KARACHI: The coalition government has doubled the limit of exemption from income tax imposed on earning for the salaried individuals to Rs100,000 per month with effect from July 1, 2022 — increasing it from the earlier Rs50,000 per month.
Besides, it has cut the income tax rates on earnings of more than Rs100,000 per month.
It also reduced tax slabs to seven for the next fiscal year 2022-23 compared to 12 in the outgoing fiscal year 2001-22.
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The budget documents suggest the people earning more would save more in taxes after the incumbent government revised downwards the income tax rate for salaried people and the maximum benefit would pass on to the people earning more than Rs1 million a month (or Rs12 million in a year).
The measure would help people spend more, improve economic activities and increase the collection of revenue in indirect taxes to the national exchequer.
The budget documents suggest that salaried individuals’ earning up to Rs50,000 per month would remain exempted from income tax.
The individuals earning over Rs50,000 to Rs100,000 per month would pay only Rs100 during the entire fiscal year 2022-23.
According to the proposed new income tax slabs, people earning above Rs1.2 million in a year, but not more than Rs2.4 million, would be subject to pay 7% income tax in the next fiscal year.
People would pay Rs84,000 or 12.5% on the income exceeding Rs2.4 million a year but not exceeding Rs3.6 million.
Salaried individuals would be subject to pay income tax totalling Rs234,000 or 17.5% on income exceeding Rs3.6 million per year, but not exceeding Rs6 million in FY23.
People who earn a salary of more than Rs6 million per year to a maximum of Rs12 million in a year would be subject to pay income tax amounting to Rs654,000 or 22.5% next fiscal year.
The salaried individuals earning any amount above Rs12 million a year would be subject to pay income tax at Rs2 million or 32.5% in FY23.
While presenting the budget for the fiscal year 2022-23 in the National Assembly on Friday, Finance Minister Miftah Ismail said that the basic threshold of taxable salary is proposed to be enhanced to Rs1.2 million per year from the current Rs600,000 for salaried individuals.
“This would pass tens of billions of rupees benefit to the salaried people,” he said.
The measures would generate a positive economic cycle whereby the money would get transferred to the businesses as the disposable income of salaried people increases “therefore ultimately, the government will benefit through the thriving of business, creation of more jobs, and tax revenues in the future”, he added.
