ISLAMABAD: The Federal Board of Revenue (FBR) has officially notified salary tax slabs according to which the individuals drawing more than Rs2.5 million in salaries a year have to bear impact of higher taxation introduced through the mini-budget in retrospective effect from July 1.
The sources said a salaried individual drawing income above Rs208,333/month will face higher tax incidence as a result of changes introduced through an amendment into the Income Tax Ordinance 2001. They said those who fall in slab of taxable income will also pay the differentials from July 1 although the amendment was applied from October 10.
The sources said the Federal Board of Revenue (FBR) has already directed employers to recover the differential tax amounts.
An FBR official said the government has maintained first four slabs out of six slabs as introduced through Finance Act 2018, but the Finance Supplementary (Amendment) Act 2018 enhanced tax rates and the slabs were increased to seven. “The changes to slabs revised for salaried and business individuals have been applicable from July 1,” an official at the Federal Board of Revenue (FBR) said. The FBR said the amendment would not result in an increased tax incidence on salaried individuals who earn income up to Rs2.5 million or up to Rs208,333 per month.
The previous government revised the tax slabs, in the last budget of 2017/18, in order to facilitate the salaried class. The income threshold for salaried taxpayers remained at Rs400,000. However, a nominal amount of fixed tax was imposed at Rs1,000 for individuals drawing income between Rs400,000 to Rs800,000. An amount of Rs2,000 was fixed as tax for individuals with salary income between Rs800,000 and Rs1.2 million per year. The present government, however, presented its amended finance bill on September 18 and revised changes to the slabs for both salaried and business individuals. The government claimed that the changes would not affect the tax chargeability on the salaried class. FBR, however, said salaried individuals drawing income above Rs2.5 million to Rs4 million are liable to pay a fixed amount of Rs65,000 and another 15 percent of the amount exceeding Rs2.5 million. Prior to the change, the tax for the slab between income of Rs2.4 million and Rs4.8 million was fixed at Rs60,000 with additional 10 percent of the amount exceeding Rs2.4 million, effective from July 1, 2018. Similar changes have been introduced for remaining higher slabs of income. The FBR has issued formula for deducting income tax from salaried individuals for July to September.
The government said it has rationalised the tax concessions given to salaried and business individuals to generate an additional Rs27 billion as opposed to the previous government which provided Rs90 billion worth of reliefs to salaried and business individuals. The present government set an ambitious tax collection target of Rs4.435 trillion for the FBR for the current fiscal year of 2018-19, up more than 18 percent over the total collection of Rs3.751 trillion in 2017-18.
