FBR Income Tax Slabs Demystified: A Swift Overview to Optimize Your Wealth
FBR income tax slabs are changed as per Finance Act 2023 with some higher tax rates on high income individuals.
In Pakistan, it is essential for both individuals and businesses to understand the income tax slabs defined by the Federal Board of Revenue (FBR). These tax slabs play a vital role in determining the amount of tax a person or an organization needs to pay to the government. In order to ensure a fair and progressive tax system, FBR has designed different tax slabs with varying tax rates relative to income brackets. In this article, we shall be discussing the tax slabs that are applicable to taxpayers and their impact on national revenue collection.
For Pakistani residents, tax is levied on their income in Pakistan and abroad. The income of a salaried person is said to be Pakistani income, if it is related to the employment exercised in Pakistan. The salary of the said employment might be paid elsewhere/abroad.
Exemption of Salary Income as per Finance Act 2023
A non-resident is levied tax for his income in Pakistan whether it’s received, earned but receivable or deemed to accrue/arise in Pakistan.
Personal Income Tax Rates
Following are the details of taxes applicable to different categories of annual income
Tax on Salary in Pakistan with New FBR Income Tax Slabs
With the passing of the budget for the fiscal year 2023-24 by the parliament of Pakistan, the new tax rates are applicable since July 1, 2023.
As per amended Finance Bill 2023 updated 30th June, 2023, Section 149 deals with salaries which directs the person to deduct the tax from the salary to be paid to employees as per the following grid and deposit the same to the government treasury. The annual income of PKR 600,000 from the salary source is exempted from tax as per Finance Act 2023 with certain changes in tax on higher salary income as per new FBR Income Tax Slabs.
As per amended Finance Bill 2023 updated 30th June, 2023, Section 149 deals with salaries which directs the person to deduct the tax from the salary to be paid to employees as per the following grid and deposit the same to the government treasury. The annual income of PKR 600,000 from the salary source is exempted from tax as per Finance Act 2023.
The tax is applicable to individuals, if 75% of their taxable income is from the salary source.
| Salary Range in Pakistani Rupee (PKR) | Tax on Base (Start Column) | Tax on Excess of Base | |
| Start | End | ||
| 0 | 600,000 | 0 | 0 |
| 600,000 | 1,200,000 | 0 | 2.5% |
| 1,200,000 | 2,400,000 | 15,000 | 12.5% |
| 2,400,000 | 3,600,000 | 165,000 | 22.5% |
| 3,600,000 | 6,000,000 | 435,000 | 27.5% |
| 6,000,000 | Onward | 1,095,000 | 35.0% |
In comparison to previous slabs, a higher income tax rate is applicable to salary income under new FBR Income Tax Slabs with the annual salary exceeding PKR2,400,000. However, there is no change in the bracket where salary ranges from 1,200,000 to 2,400,00.
You can easily calculate your income tax by just entering your monthly salary income with our easy to use tax calculator 2023
A new tax rate for the salary range from 3,600,000 to 6,000,000 and above 6,000,000 is also introduced.
Other Taxes on Salary Income
The major tax levied on salary income is the tax levied by FBR under section 149
“According to Section 149 of the Income Tax Ordinance, 2001, an employer or his designated person shall withhold/deduct income tax at the average rate of tax from payment of salary to the employee(s) exceeding the exemption limit as given in Division I of Part I of the First Schedule after allowing adjustment of tax withheld under other heads and tax credit admissible under section 61 and 63 during the tax year duly supported by the documentary evidence for any tax paid by the said employee, any extra or less deduction of tax during the preceding period, and deduction of tax was erroneously missed which was otherwise required under Income Tax ordinance, 2001.”
Section 149 of Income Tax Ordinance 2001
Taxes on Other Individuals and Association of Persons
The following tax rates are applicable to other individuals and association of persons (AOPs). With new FBR Income Tax Slabs as per amended finance bill 2023 has increased the rate of income taxes for AOPs and Individuals as compared to previous tax rates.
| Income Range in Pakistani Rupee (PKR) | Tax on Base (Start Column) | Tax on Excess of Base | |
| Start | End | ||
| 0 | 600,000 | 0 | 0 |
| 600,000 | 800,000 | 0 | 7.5% |
| 800,000 | 1,200,000 | 15,000 | 15.0% |
| 1,200,000 | 2,400,000 | 75,000 | 20.0% |
| 2,400,000 | 3,000,000 | 315,000 | 25.0% |
| 3,000,000 | 4,000,000 | 465,000 | 30.0% |
| 4,000,000 | Onward | 765,000 | 35.0% |
Applicable Withholding Taxes Under Finance Act 2023
Based on the status of the individual and AOP as tax-filer or non-filer, different types of withholding taxes are applicable on supplies of goods, rendering of services, and execution of contracts.
It is highly advisable to consult professional tax consultants or FBR sources to calculate and pay your taxes, especially filing of your tax returns and getting in depth understanding of new FBR Income Tax Slabs.
FAQs
Conclusion
Under the Finance Act 2023, the revised FBR income tax slabs in Pakistan are effective from July 1, 2023. The revisions impact salary income and other entities. It is crucial for taxpayers to stay informed about the new tax rates and applicable slabs as per the annual income bracket. The taxpayers are recommenede to seek professional advice for accurate calculations and ensure compliance of their tax obligation with the updated tax rates.
