Super tax on High Earning Persons

Super tax on High Earning Persons: The Finance Act, 2022 has brought about certain amendments in the Income Tax Ordinance, 2001 (the Ordinance, hereafter). Some significant amendments on Super tax on High Earning Persons are explained hereunder: –

Super tax on High Earning Persons

A new section 4C has been introduced through Finance Act, 2022 and this section will apply for tax year 2022 and onwards. Except for the persons whose income as envisaged in this section is below Rs. 150 million, all other persons including those assessed under Fourth, Fifth and Seventh Schedules to the Ordinance are liable to pay super tax on graduated rates ranging from 1% to 4% based on graduated income slabs provided in Division JIB of Part I of First Schedule given as under:

No Income under section 4C Rate of Tax

Where income does not exceed Rs. 150 million tax will be charged @ 0% of the income

Where income exceeds Rs. 150 million but does not exceed Rs. 200 million tax will be charged @ 1% of the income

Where income exceeds Rs. 200 million but does not exceed Rs. 250 million tax will be charged @ 2% of the income

Where income exceeds Rs. 250 million but does not exceed Rs. 300 million tax will be charged @ 3% of the income

Where income exceeds Rs. 300 million tax will be charged @ 4% of the income

However, for tax year 2022 the rate of super tax under this section will be 10% instead of 4%, where the income of the persons engaged, partly or wholly, in business of airlines, automobiles, beverages, cement, chemicals, cigarette & tobacco, fertilizer, iron & steel, LNG terminal, oil marketing, oil refining, petroleum & gas exploration and production, pharmaceuticals, sugar and textiles exceeds Rs.300 million.

For tax year 2023, this super tax on income of banking companies will be 10% if the income for the year exceeds Rs. 300 million.

For the purposes of this section, the income will be the sum of the following:

(i)        Profit on debt, dividend, capital gains, brokerage, and commission;

(ii)      Taxable income (other than brought forward depreciation and brought forward business losses) under section 9 of the Ordinance, excluding amounts specified in (i) above;

(iii) Imputable income as defined in clause (28A) of section 2 excluding amounts specified in clause (i) above; and

(iv)      Income computed, other than brought forward depreciation, brought forward amortization and brought forward business losses under Fourth, Fifth and Seventh Schedule.

Super tax payable under this section will be paid on the date and manner as specified in under section 137(1) of the Ordinance. In case of default by the person liable to pay super tax under this section, Commissioner through an order in writing will determine the liability of the person and proceed to recover the same under applicable provisions of the Ordinance.

For more information on FBR’s new regulations / circulars/ SROs/ amendments in taxation laws in Pakistan please visit https://www.fbr.gov.pk/

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