Government Increases Motor Vehicle Registration Taxes and Income Tax Rates
ISLAMABAD: In order to comply with the demands of the International Monetary Fund (IMF), the tax rates on motor vehicle registration and higher income brackets have been raised, as reported by The News.
Previously, there were no increases in tax rates for vehicle registration and income brackets for salaried and non-salaried individuals. However, to fulfill the requirements of the IMF program, the government had to implement additional taxation measures to generate over Rs215 billion in revenue.
While searching for avenues to generate additional income, the government overlooked those who were already exempted from paying taxes.
Under the recently amended Finance Bill 2023-24, the government has imposed fixed taxes on both imported and locally manufactured vehicles with engine capacities ranging from 2,001cc to above 3,000cc.
For vehicles with an engine capacity of 2,001cc to 2,500cc, the fixed tax rate is set at 6% of the vehicle’s value. Vehicles with engine capacities between 2,501cc and 3,000cc will be subject to an 8% fixed tax rate.
Vehicles with engine capacities above 3,000cc will face a fixed tax rate of 10% based on the vehicle’s value. Additionally, the Finance Bill 2023-24 has also raised the tax rates for higher income brackets of salaried and non-salaried individuals in the budget.
The tax rate remains unchanged for salaried individuals whose taxable income exceeds Rs1,200,000 but does not exceed Rs2,400,000. The tax rate will remain at Rs15,000 plus 12.5% of the amount exceeding Rs1,200,000.
For taxable incomes exceeding Rs2,400,000 but not exceeding Rs3,600,000, the tax rate will be Rs165,000 plus 22.5% of the amount exceeding Rs2,400,000.
In the case of taxable incomes exceeding Rs3,600,000 but not exceeding Rs6,000,000, the tax rate will be Rs405,000 plus 27.5% of the amount exceeding Rs3,600,000.
For taxable incomes exceeding Rs6,000,000, the tax rate will be Rs1,095,000 plus 35% of the amount exceeding Rs6,000,000.
The amended Finance Bill 2023 has also increased income tax rates for individuals and associations of persons (AOPs), excluding salaried individuals.
The revised tax slabs for individuals/AOPs show that for taxable incomes exceeding Rs600,000 but not exceeding Rs800,000, the tax rate will be 7.5% of the amount exceeding Rs600,000.
If the taxable income exceeds Rs800,000 but does not exceed Rs1,200,000, the tax rate will be Rs15,000 plus 15% of the amount exceeding Rs800,000.
For taxable incomes exceeding Rs1,200,000 but not exceeding Rs2,400,000, the tax rate will be Rs75,000 plus 20% of the amount exceeding Rs1,200,000.
If the taxable income exceeds Rs2,400,000 but does not exceed Rs3,000,000, the tax rate will be Rs315,000 plus 25% of the amount exceeding Rs2,400,000.
Under the new tax bracket, if the taxable income exceeds Rs3,000,000 but does not exceed Rs4,000,000, the tax rate will be Rs465,000 plus 30% of the amount exceeding Rs3,000,000.
For taxable incomes exceeding Rs4,000,000, the tax rate will be Rs765,000 plus 35% of the amount exceeding Rs4,000,000.
Published in PakWeb, June 26, 2023.
Stay informed and engaged with the PakWeb by following us on Facebook, Twitter, and participating in our Discussion Forums.