Key Changes in Tax Rates – Federal Budget 2024-25

Changes in Income Tax

Salaried Individuals: The income tax exemption threshold is still at PKR 600,000 per year for salaried individuals, but there have been revisions to the tax slabs. The highest tax rate for salaried individuals can reach up to 35%.

Income Tax Slab Rates for Individuals

For salaried individuals, the updated tax rates are as follows:

1. Income up to PKR 600,000

0% (No tax)

2. Income between PKR 600,001 and PKR 1,200,000

5% of the amount exceeding PKR 600,000

3. Income between PKR 1,200,001 and PKR 2,200,000

PKR 30,000 + 15% of the amount exceeding PKR 1,200,000

4. Income between PKR 2,200,001 and PKR 3,200,000

PKR 180,000 + 25% of the amount exceeding PKR 2,200,000

5. Income between PKR 3,200,001 and PKR 4,100,000

PKR 430,000 + 30% of the amount exceeding PKR 3,200,000

6. Income above PKR 4,100,000

PKR 700,000 + 35% of the amount exceeding PKR 4,100,000

Exporters: Exporters will now be subjected to the regular tax rate of 29%, replacing the previous fixed tax rate of 1%.

Capital Gains Tax: Capital gains tax on real estate and securities will be 15% for filers and 45% for non-filers​

Withholding Tax: Introduction of withholding income tax on the transfer of immovable property with varying rates for filers, non-filers, and delayed filers. Also, there is an increase in advance tax for non-filer distributors, wholesalers, dealers, and retailers from 1% to 2.25%.

Motor Vehicles: Motor vehicle registration taxes will now be calculated based on the value of the vehicle rather than its engine capacity.

Super Tax: A new bracket for super tax has been implemented, with a top rate of 10% applicable to taxpayers in all industries earning more than PKR 500 million.

Changes in Sales Tax

Textiles and Leather: The sales tax rate on textiles and leather products has been raised from 15% to 18%.

Mobile Phones: Mobile phones will now be subjected to the standard 18% sales tax rate.

Scrap Materials: For bronze, coal, and plastic scrap materials, a sales tax withholding regime will be enforced while the exemption for iron and steel scrap remains.

FATA/PATA Exemptions: Tax exemptions for the newly merged districts of FATA/PATA have been eliminated.

Food Products: The exemption of sales tax on edible products sold in bulk under brand names or trademarks has been taken away.

Retailers: The sales tax rate on textile and leather product retailers has increased from 12% to 15%.

Other Changes

Minimum Wage: The minimum wage has been increased from PKR 32,000 to PKR 37,000.

Federal Excise Duty: An increase in federal excise duty (FED) on various sectors, including a 50% increase on cement.

Advance Tax: A 0.6% advance tax on cash withdrawals by non-filers has been reintroduced i.e. 0.9%.

IT Sector Incentives: SMEs in the IT sector will benefit from an extended special tax regime with a turnover threshold increased to PKR 800 million and a five-year income tax holiday for certain agro-based SMEs.

Essence

The Federal Budget 2024-25 in Pakistan significantly changes tax rates and fiscal policies. Although the income tax exemption threshold for salaried individuals remains at PKR 600,000 per year, the revised tax slabs now feature the highest rate of 35%. Exporters are now subject to a new standard tax rate of 29%, replacing the previous fixed rate of 1%. Capital gains tax on real estate and securities is set at 15% for filers and considerably higher at 45% for non-filers. The introduction of withholding taxes on property transfers, along with increased advance taxes on various sectors, reflects efforts to enhance revenue collection. Adjustments to sales tax include an increase in rates to 18% for textiles and leather products, while mobile phones now incur a standard 18% tax.

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