Salaried Class Tax Calculation

1821RECORDER REPORT ISLAMABAD: The Federal Board of Revenue has slightly burdened the salaried class with extra income tax ranging between Rs500 to Rs10,000 per annum by introducing new slabs at serial number 1 to 6 whereas maximum relief in tax has been provided up to Rs170,000 per annum to the salaried persons falling under slabs between 7 to 10. A comparison of new slabs for salaried class with the old slabs by tax experts revealed that the burden of income tax in between Rs 500 to Rs 10,000 has been proposed on the salaried persons falling under slabs 1-6 as per Finance Bill (2013-14). However, the highest increase in tax has been proposed in the last tax bracket, ie, slab 12. The maximum income tax relief of up to Rs170,000 has been allowed to salaried individuals through Finance Bill, 2013. Newly introduced slabs 7 to 10 allowed maximum relief up to Rs170,000 and slabs between 1 to 6 slightly burden the salaried class ranging between Rs500 to Rs10,000. The slab number 11 is twofold, salary ranging between Rs 4 million to Rs 5.5 million got relief in tax liability, however, the remaining portion of taxable income exceeding Rs5.5 million though falling under slab 11 shall burden the salaried taxpayer. When contacted a Lahore-based tax lawyer Waheed Shahzad Butt told Business Recorder here on Thursday that as a result of new salary slabs, major salary portion has automatically been added to the take-home salaries of medium class salaried persons. This means there is ultimate increase in the monthly pay of salaried persons belonging to middle-income categories of salaried individuals in their take-home salary in August 2013 pertaining to the period of July 2013. Maximum annual benefit for salaried class may touch the figure of Rs170,000. Tax experts said a substantial reduction in tax liability of middle-income salaried taxpayers, automatically adding a handsome amount of salary portion to their take-home salaries. Though salaried taxpayers falling under higher tax brackets will now pay income tax at an increased rate ranging between 22.50 percent to 30 percent because the highest tax bracket of 20 percent has been split into six more new brackets with a progressive increase in tax rate. Waheed Butt elaborated that a salaried taxpayer means a person whose salary constitutes more than 50 percent of the total income. All perquisites, allowances or benefits subject to exclusion under Part-I of the Second Schedule to the Income Tax Ordinance 2001, are to be included in the taxable salary. Presently introduced salary slabs shall be applicable for tax year 2014. For withholding purposes, these shall apply to salary paid on or after 1st day of July 2013. In the light of Finance Bill, 2013 the comparison of tax relief and further burden on different salary groups has been elaborated in the following table:-

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Serial SALARY ANNUAL TAX BEFORE TAX AFT ER INCREASE/
No. MONTHLY SALARY BUDGET-13 BUDGET-13 (RELIEF) (Rs) (Rs) (Rs) (Rs) Rs
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1 33,333 400,000 Zero Zero 0
2 50,000 600,000 10,000 12,500 2,500
3 60,000 720,000 16,000 16,500 500
4 66,667 800,000 22,500 27,500 5,000
5 70,000 840,000 26,500 31,500 5,000
6 83,333 1,000,000 42,500 47,500 5,000
7 90,000 1,080,000 50,500 55,500 5,000
8 100,000 1,200,000 62,500 67,500 5,000
9 116,667 1,400,000 82,500 90,000 7,500
10 125,000 1,500,000 92,500 102,500 10,000
11 133,333 1,600,000 110,000 115,000 5,000
12 141,667 1,700,000 125,000 127,500 2,500
13 150,000 1,800,000 140,000 140,000 0
14 158,333 1,900,000 155,000 155,000 0
15 166,667 2,000,000 170,000 170,000 0
16 183,333 2,200,000 210,000 200,000 -10,000
17 200,000 2,400,000 245,000 235,000 -10,000
18 233,333 2,800,000 480,000 310,000 -170,000
19 266,667 3,200,000 560,000 395,000 -165,000
20 316,667 3,800,000 680,000 537,500 -142,500
21 375,000 4,500,000 820,000 725,000 -95,000
22 416,667 5,000,000 920,000 862,500 -57,500
23 458,333 5,500,000 1,020,000 1,000,000 -20,000
24 500,000 6,000,000 1,120,000 1,137,500 17,500
25 566,667 6,800,000 1,280,000 1,357,500 77,500
26 600,000 7,200,000 1,360,000 1,472,500 112,500
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