How to calculate income tax on salaries in Pakistan in 2022?
A Comprehensive Guide to Income Tax for salaried persons
Income tax is a direct type of tax levied by all governments on the income generated by citizens and businesses. For direct taxes, Pakistan has the Income Tax Ordinance 2001, which is administered by the Federal Board of Revenue (FBR). Under this ordinance, the central government is responsible for collecting this tax. The government has the authority to adjust income slabs and tax rates every year in its Annual Budget. Pakistan’s tax law considers the period from 1st July to 30th June to be the normal fiscal year. You can find all the information you need here on how to calculate income tax on salary in Pakistan.
As a result of income taxes, governments can fund public services, pay their obligations, and provide goods for citizens. Income doesn’t just refer to salary income. In addition, it includes rents from houses, shops, and profits from businesses, plus bonuses, capital gains, and income from other sources. Since 2019, the Corporate Income Tax rate is 29%, while the corporate tax rate for the Banking Sector is 35%. Other income taxes are also applicable, including the Super Tax, the Minimum Tax, and the Tax on Undistributed Reserves.
According to the Income Tax Ordinance of 2001, your salary is divided into the following categories:
- Basic Salary
- House Rent Allowance (HRA)
- Conveyance Allowance
- Medical and Other Allowances
Calculating Income Tax on Salary in 2022
- Online Method is available to calculate income tax
- Go to Income Tax Calculator
- Provide your income information
- Select whether you want to enter monthly or annual income
- Hit ‘Calculate’
- The results are shown below along with the applicable tax, salary after tax, exempted amount, and tax slab that you belong to.
- Income Tax Slabs
Individuals with salaries over Rs. 600,000/- per year will have a certain amount deducted from their salaries under the income tax slabs for the FY 2021-22.
Here’s what you need to know about tax slabs for FY 2021-22:
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Taxable Income | Income Tax Rate in Pakistan |
When taxable income exceeds Rs. 600,00 but not more than Rs. 1,200,000 | 5% of amounts exceeding Rs. 600,000 |
An income exceeding Rs. 1,200,000 but not exceeding Rs. 1,800,000 is taxable | 10% of the amount exceeding Rs. 1,200,000 plus Rs. 30,000 |
Taxable income exceeding Rs. 1,800,000 but not exceeding Rs. 2,500,000 | A total of Rs. 90,000 plus 15% of the amount over Rs. 1,800,000 |
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When taxable income exceeds Rs. 2,500,000 but does not more thanRs. 3,500,000 | You will have to pay Rs. 195,000 plus 17.5% of any amount exceeding Rs. 2,500,000 |
When taxable income exceeds Rs. 3,500,000 but not more than Rs. 5,000,000 | An amount of Rs. 370,000 plus 20% of an amount exceeding Rs. 3,500,000 |
When taxable income exceeds Rs. 5,000,000 but does not more than Rs. 8,000,000 | The amount exceeded Rs. 5,000,000 plus Rs. 670,000. |
When taxable income exceeds Rs. 8,000,000 but not more than Rs. 12,000,000 | 1 345 000 plus 25% of the amount exceeding 8,000,000 |
If taxable income exceeds Rs. 12,000,000 but not more thanexceed Rs. 30,000,000 | 2345,000 plus 27.5% of the amount exceeding 12,000,000 |
When taxable income exceeds Rs. 30,000,000 but not more than Rs. 50,000,000 | Rs. 7,295,000 plus 30% of any amount over Rs. 30,000,000Rs. |
When taxable income exceeds Rs. 50,000,000 but not more than Rs. 75,000,000 | Amount exceeding Rs. 50,000,000 plus 32.5% of the amount exceeding Rs. 13,295,000 |
When taxable income exceeds Rs. 75,000,000 | Rs. 21,420,000 plus 35% of an amount exceeding Rs. 75,000,000 |
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