Income Tax

What is the Income Tax?

As the name suggests, the income tax is the applicable tax on your income. Income earners pay it, which includes self-employed persons, salaried individuals, and non-incorporated firms. It is among one of the significant sources of payroll generation for the government.

Income Tax

By section 4 under Income Tax Ordinance 2001, It is applicable to each person who has taxable income for every tax year upon the rates declared by the government.

What is Tax Year?

The tax year is a twelve months period from 1st July to 30th June and shall be marked by the Calendar year under which the said date arrives.

What is Taxable Income in Pakistan?

The taxable income is observed as the whole income of a person calculated within the tax year after subtracting the whole of any allowances to deduct, e.g., Zakat, etc.

What is the Total Income?

The total Income is the sum of a person’s yearly income upon each of the income heads.

income tax sales tax

What are the Income Heads in Pakistan?

By Tax Ordinance 2001, the income is classified into different types which include Income from property, Salary, income from a business, income from any other sources, or capital gains on investments.

The taxation structure of a country determines the strength of the economy. Under the law, it is the responsibility of Pakistani citizens to declare their assets, document the annual tax returns, and pay due taxes timely. The new tax reforms are announced a while ago, to restructure the taxation system in Pakistan by making it easier, simpler, and convenient in order to get people under the tax net by encouraging them to document tax returns and pay the due taxes timely.

 A common misconception is revolving among people that tax paying is optional. However, tax evasion is a criminal offense and the tax evader may be penalized for the violation of the law.

The tax regulations in Pakistan are defined in the Income Tax Ordinance 2001. The Federal Board of Revenue (FBR) is responsible to regulate the taxation system in the country. For documenting tax returns, a person must have NTN registration.

By Federal Budget of 2019-2020 presented by the Government of Pakistan, the following tax rates and tax slabs are applicable for salaried and non-salaried persons for 2019-2020:

TAX SLABS FOR SALARIED PERSONS

If an individual’s income is under the ‘Salary’ head exceeds 75% of its taxable income, the mentioned below tax rates will be applied:

Taxable Income Rate of Tax:

  1. If the taxable income remains below Rs. 600,000 – Income tax rate= 0%.
  1. If taxable income surpasses Rs. 600,000 but below to Rs. 1,200,000 – Income tax rate= 5% on the amount above to Rs. 600,000.
  1. If taxable income surpasses Rs. 1,200,000 but below to Rs. 1,800,000 – Income tax rate= Rs. 30,000 plus 10% on the amount above to Rs. 1,200,000.
  1. If taxable income surpasses Rs. 1,800,000 but below to Rs. 2,500,000 – Income tax rate= Rs. 90,000 plus 15% on the amount above to Rs. 1,800,000.
  1. If taxable income surpasses Rs. 2,500,000 but below to Rs. 3,500,000 – Income tax rate= Rs. 195,000 plus 17.5% on the amount above to Rs. 2,500,000.
  1. If taxable income surpasses Rs. 3,500,000 but below to Rs. 5,000,000 – Income tax rate= Rs. 370,000 plus 20% on the amount above to Rs. 3,500,000.
  1. If taxable income surpasses Rs. 5,000,000 but below to Rs. 8,000,000 – Income tax rate= Rs. 670,000 plus 22.5% on the amount above to Rs. 5,000,000.
  1. If taxable income surpasses Rs. 8,000,000 but below to Rs. 12,000,000 – Income tax rate= Rs. 1,345,000 plus 25% on the amount above to Rs. 8,000,000.
  1. If taxable income surpasses Rs. 12,000,000 but below to Rs.30,000,000 – Income tax rate= Rs. 2,345,000 plus 27.5% on the amount above to Rs. 12,000,000.
  1. If taxable income surpasses Rs. 30,000,000 but below to Rs.50,000,000 – Income tax rate= Rs. 7,295,000 plus 30% on the amount above to Rs. 30,000,000.
  1. If taxable income surpasses Rs. 50,000,000 below to Rs.75,000,000 – Income tax rate= Rs.13,295,000 plus 32.5% on the amount above to Rs. 50,000,000.
  1. If taxable income surpasses Rs.75,000,000 – Income tax rate= Rs. 21,420,000 plus 35% on the amount above to Rs. 75,000,000.

TAX SLABS FOR NON-SALARIED PERSONS:

If an individual’s income is under the ‘Salary’ head exceeds 75% of its taxable income, the mentioned below tax rates will be applied:

Taxable Income Rate of Tax:

1. If the taxable income remains below Rs. 400,000 – Income tax rate= 0%.

2. If taxable income surpasses Rs. 400,000 but under Rs. 600,000 – Income tax rate= 5% on the amount above to Rs. 400,000.

3. If taxable income surpasses Rs. 600,000 but under Rs. 1,200,000- Income tax rate= Rs. 10,000 plus 10% on the amount above to Rs. 600,000.

4. If taxable income surpasses Rs. 1,200,000 but under Rs. 2,400,000 – Income tax rate= Rs. 71,000 plus 15% on the amount above to Rs. 1,200,000.

5. If taxable income surpasses Rs. 2,400,000 but under Rs. 3,000,000 – Income tax rate= Rs. 250,000 plus 20% on the amount above to Rs. 2,400,000.

6. If taxable income surpasses Rs. 3,000,000 but under Rs. 4,000,000 – Income tax rate= Rs. 370,000 plus 25% on the amount above to Rs. 3,000,000.

7. If taxable income surpasses Rs. 4,000,000 but under Rs. 6,000,000 – Income tax rate= Rs. 620,000 plus 30% on the amount above to Rs. 4,000,000.

8. If taxable income surpasses Rs. 6,000,000 – Income tax rate= Rs. 1,220,000 plus 35% on the amount above to Rs. 6,000,000.

Income Tax Slabs

LOOKING TOWARDS GETTING INCOME TAX RETURNS FILED?

Under the strict government programs regulations, it has come greatly necessary that you’re completely biddable with Pakistan’s taxation system. Taxocrate is a league of professional tax advisers in Karachi and tax lawyers in Islamabad. We don’t just give tax consultancy but also aid you in tax deduction and insurance conditions in your favor. This will let you concentrate your energy and time on the core business conditioning. We’ve tax lawyers in Karachi and tax advisers in Islamabad who work in the following parts in the area of tax consultancy

– Individualities.
– Salaried Earner.
– Associations.
– Companies.
– Non-Profit Organization (NGOs).

We work by making a complete analysis of your accounts books, making your Income Statement, doing essential amendments (if needed), and finishing the Income Statement. After process completion, we demonstrate the Return of Income after discussion and getting approval from the customer.

TAXOCRATE SERVICES

Taxocrate

We give you mentioned below high-quality tax consultancy services for your compliance with the tax regulations:
• The strategy development and planning of your tax filing.
• Documenting of your Tax returns.
• National Tax Number enrollment for tax correspondence with FBR.
• Dealing with Taxation Authorities like taking interpretations, documentations, and approval from FBR.
• Wealth statement Preparation.
• Electronic Challan Payment and Preparation.
• Filing and Preparation of other tax statements (if needed).
• give guidance in FBR audit and Conduct tax audit.
• Guidance and Advisory on day-to-day tax issues of the clients.
• Manage appeals and objections.
• Guidance on Tax Deduction.
• Refunds of Income-tax from the tax authorities for clients.
• Manage Tax exemptions for educational institutions and NGOs.

Taxocrate