Super Tax under 4C
Today our topic is Super Tax newly introduced a year ago as per section 4C in the income tax ordinance 2001. The Government introduced a concept of “Super Tax” Charged on high-earning persons through a Finance Act-2022. The super tax is to be charged on top of income that is already taxed under different tax regimes.
Earliest, the super tax rate starts from 1% up to 4% on income of Rs 300 Million or more but in the current year 2023-2024, the tax rate increased to 10% based on the income if is it more than Rs 300 Million.
Tax Chargeability annually at the time of filing the return
Income is subject to tax annually as per the threshold (Table 1) in the case of individuals or AOP and (Table 2) in the case of companies before adjustment of depreciation and unabsorbed Losses of the prior period.
The super tax is to be charged as per the following threshold on the income of high-earning persons from every industry and excluding depreciation and unabsorbed losses.
Applicable for the years 2023-2024
|S.No.||Income Under Section 4C||Rate of Tax|
|1||Where income does not exceed Rs.150 million Annually.||0% of the income|
|2||Where income exceeds Rs. 150 million but does not exceed Rs. 200 million Annually.||1% of the income|
|3||Where income exceeds Rs. 200 million but does not exceed Rs. 250 million Annually.||2% of the income|
|4||Where income exceeds Rs. 250 million but does not exceed Rs. 300 million
|3% of the income|
|5||Where income exceeds Rs. 300 million but does not exceed Rs. 350 million Annually.||4% of the income|
|6||Where income exceeds Rs. 350 million but does not exceed Rs. 400 million Annually.||6% of the income|
|7||Where income exceeds Rs. 400 million but does not exceed Rs. 500 million Annually.||8% of the income|
|8||Where income exceeds Rs. 500 Annually.||10% of the income|
Rates of tax for companies
The rate of tax imposed on the taxable income of a company shall be as set out in the following table, namely ;
|Types of Company||Rate of Tax|
|Any other company||29%|
Withholding tax treatment
The Super tax is to be adjusted with the tax already deducted at the sources by the withholding agent at the time of filling the return.
Basically, the super tax is targeted and focused on high-earning persons whose income is more than Rs 150 Million. It has been observed and criticized that the normal tax rates are already higher for companies from 20% up to 39% and the addition of the supper tax is up to 10%, leading to almost 50% tax charged on high-earning persons. As a result, the higher tax rate including super tax will discourage new foreign and local investments inwards and adversely affect existing businesses.
Due to a super tax imposition, there are several negative effects on the economy of the country, leading to various claims and criticisms including a direct target on income on high earning person, reduction in the growth of the economy of the country, increase in compliance cost, try to avoid income if falling under or meeting criteria, the applicability of tax avoidance, reduction or discouragement in international competitiveness, negatively impacting infrastructure development of the country, imbalance or unfair competitive environment.
There are serious concerns that taxpayers are going to face in order to run their new businesses or existing ones under such new high taxes which must be considered by the Government to a lower level acceptable to everyone.