In the budget for fiscal year 2022-23, the government has exempted those earning up to Rs100,000 per month from paying income tax, up from Rs50,000 last year.
For the salaried income group, the latest budget is a mishmash as the government reduced tax rates and the number of slabs while eliminating available credit through the omission of deductible allowance for profit on debt and tax credit for investment in shares, health insurance, and pension funds.
Moreover, the government has released a revamped list of income tax brackets for salaried employees. There were previously 12 slabs, which have now been shrunk to seven.
Here are the new slabs:
- For annual incomes less than Rs600,000 (below Rs50,000 per month)
- For a yearly income of Rs600,000-Rs1.2 million (Rs50,000 to Rs100,00 per month).
- For annual earnings of Rs1.2m-2.4m (Rs100,000 to Rs200,000 per month)
- For annual earnings of Rs2.4m-3.6m (Rs200,000 to Rs300,000 per month)
- For earnings of Rs3.6m-6m (Rs300,000 to Rs500,000 per month)
- For annual earnings of Rs6m-12m (Rs500,000 to Rs10,00,000 per month)
For annual earnings of more than $12 million (more than $100,000 per month), income tax is not to be levied on people earning between 0 and Rs600,000 per year (where income from salary exceeds 75 per cent of taxable income). A nominal amount of Rs100 will be subtracted per year from those earning between Rs600,000 and Rs1.2 million.
Employees getting paid more than Rs1.2 million but less than Rs2.4 million per year will be levied 7 per cent of the amount that exceeds Rs1,200,000 in the third slab.
An employee getting paid Rs1,400,000 per year will be levied 7 per cent of Rs200,000 (Rs1,400,000 minus Rs1,200,000 since that is the amount exceeding Rs1,200,000).
As per the latest budget resolution, the government recommended an income tax rate of 20 per cent on small business earnings, 42 per cent on banking, and 29 per cent on related companies.
