As a responsible citizen of Pakistan, it is important to understand how to calculate income tax. It not only helps you to plan your finances but also ensures that you comply with the tax regulations in the country. In this article, we will guide you through the process of calculating income tax in Pakistan.
Step 1: Determine your taxable income:
Taxable income refers to the income that is subject to income tax. It is calculated by deducting allowable expenses from your total income. Allowable expenses include business expenses, donations to approved charities, and deductions for health insurance premiums and pension contributions.
Step 2: Determine your tax bracket:
The next step is to determine your tax bracket. Tax brackets in Pakistan range from 0% to 35%. Your tax bracket is determined by your income level. You can find the latest tax rates and tax brackets on the Federal Board of Revenue (FBR) website.
Step 3: Calculate your income tax
Once you have determined your taxable income and tax bracket, you can use the following formula to calculate your income tax: (Taxable income x Tax rate) – (Tax credit)
Tax credit is the amount that is deducted from your tax liability. It includes tax withheld by your employer, tax already paid, and any tax rebates.
For example, if your taxable income is Rs. 1,000,000 and your tax bracket is 15%, your income tax would be calculated as follows: (1,000,000 x 0.15) – 24,000 = 126,000
In this example, tax credit of Rs. 24,000 is deducted from the total tax liability.
Step 4: Pay your income tax
After calculating your income tax, you need to pay it to the government. You can pay your income tax through various methods including online banking, ATM, or by visiting the National Bank of Pakistan (NBP) or State Bank of Pakistan (SBP) branches.
In conclusion, calculating income tax in Pakistan can be a complex process but understanding the basics can help you to plan your finances and comply with tax regulations. It is recommended to seek advice from a qualified tax consultant if you have any doubts or questions.