Minister for Finance and Revenue Muhammad Aurangzeb announced major tax relief measures for salaried persons, construction sector, and purchase of immovable property besides introducing tax credit to provide loans to construct low-cost houses.
This relief will not only simplify the tax structure but will also ensure a balance between inflation and take-home salary by reducing the tax burden on the middle-income earners.
Under the new tax structure, salaried individuals earning up to Rs 600,000 annually were exempted from income tax.
Those earning between Rs.600,000 and Rs.1.2 million were required to pay 1 percent tax on the amount exceeding Rs.600,000.
For annual salaries between Rs.1.2 million and Rs.2.2 million, a fixed tax of Rs.6,000 and an additional 11 percent tax on the amount above Rs.1.2 million was imposed.
The individuals earning Rs.2.2 million to Rs.3.2 million annually were required to pay a fixed tax of Rs.116,000 along with a 23 percent tax on the amount above Rs.2.2 million.
Those with annual salaries between Rs.3.2 million and Rs.4.1 million had to pay a fixed tax of Rs.346,000 and 30 percent on the amount exceeding Rs.3.2 million.
The employees earning above Rs.4.1 million were taxed Rs.616,000 with an additional 35 percent on the amount above Rs.4.1 million.
He said the super tax rate on the corporations earning annual income between Rs.200 million to 500 million is being reduced by 0.5%.
In the construction sector, the government has also proposed to reduce the rate of Withholding Tax on the purchase of property from 4% to 2.5%, from 3.5% to 2%, and from 3% to 1.5%.
Likewise, the finance minister also announced to eliminate the federal excise duty of up to 7% imposed last year on the transfer of commercial properties, plots, and houses.
Furthermore, he said tax credit is being introduced for houses up to 10 marla and flats of up to 2000 sq.ft to provide loans for the construction of low-cost houses and to encourage mortgage.
The government has also proposed to reduce the stamp paper duty on the purchase of property in Islamabad from 4% to 1%. He hoped that the provinces will also support the federal government’s move by slashing heavy taxes imposed on the immovable property.
He said the tax rate on the interest income has been proposed to increase from current 15% to 20%. However, he made it clear that this increase will not apply on the national savings and small scale savings.
The finance minister highlighted that new tax was being introduced for e-commerce platforms, courier services and other digital services.
He said the government has proposed 5% tax on the income of pensioners of up to 70 years, whose annual pension exceeds Rs.10 million. He made it clear that the government has no intention to impose tax on the low and middle income pensioners.
In order to promote cashless economy, the government has proposed to increase the advance tax rate on withdrawing cash for the non-filers from current 0.6% to 1%.
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