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Print Print 2024-06-17

Salaried class: Higher income tax rate of up to 35pc imposed

  • New income tax slabs for salaried class to be applicable from tax year 2024 effective for salary payable on or after July 1 2024
Published June 17, 2024

ISLAMABAD: The government has imposed a higher income tax rate of up to 35 percent on the salaried class, which is the most documented sector of the economy with no chances of tax evasion due to tax deduction at source.

Budget 2024-25 documents revealed that the new income tax slabs for the salaried class would now be applicable from tax year 2024 effective for salary payable on or after 1st day of July 2024, in case annual salary exceeds Rs 600,000/.

However, for salaried taxpayers earning up to Rs.600,000/- in a year, there is no change as this bracket remains at zero tax. This limit ensures that the lower-income segment is not burdened with taxes.

Fear comes alive: all salaried persons earning over Rs50k a month to bear higher taxation in FY25

When contacted tax lawyer Waheed Shahzad Butt told this correspondence that the increased tax rates will directly impact the take-home pay of salaried employees (the most documented sector of economy). This comes at a time when inflation is already putting a strain on household budgets.

The recent government decision to raise income tax rates for salaried individuals has sparked concerns among taxpayers. Waheed argue that the increase, which he describe as “rocket high” fails to consider the economic realities faced by many working professionals falls under the category of salaried individuals liable to withholding income tax in terms of Section 149 of the Income Tax Ordinance, 2001.

Waheed Butt further added that the government should have conducted a more thorough analysis of the impact on the salaried class before implementing these hikes in Finance Act, 2024.

He urged the government to consider alternative measures to raise revenue or provide tax breaks to offset the increased burden. The full extent of the impact of these tax increases remains to be seen. It is unclear how this will affect consumer spending and overall economic activity.

He expected a potential decrease in disposable income, leading to a slowdown in economic growth. The public reaction to the tax increase has been largely negative. It is likely that this issue will continue to generate debate in the coming days and weeks.

As per budget documents, following picture in the hands of salaried taxpayers shall elaborate the view point of the un-influential taxpayer class of Pakistan knows as Salaried Persons:

Income Bracket: Rs 600,000 to Rs 1,200,000 Annually

Monthly Income: Rs 100,000

Annual Income: Rs 1200,000

Previous Monthly Tax: Rs 1,250

New Monthly Tax: Rs 2,500

Income Bracket: Rs 1,200,000 to Rs 2,200,000 Annually

Monthly Income: Rs 183,333

Annual Income: Rs 2200000

Previous Monthly Tax: Rs 11,650

New Monthly Tax: Rs 15,000

Income Bracket: Rs 2,200,000 to Rs 3,200,000 Annually

Monthly Income: Rs 266,667

Annual Income: Rs 3200000

Previous Monthly Tax: Rs 28,750

New Monthly Tax: Rs 35,834.

==============================================================================================
Monthly     Annual       Annual Tax     Monthly Tax      Annual         Monthly
Salary      Salary         Current        Current        Tax New        Tax New       Increase
==============================================================================================
50,000      600000            0              0              0              0                 0
100,000     1200000        15,000          1250           30000          2500             1250
150,000     1800000        90,000          7500          120000          10000            2500
200,000     2400000        165,000         13750         230000          19167            5417
225,000     2700000        232,500         19375         305000          25417            6042
250,000     3000000        300,000         25000         380000          31667            6667
300,000     3600000        435,000         36250         550000          45833            9583
350,000     4200000        600,000         50000         735000          61250           11250
400,000     4800000        765,000         63750         945000          78750           15000
==============================================================================================

Copyright Business Recorder, 2024

Comments

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Shahzaib Khan Jun 17, 2024 07:46am
PMLN and PPP have no vote bank among the salaried class, which is why they are taking revenge on them and dont forget their master the Lumber 1
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Asghar Ali Qadri Jun 17, 2024 10:33am
So the writer thinks that income starting 601000 per annum is higher income & they would not be burdened! What a joke!
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Bilal Jun 17, 2024 01:42pm
Bilal help you
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Dawood Mustafa Jun 17, 2024 08:57pm
What is the tax on real estate agents dealing in cash? What abt retailers making millions monthly? Transporters dealing in cash. Animal sellers dealing in cash and making millions and so on
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Ali Hassan Javed Jun 19, 2024 01:33pm
Shame on Govt they want to kill the salaried class
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Hamza Jun 21, 2024 08:53pm
The bigger issue is not increasing the tax on salaried class but tax exemption for agriculture and real estate is not acceptable.
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