Income tax 2024: Calculate your salary deductions starting July 1

The Finance Bill 2024, effective July 1, introduces varied tax rates and fixed taxes based on income brackets

Effective from July 1, the Finance Bill 2024 introduces major tax reforms aimed at increasing revenue. These changes impact the salaried class with varied tax rates and fixed taxes based on income brackets.

Key Points of the new tax regime

1. Exemption and initial tax brackets

• Individuals earning up to Rs50,000 per month (or Rs600,000 annually) are exempt from income tax.
• Monthly incomes up to Rs100,000 will be taxed at 5%, affecting annual incomes between Rs600,000 and Rs1.2 million. This results in a monthly tax of Rs2,500, up from Rs1,250.

2. Mid-range incomes

• Annual incomes between Rs1.2 million and Rs2.2 million will incur a 15% tax rate plus a fixed annual tax of Rs30,000.
• Monthly earners of Rs183,344 will pay a 15% tax, amounting to Rs15,000 per month, an increase from Rs11,667.

3. Higher income brackets

• Those earning between Rs2.2 million and Rs3.2 million annually will face a 25% tax rate and a fixed tax of Rs180,000 annually.
• Individuals with a monthly income of Rs267,667 will be taxed 25%, resulting in Rs36,083 monthly, up from Rs28,770.

4. Top-tier incomes

• Annual incomes from Rs3.2 million to Rs4.1 million are subject to a 30% tax rate and a fixed tax of Rs430,000 annually.
• Monthly earners of Rs341,667 will now pay 30%, or Rs58,333 per month, up from Rs47,408.
• Salaries exceeding Rs4.1 million per annum will be taxed at 35%, with a fixed annual tax of Rs700,000.

5. Surcharge

• A 10% surcharge is applied to incomes over Rs10 million for individuals and Associations of Persons (AOPs).

Monthly Income	Annual Income	Income Tax Rate	Fixed Annual Tax	Previous Monthly Tax	New Monthly Tax
Up to Rs 50,000	Up to Rs 600,000	0%	Rs 0	Rs 0	Rs 0
Rs 50,001 - Rs 100,000	Rs 600,001 - Rs 1,200,000	5%	Rs 0	Rs 1,250	Rs 2,500
Rs 100,001 - Rs 183,344	Rs 1,200,001 - Rs 2,200,000	15%	Rs 30,000	Rs 11,667	Rs 15,000
Rs 183,345 - Rs 267,666	Rs 2,200,001 - Rs 3,200,000	25%	Rs 180,000	Rs 28,770	Rs 36,083
Rs 267,667 - Rs 341,666	Rs 3,200,001 - Rs 4,100,000	30%	Rs 430,000	Rs 47,408	Rs 58,333
Above Rs 341,666	Above Rs 4,100,000	35%	Rs 700,000	-	-
Above Rs 833,333	Above Rs 10,000,000	10% Surcharge	-	-	-

 

Impact and government’s goal

These measures are expected to increase the tax burden on higher-income earners, reducing their disposable income. The government aims to boost revenue collection through these revised tax rates, reflecting broader fiscal policies in the Finance Bill 2024.

Changes in vehicle taxation

The Finance Bill 2024 also revises the taxation on locally manufactured vehicles. Shifting from a fixed tax rate to a value-based system, the new regime taxes vehicles based on their value rather than a fixed amount.

These updates, effective from July 1, 2024, represent a significant shift in the government's approach to taxation, aiming for a more equitable revenue generation method.