The Federal Board of Revenue (FBR) has updated the income tax rates for salaried individuals for the tax year 2021. These rates, which have been incorporated into the Income Tax Ordinance, 2001, as amended by the Finance Act, 2020, will remain applicable from July 1, 2020, to June 30, 2021, unless further amendments are made.
The updated ordinance specifies that the revised tax rates will apply to individuals whose income under the head of salary exceeds 75 percent of their total taxable income.
For salaried persons with an annual taxable income up to Rs. 600,000, no tax will be charged. Those earning between Rs. 600,000 and Rs. 1,200,000 will be taxed at 5% of the amount exceeding Rs. 600,000. For income between Rs. 1,200,000 and Rs. 1,800,000, the tax will be Rs. 30,000 plus 10% of the amount exceeding Rs. 1,200,000.
Individuals with a taxable income between Rs. 1,800,000 and Rs. 2,500,000 will be taxed Rs. 90,000 plus 15% of the amount exceeding Rs. 1,800,000. For those earning between Rs. 2,500,000 and Rs. 3,500,000, the tax will be Rs. 195,000 plus 17.5% of the amount exceeding Rs. 2,500,000.
For incomes between Rs. 3,500,000 and Rs. 5,000,000, the applicable tax will be Rs. 370,000 plus 20% of the amount exceeding Rs. 3,500,000. Salaried individuals with income between Rs. 5,000,000 and Rs. 8,000,000 will face a tax of Rs. 670,000 plus 22.5% of the amount exceeding Rs. 5,000,000.
Those earning between Rs. 8,000,000 and Rs. 12,000,000 will be subject to a tax of Rs. 1,345,000 plus 25% of the amount exceeding Rs. 8,000,000. For taxable incomes between Rs. 12,000,000 and Rs. 30,000,000, the tax rate will be Rs. 2,345,000 plus 27.5% of the amount exceeding Rs. 12,000,000.
Individuals with an income between Rs. 30,000,000 and Rs. 50,000,000 will be taxed Rs. 7,295,000 plus 30% of the amount exceeding Rs. 30,000,000. For those earning between Rs. 50,000,000 and Rs. 75,000,000, the applicable tax will be Rs. 13,295,000 plus 32.5% of the amount exceeding Rs. 50,000,000.
Finally, for individuals with a taxable income exceeding Rs. 75,000,000, the tax rate will be Rs. 21,420,000 plus 35% of the amount exceeding Rs. 75,000,000.
These updated rates aim to ensure a more equitable tax system by appropriately taxing higher income brackets. The FBR encourages all salaried individuals to review the updated ordinance and ensure compliance with the revised tax rates. The adjustments reflect the government’s ongoing efforts to improve revenue collection and address fiscal challenges. Taxpayers are advised to seek professional advice to understand the implications of these changes and to fulfill their tax obligations accurately.
