Income tax 2024: Calculate your salary deductions starting July 1
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.