What is the Difference Between Super Tax and Surcharge on Salary?

Super Tax vs. Surcharge:

  • Super tax: This is an existing tax levied on very high income earners in Pakistan. It kicks in for incomes exceeding Rs. 150 million.
  • Surcharge: This is a new 10% tax introduced as a surcharge on regular income tax for individuals and associations with Salary taxable income exceeding Rs. 10 million.

Who this applies to:

This explanation targets taxpayers who fall under both categories:

  1. Exceed the income threshold for super tax (Rs. 150 million or more).
  2. Exceed the income threshold for the new surcharge (Rs. 10 million or more).

How the surcharge applies to them:

  • The 10% surcharge will be calculated ONLY on their regular income tax liability, not on the super tax amount they owe.
  • In simpler terms, imagine their tax bill has two parts: regular income tax and super tax. The surcharge applies only to the regular income tax portion, not the super tax portion.

Example:

  • Let’s say a taxpayer has a taxable income of Rs. 200 million.
  • They would be liable for both super tax (on income exceeding Rs. 150 million) and the new surcharge (on income exceeding Rs. 10 million).
  • However, the surcharge will only be applied to their regular income tax calculated on the entire Rs. 200 million income, not the additional super tax amount.

Why this distinction?

The government might have implemented this distinction to avoid excessively taxing individuals who already fall under the highest tax bracket (super tax). It creates a tiered system where the surcharge applies progressively on income exceeding the regular tax slabs but doesn’t further burden those already paying super tax.

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