Juggernaut of income tax hike to roll over salaried class

Increase in rates and new slabs means tough time ahead of middle class

KARACHI: The next fiscal year starting from July 1 is set to bring a new bout of troubles for salaried individuals earning more than Rs50,000 per month as the government has aggressively increased income tax rates in the proposed budget in a bid to increase revenue collection.

People earning less than Rs50,000 per month are exempted from paying income tax, according to budget documents.

Salaried individuals earning over Rs50,000 per month but less than Rs100,000  are liable to pay 5% of the amount exceeding the sum of Rs50,000. For example, if a person earns Rs75,000 a month, they will be liable to pay 5% of Rs25,000 as Rs50,000 of their earning is exempted from income tax. Accordingly, that person will pay Rs1,250 per month from July onwards.

In the outgoing year FY19, a person drawing a salary of Rs75,000 per month was paying a fixed income tax of Rs166.66 per month. So by paying an additional Rs1,083.34 in income tax every month from July, that person will pay Rs13,000 extra than last year.

Under the reintroduced slab number two, a person earning over Rs100,000 per month but less than Rs150,000  is liable to pay a fixed amount of Rs2,500 in addition to the 10% of the amount exceeding Rs100,000 per month from July onwards. If a person is drawing Rs125,000, they will pay Rs2,500 as well as 10% of Rs25,000 which comes to Rs2,500. In total, that person will pay Rs5,000 per month in income tax.

In the outgoing year FY19, a person drawing a salary of Rs125,000 was paying Rs1,250 per month. From July, they will be paying an additional amount of Rs3,750 per month in income tax. In the entire FY20, they will paying Rs45,000 more than in FY19.

Under the third slab, a person earning over Rs150,000 per month but less than Rs208,333.33 is liable to pay a fixed amount of Rs7,500 and 15% of the amount exceeding Rs150,000 from the next fiscal year.

If a person is drawing Rs175,000 a month then he will pay Rs7,500 and 15% of Rs25,000 which comes to Rs3,750. That person will pay Rs11,250 per month in income tax.

In FY19, a person drawing Rs175,000 per month was paying Rs3,750. Now they will pay an additional amount of Rs7,500 per month every month. In the entire fiscal year, They will pay Rs90,000 extra than what they paid in FY19.

Under the fourth slab, a person earning more than Rs208,333.33 per month  but less than Rs291,666.66  is liable to pay a fixed sum of Rs16,250 and 17.5% of the amount exceeding Rs208,333.33 per month from the next fiscal year. If someone is drawing a salary of Rs250,000 a month, they will pay Rs16,250 and 17.5% of Rs41,666.67 which comes to Rs7,291.66.They will pay a total of Rs23,541.66 per month in income tax.

In the outgoing year, a person drawing a salary of Rs250,000 per month was paying Rs11,666.66 per month. Now they will pay an additional Rs11,875 per month in tax every month. In the entire FY20, they will pay Rs142,500 extra than in FY19.

In the fifth slab, a person earning more than Rs291,666.66 per month but less than Rs416,666.66 is liable to pay a fixed amount of Rs30,833.33 and 20% of the amount exceeding Rs291,666.66 per month from FY20.

For example, if a person is drawing Rs350,000 a month, they will pay Rs30,833.33 and 20% of Rs58,333.34 which comes to Rs11,666.66. Now they will pay a total of Rs42,499.99 per month in income tax.

In FY19, a person drawing a salary of Rs350,000 per month was paying Rs27,500. Now they will pay an additional Rs14,999.99 every month. In the entire FY20, they will pay Rs179,999.88 more than what they did in FY19.

Under slab number six, a person earning more than Rs416,666.66 per month but less than Rs666,666.66 is liable to pay a fixed sum of Rs55,833.33 and 22.5% of the amount exceeding Rs416,666.66 per month in FY20.

If a person is drawing Rs550,000 a month, they will pay Rs82,083.32 per month in FY20 compared to Rs45,833.33 per month in FY19. They will be paying an additional Rs36,249.99 per month from July 2019.

In the seventh bracket, a person earning over Rs666,666.66 per month but less than Rs1 million is liable to pay Rs112,083.33 and 25% of the amount exceeding Rs666,666.66 per month in FY20.

If they are drawing Rs850,000 a month, they will pay Rs157,916.66 per month in FY20 in comparison with Rs136,666.66 per month in FY19. They will be paying an additional Rs21,249.99 per month from July 2019.

Under the eighth slab, a person earning more than Rs1 million per month but less than Rs2.5 million is liable to pay a fixed sum of Rs195,416.66 and 27.5% of the amount exceeding Rs1 million per month in FY20. If a person is drawing Rs2 million a month, he will pay Rs470,416.66 per month in FY20 against Rs424,166.66 per month in FY19. They will be paying Rs46,250 per month extra from the next fiscal year.

In the ninth bracket, a person earning over Rs2.5 million per month but less than Rs4.16 million is liable to pay Rs607,916.66 and 30% of the amount exceeding Rs2.5 million per month in FY20.

If they are drawing Rs3.5 million a month, they will pay Rs907,916.66 per month in FY20 against Rs799,166.66 per month in FY19. They will be paying an additional amount of Rs108,750 per month from July.

Under slab number 10, a person earning over Rs4.16 million per month but less than Rs6.25 million is liable to pay Rs1.10 million and 32.5% of the amount exceeding Rs4.16 million per month in FY20.

If a person is drawing Rs5.50 million a month, they will pay Rs1.53 million per month in FY20 against Rs1.29 million per month in FY19.

Under slab number 11, a person earning any amount exceeding Rs6.25 million per month, they will pay a fixed amount of Rs1.78 million and 35% of the amount exceeding Rs6.25 million per month in FY20.

If they were drawing Rs7.50 million a month, they will pay Rs2.21 million per month in FY20 in comparison with Rs1.79 million per month in FY19.