The Federal Board of Revenue (FBR) has changed tax rates for seven PIT slabs and shared them with the IMF in order to remove a significant stumbling block in reaching a staff-level agreement.
The PIT slabs for the salaried class will continue at 7%, but the rates may be changed, according to FBR Chairman Asim Ahmad, who spoke to the press on Wednesday.
He also added that these rates were communicated with the IMF in order to make them in accordance with the fund’s criteria.
He did not, however, reveal the new rates for different income brackets in the salaried class.
Official sources said that taxable income up to Rs. 1.2 million would be free from paying income tax, but that taxable income above Rs. 600,000 but not exceeding Rs. 1,200,000 would only have to pay a nominal amount of Rs. 100.
The government is still trying to persuade the IMF that persons earning up to Rs. 0.2 million per month are not burdened.
The FBR suggested a 7% tax on the amount exceeding Rs. 1,200,000 per annum in the Finance Bill 2022 if the taxable income rises Rs. 1,200,000 but does not exceed Rs. 2,400,000.
The FBR wants to keep the rate at 7%, but the IMF wants it raised to 10%.
The FBR may now raise the tax rate on amounts above Rs. 1,200,000 to 10% under the new plan.
The FBR has suggested Rs. 84,000 plus 12.5 percent of the amount above Rs. 2,400,000 when the taxable ceiling exceeds Rs. 2,400,000 but does not exceed Rs. 3,600,000.
The FBR has now amended its rate and informed the IMF that it will be increased to 17.5 percent.
When taxable income exceeds Rs. 3,600,000 but does not exceed Rs. 6,000,000, the FBR proposes a payment of Rs. 234,000 plus 17.5 percent of the amount over Rs. 3,600,000.
The FBR has suggested a 20 percent tax rate for this category in the amended proposal.
The FBR has suggested Rs. 654,000 additional 22.5 percent of the amount above Rs. 6,000,000 in the Finance Bill 2022 if the taxable ceiling exceeds Rs. 6,000,000 but does not exceed Rs. 12,000,000.
The revised rate for this slab has been recommended to be increased to 25% under the revised plan.
The FBR has recommended Rs. 2,004,000 plus 32.5 percent of the amount above Rs. 12,000,000 for the seventh slab, if taxable income exceeds Rs. 12,000,000.
The IMF sought to bring all types of pension payments and funds under the tax net, according to sources.
The IMF had convened a two-day workshop before the budget announcement, and the FBR had persuaded the IMF that bringing retirees into the tax net during rising inflation would be impossible.
Finally, the IMF agreed that up to 50% of private-sector gratuities would be taxed, with the burden being carried by the employer rather than the employees.
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