Islamabad: The government has proposed revised income tax slabs for salaried individuals in the new Finance Bill. The Salary Tax changes, effective July 1, will affect employees across different income groups from the start of the new fiscal year.
The government plans to present the final Finance Bill before the National Assembly for approval today. After approval, the revised tax structure will come into effect on July 1.
Under the proposed plan, employees earning up to Rs600,000 per year will not pay income tax. This exemption will provide relief to lower-income salaried workers.
However, people with annual salaries between Rs600,000 and Rs1.2 million will pay tax at a rate of 1 percent. The government has kept this rate low for workers in the early taxable income bracket.
Meanwhile, employees earning between Rs1.2 million and Rs2.2 million annually will pay a fixed tax of Rs6,000. They will also pay 11 percent tax on income above Rs1.2 million.
The Salary Tax July 1 plan also reduces the tax rate for people earning between Rs2.2 million and Rs3.2 million annually. These taxpayers will pay a fixed tax of Rs116,000, followed by a 20 percent tax on income above Rs2.2 million.
Previously, this income group faced a 23 percent rate on the additional amount. Therefore, the revised proposal offers some relief to salaried workers in this bracket.
People earning between Rs3.2 million and Rs4.1 million per year will pay a fixed tax of Rs346,000. In addition, they will pay 25 percent tax on the amount that exceeds Rs3.2 million.
Similarly, individuals with annual incomes between Rs4.1 million and Rs5.6 million will pay a fixed tax of Rs541,000. They will then pay 29 percent tax on income above the lower limit.
For annual income between Rs5.6 million and Rs7 million, the Finance Bill sets fixed tax at Rs976,000. Moreover, taxpayers in this category will pay 32 percent tax on the excess amount.
The highest tax bracket will apply to salaried individuals earning more than Rs7 million annually. They will pay Rs1.424 million as a fixed tax, along with a 35 percent tax on income exceeding Rs7 million.
The new Salary Tax July 1 structure shows how much tax employers may deduct from monthly salaries after the new financial year begins. However, the exact deduction will depend on an employee’s total taxable annual income and applicable tax adjustments.
Salaried employees should review their expected annual income before July. This step can help them understand the likely impact of the new Salary Tax rates effective July 1 on their monthly take-home pay.
