The federal government has revised the tax rates for the salaried class in order to increase revenue for the fiscal year 2022-23 (FY2022-23). According to the details, the coalition government has withdrawn the tax relief and also imposed an additional Rs. 33 billion in net additional taxes, which will put a burden of Rs. 80 billion on them..
The decision has been taken in response to the pressure by International Monetary Fund (IMF) in order to restore the $6 billion loan programme. The IMF had demanded to tax the upper middle and rich income groups that earn in the range of Rs. 104,000 to Rs. 1 million a month at a single rate of 30%, which the government did not accept.
The new tax rates for salaried class are still lower than the initial demand of the International Monetary Fund (IMF) but they will still put a massive burden of Rs. 80 billion on them. Furthermore, the impact of the increased taxes would be seen in the salaries for the month of July 2022 that will be withdrawn in August 2022.
New Tax Slabs For Fiscal Year 2022-23
According to the new proposals, the government plans to impose a tax rate of 2.5% for monthly income Rs. 50,001 to Rs. 100,000, while those earning over Rs. 100,000 to Rs. 200,000 on monthly basis will pay an annual fixed tax of Rs. 15,000 in addition to 12.5% on amount exceeding Rs. 100,000 on their monthly salary.
Furthermore, those earning over Rs. 200,000 to Rs. 300,000 per month will have to pay an annual fix tax of Rs. 165,000 in addition to 20% on amount exceeding Rs. 200,000 on their monthly salary. Moreover, those earning a monthly income over Rs. 300,000 to Rs. 500,000 will pay a fixed annual tax of Rs. 405,000 plus an additional 25% on the amount exceeding Rs. 300,000 on their monthly salary.
The tax rates increase significantly beyond this point as people earning over Rs. 500,000 to Rs. 1,000,000 per month will pay Rs. 1,005,000 annual fixed tax with an additional 32.5% on the amount exceeding Rs. 500,000 on their monthly salary. Meanwhile, those earning over Rs. 1,000,000 will pay Rs. 2,955,000 annual fixed tax plus additional Rs. 35% on amount exceeding Rs. 1,000,000 on their monthly salary.
Revised Income Tax Rates on Salary Slabs
Salary Per Month | Annual Income Tax |
|---|---|
Under Rs. 50,000 | Zero Tax |
Rs. 50,001 to Rs. 100,000 | 2.5% of amount exceeding Rs. 50,000 |
Rs. 100,001 to Rs. 200,000 | Rs. 15,000 + 12.5% of amount exceeding Rs. 1,200,000 in annual salary |
Rs. 200,001 to Rs. 300,000 | Rs. 165,000 + 20% of amount exceeding Rs. 2,400,000 in annual salary |
Rs. 300,001 to Rs. 500,000 | Rs. 405,000 + 25% of amount exceeding Rs. 3,600,000 in annual salary |
Rs. 500,001 to Rs. 1,000,000 | Rs. 1,005,000 + 32.5% of amount exceeding Rs. 6,000,000 in annual salary |
Rs. 1,000,001 or above | Rs. 2,955,000 + 35% of amount exceeding Rs. 12,000,000 in annual salary |
It is pertinent to mention that salaries are mentioned on monthly basis while tax is calculated based on the annual or yearly salary for individuals to make it easier to understand. This decision by the government will put a lot of pressure on the salaried class in the coming fiscal year 2022-23.
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