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How To Calculate Income Tax | Complete Guide

Being a citizen of any country may be a relief and bring a sense of freedom to the people. Yet, there are a few factors that may make you feel burdened. One of those factors is taxes. Taxes are imposed by governments on the citizens. These taxes are utilized in public service and national matters. In Pakistan, income tax (a kind of direct tax) is imposed on the citizens to be paid to the country. According to Income Tax Ordinance 2001, Pakistan has a structured Taxation System which is administered by the Federal Board Of Revenue (FBR). Therefore, all the taxpayers must know how to calculate income tax. 

Calculate Income Tax On Salary

Every year, the Government alters its fiscal policy that brings changes to the rate of income tax when the Final budget is introduced. With changings in prices of everything, annual incomes and tax rates are also amended. Indeed, there is no exception to tax paying as a citizen. Else, you will have to face serious legal actions as a result of evading taxes. So, to prove yourself a good citizen it is obligatory to pay income to avoid getting in trouble. 

To know how to calculate income tax on salary is of utmost importance because it aids in giving the taxpayers a fixed amount of disposable income. Once they have their disposable income after deducting the income tax, it gives them the freedom to plan their spending and saving patterns. If this thought comes to your mind that income tax is only levied upon the salaried people, you need to correct your notions right there. Every person has to pay tax who is earning a certain amount of income by any means.

Types Of Income Taxes

How to calculate income tax on salary

As there are different kinds of income taxes. So, Corporate taxes are also included which are imposed on the rents from personal assets like houses or shops, profits from businesses, bonuses, capital gains income, and ‘income from other sources. Along with these,  rents from personal assets like houses or shops, profits from businesses, bonuses, capital gains income, and ‘income from other sources. Along with these,  Super Tax, the Minimum Tax, and the Tax on Undistributed Reserves are other types of income taxes. 

How to Calculate Income Tax on Salary?

There are two ways to find out income tax on your income. 

  • Online Method
  • Income Slabs

Online Method

How to calculate income tax on salary

 To check your income tax online, follow the given steps:

  • Go to Tax Calculator Pakistan
  • Enter the amount you get as your salary.
  • Select whether you want the monthly or yearly tax.
  • Then, click the Calculate button. 
  • The results will show you applicable tax, disposable income, and the income slab you fall under.

Income Tax Slabs

Every year, Government introduces a budget with changes in its fiscal policy including income and tax rates. Therefore, the tax applicable income is more than Rs. 60,000/- per year, according to the 2022 slabs. 

Here is complete information on the income tax slabs for the year 2021-22. 

Taxable Income Income Tax Rate in Pakistan
Where the taxable income exceeds Rs. 600,000 but does not exceed Rs. 1,200,000 5% of the amount exceeding Rs. 600,000
Where the taxable income exceeds Rs. 1,200,000 but does not exceed Rs. 1,800,000 Rs. 30,000 plus 10% of the amount exceeding Rs. 1,200,000
Where the taxable income exceeds Rs. 1,800,000 but does not exceed Rs. 2,500,000 Rs. 90,000 plus 15% of the amount exceeding Rs. 1,800,000
Where the taxable income exceeds Rs.2,500,000 but does not exceed Rs. 3,500,000 Rs. 195,000 plus 17.5% of the amount exceeding Rs. 2,500,000
Where the taxable income exceeds Rs. 3,500,000 but does not exceed Rs. 5,000,000 Rs. 370,000 plus 20% of the amount exceeding Rs. 3,500,000
Where taxable income exceeds Rs. 5,000,000 but does not exceeds Rs. 8,000,000 Rs. 670,000 plus 22.5% of the amount exceeding Rs. 5,000,000
Where taxable income exceeds Rs. 8,000,000 but does not exceeds Rs. 12,000,000 Rs. 1,345,000 plus 25% of the amount exceeding Rs. 8,000,000
Where taxable income exceeds Rs. 12,000,000 but does not exceeds Rs. 30,000,000 Rs. 2,345,000 plus 27.5% of the amount exceeding Rs. 12,000,000
Where taxable income exceeds Rs. 30,000,000 but does not exceeds Rs. 50,000,000 Rs. 7,295,000 plus 30% of the amount exceeding Rs. 30,000,000
Where taxable income exceeds Rs. 50,000,000 but does not exceeds Rs. 75,000,000 Rs. 13,295,000 plus 32.5% of the amount exceeding Rs. 50,000,000
Where taxable income exceeds Rs. 75,000,000 Rs. 21,420,000 plus 35% of the amount exceeding Rs. 75,000,000

 

FAQs:

How to calculate income tax online?
  • Go to Tax Calculator Pakistan
  • Enter the amount you get as your salary.
  • Select whether you want the monthly or yearly tax.
  • Then, click the Calculate button. 
  • The results will show you applicable tax, disposable income, and the income slab you fall under.
Duaa Naeem
Duaa Naeem
Duaa Naeem is a fresh graduate who is utilizing her writing skills into writing articles that are informative for the readers.

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