The federal government has announced an increase in the tax rate for both salaried and non-salaried taxpayers in the federal budget for the next financial year. This change will place a cumulative burden of Rs 225 billion on taxpayers. Rs 75 billion will affect salaried individuals, and Rs 150 billion will impact non-salaried individuals.
Tax Rates and Thresholds
The budget proposes a maximum tax rate of 35% for salaried persons and 45% for non-salaried individuals. The minimum income threshold of Rs 600,000 per annum, or Rs 50,000 per month, has been maintained for both categories. The number of tax slabs will also remain at six.
Tax Slabs for Salaried Individuals
For salaried individuals, the first tax slab applies to those with an annual income of up to Rs 600,000 (Rs 50,000 per month). These individuals are exempt from income tax. In the second tax slab, those earning between Rs 600,000 and Rs 1.2 million per annum will be taxed at a rate of 5% on the amount exceeding Rs 600,000. This will increase the monthly tax from Rs 1,250 to Rs 2,500.
Under the third slab, for annual incomes between Rs1.2 million and Rs2.2 million, a fixed tax of Rs30,000 will be levied. Additionally, a 15% tax on the amount exceeding Rs 1.2 million will be applied. This will raise the monthly tax from Rs 11,667 to Rs 15,000.
In the fourth tax slab, covering annual incomes between Rs2.2 million and Rs3.2 million, the tax will include a fixed amount of Rs180,000. There will also be a 25% tax on the amount exceeding Rs 2.2 million. Consequently, the monthly tax will rise from Rs 28,770 to Rs 35,834.
For those earning between Rs 3.2 million and Rs 4.1 million annually, the fifth slab imposes a fixed tax of Rs 430,000. An additional 30% tax on the amount exceeding Rs3.2 million will be applied. This will increase the monthly tax from Rs47,408 to Rs53,333.
The sixth and final slab applies to individuals with an annual income of more than Rs4.1 million. These individuals will face a fixed tax of Rs 700,000. There will also be a 35% tax on the amount exceeding Rs4.1 million.
Tax Slabs for Non-Salaried Individuals
For non-salaried individuals, the Finance Bill increases the number of tax slabs to six. The tax exemption limit remains at Rs 600,000 per annum. In the second slab, for annual incomes between Rs 600,000 and Rs 1.2 million, a tax rate of 15% will be applied to the amount exceeding Rs 600,000.
The third slab, for incomes between Rs1.2 million and Rs1.6 million, includes a fixed tax of Rs90,000. Additionally, a 20% tax on the amount exceeding Rs 1.2 million will be levied. For those earning between Rs1.6 million and Rs3.2 million per annum, the fourth slab proposes a fixed tax of Rs 170,000. There will also be a 30% tax on the amount exceeding Rs 1.6 million.
The fifth slab, for annual incomes between Rs 3.2 million and Rs 5.6 million, includes a fixed tax of Rs 650,000. An additional 40% tax on the amount exceeding Rs3.2 million will be levied. Finally, the sixth slab covers individuals earning more than Rs5.6 million annually. These individuals will face a fixed tax of Rs. 1.61 million. Additionally, there will be a 45% tax on the amount exceeding Rs 5.6 million.
The new federal budget imposes higher tax rates on both salaried and non-salaried taxpayers. The minimum threshold is maintained at Rs 600,000 per annum. The introduction of these changes aims to increase government revenue. However, it also places additional financial burdens on individuals across various income levels. It is crucial for taxpayers to understand these new rates and plan accordingly to manage their finances effectively.
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