Earning below Rs1 million annually: KTBA proposes tax exemption for salaried people

KARACHI: Karachi Tax Bar Association (KTBA) has proposed to exempt income tax from the salaried class earning below Rs 1 million annually to reduce inflationary pressure.

Addressing the FBR Chairman, KTBA in its budget proposals for the fiscal year 2025-26, outlined key recommendations spanning income tax, sales tax, and digital infrastructure improvements.

The proposals are particularly significant as they come amid growing concerns about the effectiveness of recent appellate structure reforms implemented in May 2024.

Salaried class: Call for revision of tax slabs, rise in exemption limits

“The recent amendments to appellate mechanisms have unfortunately created more confusion than clarity,” noted the KTBA in their submission. “Superior courts have raised valid concerns over procedural impracticalities, leading to delays rather than the promised efficiencies.”

The KTBA’s most significant recommendation is raising the basic income tax threshold from Rs 600,000 to Rs 1,000,000 to account for inflationary pressures that have disproportionately burdened low-income earners.

The KTBA has also advocated for reducing the 45 percent tax slab for individual income exceeding Rs 5,600,000, which they described as “too regressive.”

For businesses, KTBA has proposed reducing the minimum turnover tax from 1.25 percent to 0.75 percent, arguing this would particularly benefit SMEs, startups, and loss-making entities operating in challenging economic conditions.

Other major recommendations include gradually reducing corporate tax rates to 25 percent with annual one percent reductions, introducing a 15 percent deductible allowance against salary income, and restoring various tax credits, including section 65B credits for industrial investments.

The KTBA has also called for extending the Tribunal’s authority to grant stays for up to 180 days and implementing zero-rated tax for supplies to approved Non-Profit Organisations.

They further suggested several technical improvements to the FBR’s Inland Revenue Information System (IRIS), including implementation of system-generated barcodes for sales tax correspondence and comprehensive addressing of ongoing system glitches.

To address widespread issues with tax appeals, the KTBA proposed increasing appeal thresholds to Rs 50 million and removing payment requirements for obtaining stays.

Copyright Business Recorder, 2025