Surcharge on tax where taxable income exceeds Ten million rupees Section 4AB
Surcharge on tax where taxable income exceeds Ten million rupees Section 4AB: Finance Act, 2024 — Explanation regarding Important Amendments made in the Income Tax Ordinance, 2001
Important amendments made in Income Tax Ordinance, 2001 (“the Ordinance”) through Finance Act, 2024 are explained in the subsequent paragraphs.
Surcharge on tax where taxable income exceeds Ten million rupees Section 4AB
Through a newly inserted section 4AB, a surcharge has been levied on chargeable tax of individuals and associations of persons (A0Ps) if their taxable income exceeds ten million rupees. The surcharge is levied at a rate of ten percent of income tax charged under clause (1) and clause (2) of the Division I of Part I of the First Schedule for non-salaried as well as salaried persons. In order to ensure that tax on salary is deducted at an average rate by including the amount of surcharge, similar changes have been made in the formula of average rate of tax specified in sub-section (2) of section 149. An illustration is given below to describe the computation of tax and tax-deductible u/s 149 of the Ordinance;
Illustration:
Annual salary income: Rs. 13,000,000
Tax on salary income for the year as provided under Division I of Part I of First Schedule: Rs. 3,815,000
Surcharge @ 10% on tax payable: Rs. 381,500
Total annual tax liability: Rs. 4,196,500
Average rate of tax = A/B where —
A is the tax that would be payable if the amount referred to in component B of the formula were the employee’s taxable income for that year plus tax chargeable under section 4AB; and B is the employee’s estimated income under the head “Salary” for that year. Hence in the above illustration—
A= 3,815,500 + 381,500 = 4,196,500 B = 13,000,000
Average rate of tax = 4,196,500/13,000,000 = 32.28% Tax for the year = 4,196,491
Tax deductible per month = Rs. 349,708
Read full text of Explanation of Finance Act, 2024 Amendments made in the Income Tax Ordinance, 2001 for more updates on taxes from FBR click here.
