With the approval of the Budget 2024-25, the federal government has introduced new income tax slabs effective from July 1, 2024, altering the tax obligations for many salaried individuals.
The Federal Board of Revenue (FBR) has outlined a revised structure, setting new income tax brackets and rates that will affect those earning above Rs50,000 per month.
Under the new tax regime, individuals with a monthly salary of Rs150,000 will face a significant tax increase. This revised structure includes several tax slabs designed to capture a wider income range, impacting salaried individuals and government employees alike.
Tax slabs overview
The updated tax slabs are as follows:
- No Tax: Income up to Rs50,000 per month.
- 5% Tax: Income ranging from Rs50,001 to Rs100,000 per month. Previously, this bracket had a fixed tax of Rs1,250, which has now increased to Rs2,500.
- 15% Tax: Income between Rs100,001 and Rs183,344 per month. Tax in this bracket has risen from Rs11,667 to Rs15,000.
- 25% Tax: Income from Rs183,345 to Rs267,667 per month.
- 30% Tax: Income ranging from Rs267,668 to Rs341,667 per month. This rate replaces the previous tax of Rs47,468, increasing to Rs53,333.
Impact on Rs150,000 Monthly Salary
For those earning Rs150,000 monthly, the income tax will now be calculated under the 30% slab. Based on the new structure, their annual income falls into the Rs1,800,000 – Rs3,600,000 range, which is taxed at 30% of the amount exceeding Rs1,600,000. The revised tax burden means individuals with this salary will see a more substantial deduction from their paychecks starting August 2024.
Income tax calculation
To illustrate, for a monthly salary of Rs150,000:
- The total annual income amounts to Rs1,800,000.
- The taxable amount exceeding Rs1,600,000 is Rs200,000.
- The tax on this exceeding amount at 30% is Rs60,000 annually, translating to Rs5,000 per month.
The introduction of these new tax slabs underscores the federal government's intent to restructure the tax system, aiming to increase revenue while adjusting to economic realities. As employees await their August salaries, understanding these changes is crucial for financial planning and budgeting.
