Govt Reverts Decision to Exempt Tax On Salaried Income Below Rs 1.2 million

The government, just a few weeks ago, announced huge relief for salaried persons by increasing the minimum taxable income to Rs 1.2 million a year. However, this increased threshold meant that around 0.5 million or 44% of the individuals would slide off the tax net.

Now, upon the request of the Federal Board of Revenue, the government has reversed its decision of increasing the minimum threshold. According to the latest reports, the minimum taxable income has been set at Rs 0.4 million a year – same as it was before announcing the relief.

The New Tax Rates

According to the amendment in the tax bill, the income tax will be charged at following rates;

  • Rs 1,000 tax to be introduced for incomes slabs Rs 400,001 to Rs 800,000 (yearly)
  • Rs 2,000 for income ranging from Rs800,001 to Rs1,200,000 a year.

ALSO READ

Three Times Higher Withholding Tax Proposed for Non-Filers


Before this latest amendment, Miftah Ismael while announcing the budget told;

Tax rates on individuals have been lowered. Complete tax exemption has been given to people who earn up to Rs 1.2 million a year or Rs 0.1 million a month. This exemption limit, which was previously Rs 0.4 million a year, has been increased three times to Rs 1.2 million a year. Tax will be levied at the rate of 5 percent for the income between 0.2 and 0.4 million monthly.

He further added;

People earning above 0.4 million monthly will be taxed at the rate of 15 percent. In Pakistan highest tax burden was on the salaried middle-class which include teachers, doctors, lawyers, nurses, accountants. Reduced tax rates will significantly lower tax burden on this class.

Pakistan’s tax net is already pretty much thin with only 1.2 million people under the tax net. This is roughly only 0.6% of the total population of Pakistan that exceeds the 200 million mark.

What’s interesting is that a PMLN Senator, Musadiq Malik, had justified that providing this tax relief would only have a minor impact on tax revenues and would give relief to the salaried class who were poor or belonging to the lower middle class. He claimed that the effect of Rs 80 billion in terms of relief was a minute one if we were to consider the total revenues of over Rs 4000 billion.


  • “Rs 2,000 for income ranging from Rs800,001 to Rs1,200,000 a year.”

    What does this mean? Is it Rs. 2000 per month fixed deduction?

          • U mean 2000 plus 5% on exceeding amount… Is it confirmed?? Any source?? Because there is big difference in the two scenarios

            • Source is glxspace dot com, visit that, it contains Income Tax Amendment Ordinance-2018, that document states clear instructions that 5% on amount exceeding 12 Lac

        • It is confirmed that 5% will only apply on amount exceeding 1.2 million. In case your annual income is 1.5 million you have to pay 17000 per annum or 1416.6 per month

  • Ltd feature videos

    Watch more at LTD

    close
    >