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How to calculate income tax on salaries in Pakistan in 2022?

A Comprehensive Guide to Income Tax for salaried persons

how to collect income tax

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

  1. Online Method is available to calculate income tax
  2. Go to Income Tax Calculator
  3. Provide your income information
  4. Select whether you want to enter monthly or annual income
  5. Hit ‘Calculate’
  6. The results are shown below along with the applicable tax, salary after tax, exempted amount, and tax slab that you belong to.
  7. 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:

 

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

  

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

Was this helpful? Contact Taxocrate (Pvt) Ltd for more information

We have tried to explain how to calculate income tax on salaries in 2022 in Pakistan. If you still have questions in mind, please contact us by calling us at 0302-66447898. 

Contact for Income Tax / Sales Tax Filing:

If you want to pay your income tax / sales tax, Taxocrate can help you by filing your taxes and will provide you with all the relevant information regarding the taxation system in Pakistan. 

Starting a New Business in Pakistan? Taxocrate can help you Register with SECP:

Thinking about starting a new business in Pakistan? Don’t wait, this is the best time to invest in Pakistan. A new business always requires registration with the concerned departments, and we’re here to help your business get registered with the Securities & Exchange Commission of Pakistan (SECP) and the Federal Board of Revenue (FBR). All you need is to contact us and your business plan and get your business or company registered within a week, with the expertise of Taxocrate (Pvt) Ltd.

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