New salary tax slabs 2022-2023 were introduced in the budget for the fiscal year 2022-2023. The former finance minister proposed a raise in taxes for people with higher incomes while an exemption was given to low-income individuals. The government reduced the tax rate from 5% to 2.5% for individuals with salaries above Rs. 50,000.
Graana.com has compiled a guide on new salary tax slabs 2022-2023 and how to use salary tax calculators.
Types of Salary Division
According to the Tax Ordinance 2001, the salary of a government or private sector employee is subjected to 4 types of divisions:
- Basic salary
- House rent allowance (HRA)
- Conveyance allowance
- Medical & other allowances
Basic Salary
It covers a large percentage of the total income that individuals are entitled to receive without any tax deductions. It does not include any commissions, allowances, or bonuses.
House Rent Allowance (HRA)
Comprising 40-45% of the total basic salary, house rent allowance (HRA) is provided to salaried individuals as compensation for their furnished or unfurnished accommodation. This percentage of HRA generally varies according to the organisation.
For instance, on a basic salary of Rs. 50,000, an employee is entitled to receive around Rs. 20,000-23,000 as HRA compensation.
Conveyance Allowance
For individuals commuting to their offices, governments or organisations usually provides 10-15% of the basic salary as a conveyance allowance.
For instance, on a basic salary of Rs. 50,000, an individual is entitled to receive up to Rs. 5,000 as a conveyance allowance.
Medical & Other Allowances
Depending upon the nature of the job, some organisations provide medical, travel, entertainment, or other allowances to their employees.
The percentage of these is generally not fixed and depends upon the job’s nature and designation. According to the Tax Ordinance 2001, additional payments in the form of allowances, bonuses, or commissions are usually not taxed.
Updated Salary Tax Slabs 2022-2023
The budget for FY2022-2023 initially proposed a tax exemption for individuals with salaries up to Rs. 100,000. However, after the International Monetary Fund (IMF) brought up concerns, the government revised the income tax slabs and reduced the limit to Rs. 50,000.
New Terms and Conditions
According to the updated tax slabs for FY 2022-2023, the following are the new terms and conditions:
- For people with an annual income up to Rs. 600,000, no taxes are applied.
- A 2.5% income tax will be applied to those earning between Rs. 600,000-1,200,000 annually.
- For people with annual income from Rs. 1.2m up to Rs. 2.4m, an income tax of 12.5% will be applied.
- Individuals earning Rs. 2.4m to Rs. 3.6m per year will pay a 20% income tax, which is roughly Rs.165,000.
- For salaried individuals earning above Rs. 3.6m and up to Rs. 6m yearly, a 25% income tax will be charged, which starts above Rs. 405,000.
- People earning between Rs. 6-12m annually will pay 32.5% total income tax of their basic salary.
- A 35% income tax will be charged on individuals with annual earnings above Rs. 12m.
| Over | Not Over | Total Tax on Starting Limit | Tax Percentage |
| 0 | 600,000 | 0 | |
| 600,000 | 1,200,000 | 2.5 | |
| 1,200,000 | 2,400,000 | 15,000 | 12.5 |
| 2,400,000 | 3,600,000 | 165,000 | 20 |
| 3,600,000 | 6,000,000 | 405,000 | 25 |
| 6,000,000 | 12,000,000 | 1,005,000 | 32.5 |
| 12,000,000 | 35% |
How to Use Income Tax Calculators?
For people struggling with income tax calculation, different organisations and online platforms have now launched income tax calculators. These are programmed according to the latest data provided by FBR, and they calculate the exact amount of taxes according to different tax slabs.
To use a salary tax calculator, you can use the following guide:
- Google the terms “Salary Tax Calculator Pakistan”, “Pakistan Tax Calculator for Salary”, Income Tax Calculator 2022-23 Pakistan” or “Salary Tax Calculator 2022”.
- From one of the search results, click on any reliable source and you will find a tax calculator.
- Type your salary in the designated field on the calculator and it will provide you with the total amount of tax on your tax-payable income.
Conclusion
According to general procedures, tax deductions are usually made on a monthly basis. However, varying withholding taxes and other taxes are usually deducted according to different service usage, and execution of contracts, mostly based on the status of the vendor being a taxpayer or not.
Using the information from the above-explained tax slab and standard procedures of using salary tax calculators, an individual can easily calculate the amount of taxes on his/her salary.
