Calculate Income Tax on Your Salaries from July 1 2024
Calculate Income Tax on Your Salaries from July 1 2024.
New Fiscal Year Brings Significant Tax Changes for Salaried Class
The Finance Bill 2024, effective from July 1, has introduced substantial changes in taxation for the salaried class.
Read More: Increase in Tax on Cash Withdrawals from July 2024
These changes aim to increase revenue through varied tax rates and fixed taxes based on income brackets, significantly impacting the disposable income of many individuals.
Overview of the New Tax Regime
The revised tax rates are structured to impose higher taxes on higher-income earners, while those with lower incomes receive certain exemptions and lower tax rates.
Exemptions and Lower Income Brackets
- Income up to Rs50,000 per month (Rs600,000 per year): Exempt from income tax.
- Monthly incomes up to Rs100,000 (annual incomes from Rs600,000 to Rs1.2 million): Subject to a 5% income tax rate. The monthly tax for this bracket increases from Rs1,250 to Rs2,500.
Middle-Income Brackets
- Annual incomes between Rs1.2 million and Rs2.2 million: Taxed at a 15% rate, with an additional fixed tax of Rs30,000 annually. For example, an individual earning Rs183,344 per month will pay Rs15,000 in monthly tax, up from Rs11,667.
- Annual incomes between Rs2.2 million and Rs3.2 million: Taxed at 25%, with an additional fixed tax of Rs180,000 annually. An individual earning Rs267,667 per month will now pay Rs36,083 in monthly tax, up from Rs28,770.
Higher-Income Brackets
- Annual incomes between Rs3.2 million and Rs4.1 million: Taxed at a 30% rate, with a fixed tax of Rs430,000 annually. For those earning Rs341,667 per month, the monthly tax rises to Rs58,333 from Rs47,408.
- Annual incomes exceeding Rs4.1 million: Subject to a 35% tax rate, coupled with a fixed tax of Rs700,000 annually.
Additional Surcharges
- Incomes exceeding Rs10 million: Individuals and Associations of Persons (AOPs) are subject to a 10% surcharge on their income.
Impact on Disposable Income
These new tax measures are expected to significantly affect the disposable income of the salaried class, especially for higher-income earners. The higher tax rates and fixed taxes will lead to increased tax burdens, prompting individuals to manage their finances more diligently.
Broader Fiscal Policies and Vehicle Taxation
The Finance Bill 2024 introduces various fiscal policies, including revised tax rates on locally manufactured vehicles. Effective from July 1, the tax on vehicles has shifted from a fixed amount to a value-based system, aligning the tax with the vehicle’s value. This change is part of the government’s broader strategy to enhance revenue collection.
Conclusion
The Finance Bill 2024 marks a substantial shift in taxation for the salaried class in Pakistan. With increased tax rates and additional fixed taxes, individuals must understand the new regime to effectively manage their finances. The government aims to bolster revenue collection through these measures, reflecting a strategic approach to fiscal policy. For more detailed information on the Finance Bill 2024 and its implications, visit FBR| Federal Board of Revenue – Government of Pakistan.
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