Rs1.2 million but does not exceed Rs2.5 million: 5 percent of the amount exceeding Rs2,000
5. Where the taxable income exceeds Rs2.5 million but does not exceed Rs4 million: Rs65,000 + 15 percent of the amount exceeding Rs2.5 million
6. Where the taxable income exceeds Rs4 million but does not exceed Rs8 million: Rs290,000 + 20 percent of the amount exceeding Rs4 million
7. Where the taxable income exceeds Rs8 million: Rs1.09 million + 25 percent of the amount exceeding Rs8 million
The FBR has also clarified that the above rates will be applicable in cases where salary income accounts for more than fifty percent of an individual’s taxable income. These rates ensure that individuals with varying income levels contribute to the national tax revenue based on their earnings.
These updates to the withholding tax rates are aimed at streamlining the tax collection process and ensuring that individuals with higher taxable incomes make their fair share of contributions to the country’s revenue.