Super Tax scope widened, additional income slabs added

August 02, 2023 (MLN): The government has introduced several important amendments to the Income Tax Ordinance, 2001 through the Finance Act, 2023, a circular issued on July 26 by Revenue Division showed.

One of the key amendments includes Super Tax, the scope of which was broadened, and uniformity was brought in the rates for high-earning persons.

In order to broaden the scope of Super Tax as well as to bring progressivity and uniformity in Super Tax rates structure, additional income slabs of Rs350 million to Rs400m, Rs400m to Rs500m, and Rs500m and above, providing for Super Tax rates of 6%, 8%, and 10% respectively have been enacted through Finance Act,2023.

To recall, Super Tax on high-earning persons was introduced through Finance Act,2022 providing for graduated tax rates ranging from 1% to 4% on income slabs starting from Rs150m to Rs300m and above.

Certain specified business 5 sectors were required to pay Super Tax at a higher rate of 10% where income exceeded Rs300m.

These Super Tax rates will apply to all persons across the board for Tax Year 2023 and onwards.

However, under the second proviso to Division IIB of Part I of the First Schedule, for the Tax year 2023, a banking company will be required to pay Super Tax at the rate of 10% if income, as defined under section 4C, exceeds Rs300m.

Furthermore, an ambiguity persisted regarding payment of Super Tax as to whether Super Tax payable under section 4C of the Ordinance will only be discharged as lump sum amount at the time of filing of income tax return or Super Tax has to be paid along with monthly/quarterly installments of advance tax payable under section 147 of the Ordinance.

In order to remove this ambiguity and to bring more clarity, Finance Act,2023 has introduced a new sub-section (5A) in section 4C of the Ordinance whereby Super Tax liability computed by a person under the said section will be paid along with monthly/ quarterly installments, as the case may be, of advance tax payable under section 147 of the Ordinance.

Corresponding amendments have also been made in section 147 of the Ordinance.

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