The Senate Standing Committee on Finance Thursday recommended that income tax slabs of salaried class should be reviewed to make them equitable as existing proposal is regressive. The Federal Board of Revenue officials agreed to review the proposed income tax structure so as to ensure minimum burden on low salary income group. A detailed discussion took place in the committee on the proposed income tax slabs for salaried class and the members expressed serious concern over the incidence of tax on lower income group earners.
When a detailed presentation of FBR was given showing the raise in various income slabs, it became clear that the tax increase in lowest slab was only Rs 200 per month whereas this impact in the highest slab was about Rs 100,000 per month. However, it was explained in detail by the FBR that in a couple of salary brackets there was a major distortion in the last budget which has now been removed and apparently it looks like incentive to the salaried persons drawing annual income in the bracket of Rs 2 million to Rs 7 million.
The FBR officials said the new slabs structure for the salaried class has corrected the anomaly in certain higher slabs of the salaried class. The FBR has also addressed the issues raised by the Federal Tax Ombudsman (FTO) last year in the salaried structure.
Within the region, the comparison revealed that the lowest rate of tax on salaried class is available in Pakistan as compared to salaried structure applicable in Indian, Sri Lanka and Bangladesh.
Last year, the salaried slabs proposed by the FBR have no anomaly and the same were recommended by the Senate Standing Committee on Finance to the National Assembly. However, there were changes in the slabs before passage of the budget (2012-13). The anomaly in the slabs has now been rectified through the proposed Finance Bill (2013-14). The incidence of tax on the salaried persons drawing higher salary between Rs 2 million to Rs 7 million was higher.
As per FBR presentation to the committee:
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Where annual income is Rs 400,000 tax payable is zero;
where income is Rs 500,000 the current tax payable Rs 5,000, proposed tax payable Rs 5,000;
where income Rs 600,000 current tax payable Rs 10,000, proposed tax payable Rs 12,500;
where income Rs 700,000 current tax payable Rs 15,000, proposed tax payable Rs 20,000;
where income Rs 800,000 current tax payable Rs 22,500, proposed tax payable Rs 27,500;
where income Rs 900,000 current tax payable Rs 32,000, proposed tax payable Rs 37,500;
where income Rs 1,000,000 current tax payable Rs 42,500, proposed tax payable Rs 47,500;
where income Rs 1,100,000 current tax payable Rs 52,500, proposed tax payable Rs 57,500;
where income Rs 1,200,000 current tax payable Rs 62,500, proposed tax payable Rs 67,500;
where income Rs 1,300,000 current tax payable Rs 72,500, proposed tax payable Rs 77,500;
where income Rs 1,400,000; tax payable current, Rs 82,500; tax payable proposed, Rs 90,000;
where income Rs 1,500,000 current tax payable Rs 95,000, proposed tax payable Rs 102,500;
where income Rs 1,600,000 current tax payable Rs 110,000, proposed tax payable Rs 115,000;
where income Rs 1,700,000 current tax payable Rs 125,000, proposed tax payable Rs 127,500;
where income Rs 1,800,000 current tax payable Rs 140,000, proposed tax payable Rs 140,000;
where income Rs 1,900,000 current tax payable Rs 155,000, proposed tax payable Rs 155,000;
where income Rs 2,000,000 current tax payable Rs 175,000, proposed tax payable Rs 170,000;
where income Rs 2,100,000 current tax payable Rs 192,500, proposed tax payable Rs 185,000;
where income Rs 2,200,000 current tax payable Rs 210,000, proposed tax payable Rs 200,000;
where income Rs 2,300,000, current tax payable Rs 227,500, proposed tax payable Rs 217,500;
where income Rs 2,400,000 current tax payable Rs 245,000, proposed tax payable Rs 235,000;
where income Rs 2,500,000 current tax payable Rs 420,000, proposed tax payable Rs 252,500;
where income Rs 2,600,000 current tax payable Rs 440,000, proposed tax payable Rs 270,000;
where income Rs 2,700,000 current tax payable Rs 460,000, proposed tax payable Rs 290,000;
where income Rs 2,800,000 current tax payable Rs 480,000, proposed tax payable Rs 310,000;
where income Rs 2,900,000 current tax payable Rs 500,000, proposed tax payable Rs 330,000;
where income Rs 3,000,000 current tax payable Rs 520,000, proposed tax payable Rs 350,000;
where income Rs 4,000,000 current tax payable Rs 720,000, proposed tax payable Rs 587,500;
where income Rs 4,500,000 current tax payable Rs 820,000, proposed tax payable Rs 725,000;
where income Rs 5,000,000 current tax payable Rs 920,000, proposed tax payable Rs 862,500;
where income Rs 5,500,000 current tax payable Rs 1,020,000, proposed tax payable Rs 1,000,000;
where income Rs 6,000,000 current tax payable Rs 1,120,000, proposed tax payable Rs 1,137,500 and
where income Rs 6,500,000 current tax payable Rs 1,220,000, proposed tax payable Rs 1,275,000.
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