ISLAMABAD: Tax collection from salary increase has sharply increased by 75 percent during first half (July – December) of current fiscal year 2019/2020 owing to changes brought in tax rates through Finance Act, 2019.
According to official data, the Federal Board of Revenue (FBR) collected Rs57.5 billion from salary income during July – December 2019/2020 as compared with Rs32.8 billion in the corresponding period of the last fiscal year.
It is pertinent to mention here that the threshold income has been enhanced to Rs600,000 for calculation of income tax for tax year 2020 as compared with Rs400,000 prevailed during tax year 2019.
The FBR issued withholding tax card for tax year 2019/2020 effective from July 01, 2019 under which every employer paying salary to employees above threshold income shall deduct withholding tax.
The FBR said that every person responsible for paying salary to an employee shall deduct tax from the amount paid under Section 149 of Income Tax Ordinance, 2001.
As per Finance Act, 2019, the provisions of newly inserted 10th schedule of the Income Tax Ordinance, 2001 shall not apply on tax deducted under section 149. Under the Tenth Schedule the withholding tax so collected shall be increased by 100 percent in case of persons not appearing on the Active Taxpayers List (ATL).
As per Finance Act, 2019, the salary slabs as well as tax rates have been revised with effect from 01.07.2019. As such all withholding tax agents disbursing salary are required to implement the revised tax rates from the same date.
Following are the salary slabs and rates on annual salary income:
TABLE
| Salary Slabs | Tax Rates on salary slabs |
| 1. Where taxable income does not exceed Rs. 600,000. | 0 percent |
| 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 exceed 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 exceed 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 exceed 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 exceed 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 exceed 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″; |
The FBR said that every person responsible for making payment for directorship fee or fee for attending board meeting or such fee by whatever name called under Section 149(3) of Income Tax Ordinance, 2001 shall collect 20 percent of gross amount paid.
