ISLAMABAD: The Federal Board of Revenue (FBR) has released the updated rates of withholding tax on salary income for the fiscal year 2021-2022.
The withholding tax, as outlined by the FBR, is to be collected by entities responsible for disbursing salaries to employees, who are mandated to deduct the applicable tax from the amounts paid.
The withholding tax on salary falls under Section 149 of the Income Tax Ordinance, 2001, providing a structured framework for tax collection based on varying income brackets. The withholding tax card for the year 2021-2022 is detailed as follows:
1. For taxable income not exceeding Rs. 600,000, the withholding tax rate is set at 0 per cent.
2. If taxable income exceeds Rs. 600,000 but does not surpass Rs. 1,200,000, the withholding tax rate is 5 per cent of the amount exceeding Rs. 600,000.
3. When taxable income is between Rs. 1,200,000 and Rs. 1,800,000, the withholding tax rate is Rs. 30,000 plus 10 per cent of the amount exceeding Rs. 1,200,000.
4. Taxable income ranging from Rs. 1,800,000 to Rs. 2,500,000 incurs a withholding tax rate of Rs. 90,000 plus 15 per cent of the amount exceeding Rs. 1,800,000.
5. In the case of taxable income between Rs. 2,500,000 and Rs. 3,500,000, the withholding tax rate is Rs. 195,000 plus 17.5 per cent of the amount exceeding Rs. 2,500,000.
6. Taxable income between Rs. 3,500,000 and Rs. 5,000,000 results in a withholding tax rate of Rs. 370,000 plus 20 per cent of the amount exceeding Rs. 3,500,000.
7. If taxable income is between Rs. 5,000,000 and Rs. 8,000,000, the withholding tax rate is Rs. 670,000 plus 22.5 per cent of the amount exceeding Rs. 5,000,000.
8. Taxable income between Rs. 8,000,000 and Rs. 12,000,000 attracts a withholding tax rate of Rs. 1,345,000 plus 25 per cent of the amount exceeding Rs. 8,000,000.
9. In the bracket of Rs. 12,000,000 to Rs. 30,000,000, the withholding tax rate is Rs. 2,345,000 plus 27.5 per cent of the amount exceeding Rs. 12,000,000.
10. Taxable income between Rs. 30,000,000 and Rs. 50,000,000 incurs a withholding tax rate of Rs. 7,295,000 plus 30 per cent of the amount exceeding Rs. 30,000,000.
11. For those falling in the Rs. 50,000,000 to Rs. 75,000,000 bracket, the withholding tax rate is Rs. 13,295,000 plus 32.5 per cent of the amount exceeding Rs. 50,000,000.
12. If taxable income exceeds Rs. 75,000,000, the withholding tax rate is Rs. 21,420,000 plus 35 per cent of the amount exceeding Rs. 75,000,000.
Furthermore, under Section 149(3) of the Income Tax Ordinance, 2001, individuals responsible for payments related to directorship fees, fees for attending board meetings, or similar compensations are subject to a withholding tax rate of 20 per cent of the gross amount paid. This comprehensive update provides a transparent framework for taxpayers and entities responsible for tax collection in accordance with the Income Tax Ordinance.
