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 MonthlySalary Salary Current Current Tax New Tax New Increase==============================================================================================50,000 600000 0 0 0 0 0100,000 1200000 15,000 1250 30000 2500 1250150,000 1800000 90,000 7500 120000 10000 2500200,000 2400000 165,000 13750 230000 19167 5417225,000 2700000 232,500 19375 305000 25417 6042250,000 3000000 300,000 25000 380000 31667 6667300,000 3600000 435,000 36250 550000 45833 9583350,000 4200000 600,000 50000 735000 61250 11250400,000 4800000 765,000 63750 945000 78750 15000==============================================================================================Copyright Business Recorder, 2024