In response to ongoing economic difficulties, the federal government is contemplating income tax relief for the salaried class.
Prime Minister Shehbaz Sharif has tasked the economic team with exploring measures to provide financial relief.
According to sources within the Ministry of Finance, the government is considering a relief package worth Rs 40 billion specifically for individuals earning up to Rs 100,000 per month. This relief aims to support those in lower salary brackets amidst rising economic pressures.
However, before any final decisions are made, the government plans to consult with the International Monetary Fund (IMF) to ensure compliance with existing financial agreements.
The proposed relief will not be sourced from the annual budget but is expected to be funded by reallocating development funds.
The Prime Minister’s economic team is currently evaluating various proposals to effectively implement this relief while maintaining financial stability.
Tax deduction from monthly salary
Earlier, after the approval of the Budget 2024-25, the federal government introduced new income tax slabs effective from July 1, 2024, altering the tax obligations for many salaried individuals.
The Federal Board of Revenue (FBR) has outlined a revised structure, setting new income tax brackets and rates that will affect those earning above Rs50,000 per month.
Under the new tax regime, individuals with a monthly salary of Rs150,000 will face a significant tax increase. This revised structure includes several tax slabs designed to capture a wider income range, impacting salaried individuals and government employees alike.
Read more: Calculate income tax you will pay on your salaries from July 1
Tax slabs overview
The updated tax slabs are as follows:
- No Tax: Income up to Rs50,000 per month.
- 5% Tax: Income ranging from Rs50,001 to Rs100,000 per month. Previously, this bracket had a fixed tax of Rs1,250, which has now increased to Rs2,500.
- 15% Tax: Income between Rs100,001 and Rs183,344 per month. Tax in this bracket has risen from Rs11,667 to Rs15,000.
- 25% Tax: Income from Rs183,345 to Rs267,667 per month.
- 30% Tax: Income ranging from Rs267,668 to Rs341,667 per month. This rate replaces the previous tax of Rs47,468, increasing to Rs53,333.
Impact on Rs150,000 Monthly Salary
For those earning Rs150,000 monthly, the income tax will now be calculated under the 30% slab. Based on the new structure, their annual income falls into the Rs1,800,000 – Rs3,600,000 range, which is taxed at 30% of the amount exceeding Rs1,600,000. The revised tax burden means individuals with this salary will see a more substantial deduction from their paychecks starting August 2024.
Also Read: New tax rates on vehicles from July 1, 2024
Income tax calculation
To illustrate, for a monthly salary of Rs150,000:
- The total annual income amounts to Rs1,800,000.
- The taxable amount exceeding Rs1,600,000 is Rs200,000.
- The tax on this exceeding amount at 30% is Rs60,000 annually, translating to Rs5,000 per month.
