Income from salary means any income that is earned/received by a person against services rendered about his employment. The Salary Income Tax Rates 2024 are given in the First Schedule, Part I, Division I, clause (1A) of the Income Tax Ordinance 2001
What is Salary
Salary income refers to any earnings received by an individual in exchange for services rendered during his employment. The applicable tax rates for individuals having salary income are given in the First Schedule, Part I, Division I, Clause 1A of the Income Tax Ordinance 2001.
“Salary earned by an individual in a tax year, excluding any income exempt under the Income Tax Ordinance 2001, is subject to taxation under the head ‘Salary’ as defined in Section 12 of the aforementioned Ordinance.
The term ‘Salary’ encompasses various components provided to an employee by their employer. This includes pay, wages, remuneration, leave pay, payment in lieu of leave, overtime payment, bonuses, commissions, fees, gratuity, and compensation for adverse work conditions, like danger pay, etc.
Additionally, ‘Salary’ comprises perquisites related to employment, whether in monetary form or not. This includes allowances for the cost of living, subsistence, rent, utilities, education, entertainment, travel, etc.
However, certain amounts paid by the employer to the employee for specific expenses incurred during duty, like travel allowance and daily allowance, are not considered part of the taxable salary.
Moreover, any expenses incurred by the employee and subsequently reimbursed by the employer, excluding expenses incurred on behalf of the employer during the performance of duties, are also included in the taxable salary. This means that any surplus or amounts exceeding the actual expenses incurred by the employee and paid or reimbursed by the employer fall under the taxable salary.
Furthermore, any additional profits received by the employee in addition to their regular salary or wages, including amounts received as consideration for entering into employment or related to changes in employment conditions, are considered part of the taxable salary. Termination-related benefits, such as golden handshake payments, are also included in the taxable salary.
In such cases, the employee has the option to apply for a different tax rate by submitting a written application to the Commissioner of Income Tax. This option is based on the average rate of taxation over the past three years, calculated using the following formula:
Tax = A/B %
where ‘A’ represents the total tax paid by the employee in the past three years, and ‘B’ represents the total taxable income of the employee during the past three years.”
Salary Income Tax Rates in Pakistan for Tax Year 2024
In case the total income of a person from salary exceeds 75% of his total taxable income during a tax year, the rates of tax for salary in Pakistan will be applied for the calculation of tax payable as defined in the First Schedule, Part I, Division I, clause (1A) of the Ordinance. The tax rates for salary income applicable for the tax year 2024 as approved and applied vide Finance Bill 2023 are as under:-
Salary Income Tax Rates 2024
| Income Tax Rates for Salary Income | ||
|---|---|---|
| Tax Year 2024 | ||
| Income Slabs | Rate of Tax | |
| From | To | |
| 0 | 600000 | 0% |
| 600001 | 1200000 | 2.5% on amount exceeding Rs.600,000 |
| 1200001 | 2400000 | Rs.15,000 + 12.5% on amount exceeding Rs.1.2 M |
| 2400001 | 3600000 | Rs.165,000 + 22.5% on amount exceeding Rs.2.4 M |
| 3600001 | 6000000 | Rs.435,000 + 27.5% on amount exceeding Rs.3.6 M |
| 6000001 | And above | Rs.1,095,000 + 35% on amount exceeding Rs.6 M |
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Disclaimer
“The contents of this post are intended for informational and educational purposes only and are based on data gathered by Team Fiscal Updates. It is important to note that the information provided here should not be relied upon as a reference for any legal documents. If you require assistance with legal decisions, it is recommended to seek proper professional advice. It may also be noted that the provisions of the Income Tax Ordinance 2001 have an overriding effect on all other laws of the country and shall prevail in case of any contradiction in terms of Section 3 of the Ordinance”