Budget FY23: Govt increases annual income tax threshold from Rs0.6mln to Rs1.2mln

Islamabad: Federal Finance Minister Miftah Ismail said the taxable income tax threshold (per year) had been increased from Rs600,000 to Rs1.2 million. 

"This proposal effectively means there will be no income tax on individuals earning up to Rs100,000 a month."

Federal Minister for Finance and Revenue, Miftah Ismail in his budget speech on Friday admitted that there was no doubt that the salaried middle class was facing maximum effects of economic crisis and despite all that it was loaded with additional burden of increased taxes.
 
Therefore, he said, the government had decided to increase middle class-taxable income limit to 1.2 million rupees to reduce the burden. "This will benefit the salaried class which will generate a positive economic cycle and it will also lead to increase in business activity. 
 
Moreover, it will also increase the disposable income of the salaried class which will help in the future to have increased tax collection", the minister said.

Ismail further said the government had suggested increasing the tax on banking companies to 39%, including 42% super tax, while the foreign nationals doing business in Pakistan will have to pay taxes.

The finance minister also proposed to increase the tax rate on non-filers from 100% to 200% for vehicles having horsepower greater than 1,600cc.

The government has also proposed an advance tax on 1,600 cars and a 2% additional tax on electronic engine cars, he said, adding that it has also been proposed to revise the tax slab for salaried people and increased the cap to Rs100,000.

Ismail said the tax imposed on Behbood Saving Certificate and Pensioners Benefit Account has been proposed to be dropped to 5% from 10%.

The tax on small-scale retailers has been proposed to be fixed, which will range from Rs3,000-10,000 and will be collected through their electricity bills, Miftah said.

It has also been suggested that the filers who send money abroad through credit, debit, or prepaid cards will have to pay 1% withholding tax, while for a similar transaction, non-filers will be charged 2% tax, he said.

However, the withholding tax on credit, debit and prepaid cards can be adjusted later on, he said.

The finance minister proposed that families using less than 200 units of electricity will be given loans in easy instalments for purchasing a solar panel, while the government is also considering abolishing sales tax on agricultural machinery and seeds.