Ahead of budget 2022-23, here is a review of income tax rates during the outgoing fiscal year

The budget announcement for 2022-23 is set to take place on Friday (June 10) and market talk suggests an uptick in income tax rates for the salaried group given Pakistan's fragile economic situation and the government's need to enhance its tax revenue.

To give its readers a recap, Business Recorder would like to mention the tax slabs that are currently in place as the end of the fiscal year approaches.

In the previous budget announcement for 2021-22, which it said was aimed at being pro-growth, the government had decided to maintain the status quo on income tax rates for the salaried group.

Currently, income tax is not imposed on individuals (where income of the individual from salary exceeds 75% of taxable income) earning between 0 and Rs600,000 a year.

The table below gives details on the tax rates applicable on different income slabs in Pakistan.

On the next slab (those earning between Rs600,000 and Rs1.2 million a year), the tax is 5% on excess of column 1.

To understand this, imagine a person with an income of Rs800,000. They will be charged 5% of Rs200,000 (Rs800,000 minus Rs600,000 since that is the amount excess of column 1).

If earnings are at Rs1.8 million a year, then Rs30,000 in addition to 10% of the amount exceeding Rs1.2 million (in this case, Rs600,000). In this case, the yearly tax applicable is Rs30,000 plus Rs60,000 i.e. Rs90,000 a year.

Reports indicate that Personal Income Tax Reforms will be incorporated in the Finance Bill 2022.

On Saturday, officials from the Federal Board of Revenue met Prime Minister Shehbaz Sharif to finalise the new budget proposals with new taxation measures to the tune of Rs400-450 billion for the next fiscal year. The initial sketch of budget proposals was discussed in detail during the meeting held with the Prime Minister at Lahore.

Budget 2022-23: Rs450bn new taxation steps shared with PM

The number of slabs of the salaried class has been proposed to be reduced to six. Moreover, there will be no change in the tax rates of the salaried class drawing salary up to Rs0.1 million.

A slight increase is expected for the salaried earners within the range of Rs0.1 million to Rs0.2 million per month.

More raise in income tax rate is expected for the salaried individuals earning a salary above Rs0.2 million per month.

All eyes are now on Finance Minister Miftah Ismail, who is set to make the budget announcement in the National Assembly on June 10.

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